Is Amazon FBA Worth It? Here’s What You Need to Consider

November 6, 2020
Written by Nicasio Co III

Most new sellers on Amazon would create an individual account because it requires no registration fee. Some startups are willing to pay for the higher sales fee, instead of paying for the subscription fee for a professional account. You may be confused now with the number of payments required to be able to sell on Amazon. Fortunately, industry experts can instead go through the process for you. Is Amazon FBA worth it? Below is a quick run-through of what FBA is -- the process, fees, and ROI projection.

How does Amazon FBA work?

FBA, or Fulfillment by Amazon, is a program that allows Amazon to take charge of storage, packing, and shipping on behalf of its sellers. On top of these services, Amazon also takes charge of customer queries, such as returns and exchanges.

The FBA process

The following is an overview of how Amazon FBA works:

  1. Seller prepares the items;
  2. Seller sends the products to Amazon. If you're doing wholesale and getting your stocks directly from a manufacturer, you have the option to send your products directly to Amazon's nearest warehouse;
  3. Buyer purchases an item;
  4. Amazon shall prepare the package in accordance with your instructions; and 
  5. Amazon shall ship out the parcel and ensure that it reaches the buyer within two days, and in excellent condition.

Amazon FBA fees

Like most services available online, you can expect that the FBA program comes with a price. For starters, Amazon deducts 15% from sales for almost all products on their platform. Under FBA, Amazon will deduct another fee for the shipping and handling of your customers' orders. Most of the time, the price is lower when compared to you being the one to process and ship the orders yourself. If you're using an individual seller account, you will be charged another dollar for each product. This additional $1 per product is only applicable for individual accounts as professional seller accounts pay a $40 monthly subscription fee.

FBA vs. FBM

FBM, or Fulfilment by Merchant, provides the same opportunity of being able to sell on Amazon. However, all the business processes -- starting from product conceptualization, to logistics and shipping, to customer care and management -- shall be done by the merchant alone. This may sound like a lot of hard work, but it also has its advantages. FBM is actually recommended for small-scale businesses that target to sell below 40 products a month.

FBM works best for sellers with large-sized products that sell slowly. This is perfect for sellers who have their own storage space and want a more hands-on approach in handling customer transactions and concerns. FBA, on the other hand, is perfect for sellers with small products that sell fast and easily. Despite the differences, a seller can actually register for both services for the different products that they offer.

Seller responsibility

With Amazon providing the option to handle the logistics and management for you, you can focus on developing your products and brand. When subscribing to FBA, the following are the responsibilities of the seller:

Product development

Doing market research and discovering which products sell best are your top priorities as a business owner. With millions of available products on Amazon, you have to make sure that your products and your brand are recognizable, even if you're a reseller offering literally the same thing as other shops. You could do this by having unique personal packaging or offering product bundles. Whatever you're selling, you have to have it ready and prepared for shipping before it goes to Amazon's warehouse.

Inventory and stock replenishment

As a business owner, it is also your responsibility to ensure the smooth operation of your business. This includes making sure that products are fully stocked at all times. This may seem like something that's a little too basic and obvious. However, a healthy inventory is actually one of the deciding factors in Amazon's ranking system. If what you're offering is a fast-selling product, it would be recommended that you regularly monitor inventory.

Posting of listings

Right before sending your products to Amazon's warehouse, you must first put up a listing on the website. In doing so, you must ensure that your listing is SEO-friendly. This involves including keywords in the product title, maximizing the slots for the product photos, uploading enticing product photos, and putting short and direct-to-the-point bullet points.

Marketing

Even though registering for the FBA program provides enough privileges to make your products available for Amazon Prime members, you cannot just call it a day and be complacent. Thousands can also sign up for the FBA program, so you should still give focus on marketing for maximum traffic and exposure. Fortunately, Amazon has numerous internal advertising programs that can help you.

start an Amazon FBA business

How do I start an Amazon FBA business?

Although FBA is already a form of marketing in itself, factors like product quality, availability, and competitiveness are still up to the seller. It would be best if you explain why the buyers need your product and how your product is better than the rest. These are just some of the points to ponder when you start your FBA business.

To start your Amazon FBA business, you must first have an Amazon seller account. You can use this account to register for FBA through Seller Central. The next step is to put up your listing on Amazon. Once done, you can then prepare your product and ship it to the nearest Amazon warehouse.

Advantages of Amazon FBA

By now, you should be enticed to register for the FBA program. Here are the reasons:

You save a lot of time

By signing up for the FBA program, you get to focus on making your business grow. You get to sleep comfortably, knowing that Amazon professionals are taking care of your customers' needs and concerns 24/7. You also save time by not stressing out on customer returns and going to and from courier offices to ship your items.

You get the Amazon Prime badge

Amazon already has more than 80 million Prime subscribers. To this day, more and more buyers subscribe to Prime because of the free and fast shipping benefits that it offers, among many other privileges. In addition, having the 'Fulfilment by Amazon' tagged to your brand automatically earns consumers' trust.

You have higher chances of getting the Buy Box

The Buy Box can be found on the lower right side of a product page, where the 'Buy now' button is located. More than 80% of Amazon sales are made through the Buy Box. This is why brands fight tooth and nail to be able to have it. Registering for FBA won't guarantee that you’ll get a Buy Box, but it will give you better chances as opposed to those who are not registered.

Disadvantages of Amazon FBA

Though signing up for FBA has its perks, it isn't for everyone. For starters, FBA would be most beneficial for sellers who sell at least 40 items a month. For accounts that have a lower amount of sales, FBA might consume the profit as payment for their service. 

Here are some more disadvantages of Amazon FBA:

You lose control

Once you send your products to Amazon, you let the company take over. You won't be able to put any more branding on your products, and you won't be able to get in touch with your customers. Amazon FBA will also use its packaging and name to label your products.

You pay fees

While paying fees isn't exactly a disadvantage, it could be if you don't make a lot of sales. FBA will ask for shipping, storage, and handling fees on top of the 15% referral fee for using their platform.

Is Amazon FBA worth it?

It has been established that Amazon FBA can really help boost businesses. However, for small-scale sellers, thought and consideration should be made to ensure that you get the maximum privileges that FBA offers. Business expansion would require new planning and conceptualization, not to mention a lot of money. To get you started with FBA and to help gauge how feasible FBA is for you, send us an email at [email protected] today.

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