What is special about the Amazon FBA service and what experience do sellers have with it?
“My experience with Amazon FBA: I sell with FBA and earn €20,000 a month! Now I will show you how to build a successful business.” – One way or another, you have certainly read several promising headlines from self-proclaimed Amazon gurus. But do these reports of experience with Amazon FBA correspond to reality? The question of whether Amazon FBA is worth it is asked by many who are involved in e-commerce or are considering starting their own online business on Amazon.
No one can deny that Amazon FBA offers many advantages for sellers. However, remain critical and beware of exaggerated success stories that are abundant online. What we can say upfront is: yes, you can make money with Amazon FBA, but it requires certain knowledge, and you need to consider some aspects. Based on experience, Amazon FBA is by no means a “get rich quick overnight” model! In this sense, we will show you here the main advantages and disadvantages of Amazon FBA and what experience other sellers have had with the fulfillment service. So: use your head, friends, and happy reading!
What is Amazon FBA and how does it work?
Amazon FBA (Fulfillment by Amazon) is a service where sellers can outsource all logistics, such as storage, packaging, shipping, returns, and customer service. Amazon takes care of all this, of course for a certain fee. Nevertheless, sellers can reach a much larger number of customers through automatic participation in the Prime program — and at lower costs.
To start as an Amazon FBA seller, you first need to send the selected products you want to sell to one of Amazon’s fulfillment centers. This can be done through carriers of your choice or you can let Amazon organize this process. In the next step, the products, including the “Prime” logo, will be listed. Now, orders placed through Amazon are fully processed by Amazon. Picking from the warehouse, packaging in boxes, and shipping is done exclusively by Amazon. If there are issues with orders, Amazon also takes care of customer service and returns of returned items. Typically, customers have a good experience with Amazon FBA, even if they are not aware that their order was shipped using this service. The profit earned, minus all fees, is transferred by Amazon to the seller’s account.
Is every seller and every product suitable for Amazon FBA?
Amazon FBA is generally available to all sellers on the Marketplace (with some exceptions). However, it should be noted that storage fees depend on the required storage space and the duration of storage. Especially for larger products, FBA can impact margins and even become unprofitable. Therefore, products that are larger purchases for the customer and are purchased less frequently may be less attractive. In general, we recommend conducting thorough and extensive product research to get a clear picture of the situation or even catch one or two trending products.
Additionally, Amazon states in its rules that products that fall under the following four criteria may be excluded from the fulfillment program or may not be offered at all. This can somewhat dampen the experience of some entrepreneurs with Amazon FBA.
Categories requiring approval: This refers to categories such as food products, which are controlled and regulated by Amazon. According to Amazon, this is necessary to ensure customer safety, quality, compliance with trademark rights, and adherence to legal import and export requirements.
Products with restrictions: This includes, for example, prescription medications, as they are legally excluded from sale. Also, nicotine-containing tobacco products or used automotive parts are restricted by Amazon’s rules.
Hazardous goods: Products with hazardous components that pose a health risk cannot be sold through Amazon and, accordingly, cannot be distributed through Amazon FBA.
Improper packaging: Packaging that does not meet Amazon’s requirements may also lead to exclusion from the FBA program. In this context, Amazon emphasizes the need for safe and efficient packaging quality that can be handled in fulfillment centers.
An alternative to Amazon FBA is dropshipping. Both delivery methods have their advantages and disadvantages. We have examined which fulfillment method is suitable for whom: Amazon FBA vs. dropshipping.
The most significant advantages: this is reported by Amazon FBA sellers based on experience
Logistics simplified
If you have sold something on an e-commerce platform, you may know how difficult it is to search for a product in your home warehouse, pack it, and then deliver it to the post office. Manual shipping takes an enormous amount of time and effort. Instead, sellers using Amazon FBA can take advantage of the expertise and human as well as material resources of the online giant.
Huge storage capacities available
With Amazon FBA, you theoretically have unlimited free storage capacity, as you utilize Amazon’s massive fulfillment centers and do not have to invest in complex logistics. No more overcrowded garages where you lose control and have to constantly clean up. Space issues, goodbye! You only pay for the space you actually use. Storage fees are based on the average daily storage volume in cubic meters per month. There is a distinction between the low season (from January to September) and the high season (from October to December). The high season is slightly more expensive; however, it is expected that you will also generate more revenue during this time. Amazon offers an official FBA calculator that should give sellers more confidence in their calculations. After all, it is not only important that other Amazon sellers with FBA have a good experience, but the financial aspects must also be in order!
Shipping through Amazon
Thanks to Amazon handling shipping and having established contracts with major carriers such as DHL, Hermes, and UPS over the years, shipping costs have significantly decreased. On the other hand, Amazon offers a fast and affordable alternative to the aforementioned delivery services through its own courier service. For the customer, fast and reliable shipping is an additional argument for purchasing your product.
Managing returns
Handling returns and dissatisfied customers is an unpleasant task. For all FBA sellers, Amazon takes on the unpleasant part, starting from inspecting returned products to handling all subsequent tasks — you no longer have to worry about anything.
However, a small fee is charged for processing returns, which depends on the volume of work. Usually, it is small and justifies itself for the seller. However, keep in mind that Amazon is very loyal to FBA products and accepts returns that you might not have accepted. All important information about the Amazon A to Z guarantee can be found here: Amazon A to Z Guarantee: Between Sales Genius and Return Madness.
Access to top-notch customer service
Amazon offers customers extensive service that Amazon FBA sellers can pass on to this e-commerce giant. The support service operates on behalf of FBA sellers worldwide 365 days a year and 24 hours a day. There is chat for direct messaging, email support, and phone service. Smaller sellers usually cannot afford this on their own, as they lack the manpower or the hired teams are often too expensive. Thus, the customer experience is significantly improved, and you can stand out against competitors who prefer to handle order fulfillment themselves or have outsourced customer support.
Prime status boosts performance
Probably one of the most significant advantages is that 70% of Prime customers shop on Amazon several times a week, while only about 27% of customers without Prime visit Amazon that often. This is a significant advantage for Amazon FBA sellers. It is also quite common for customers to filter by “Fulfilled by Amazon” status—thus, the visibility of FBA products is significantly increased. Although sellers without FBA also have the option to sell with Prime status, they must first qualify and prove that they can meet high logistics standards. This is usually impossible for many small sellers.
The most significant drawbacks: this is reported by Amazon FBA sellers from experience
Although the advantages for Amazon sellers are very positive, you also need to weigh some drawbacks of the Amazon FBA offering. However, in each specific case, the size of the barriers for sellers can vary greatly.
Advertising is only possible to a limited extent
Although advertising on the platform itself is not an issue, individual packaging or including flyers and similar items is not allowed. Amazon FBA products are shipped in packaging with the Amazon logo, which does not allow for conclusions about the actual sellers. Thus, any communication with the customer is blocked—including promotional materials. Each seller must decide for themselves whether they want to hide communication of their own brand and take advantage of the full power of the Amazon brand or if it is more important for them to raise awareness of their brand among customers.
Too high expenses
Experience with Amazon FBA also shows that, on one hand, expenses are considered an advantage, while on the other hand, they can become a significant drawback for the seller, as they need to be weighed against profits (this should always happen). If the sales volumes of a product are very low and the logistics costs are too high, in the end, nothing will be left. Amazon FBA sellers often simply start selling. The problem for many sellers is that they have miscalculated expenses such as FBA fees, storage and packaging costs, as well as subsequent reorder expenses. Therefore, there should be enough starting capital to deal with potential issues.
Amazon FBA: Experience shows that the competition is huge!
Creating your own business in online retail is much more difficult than with Amazon FBA. But the FBA business is not a walk in the park either, as sellers face the strict requirements of the Bezos corporation. The euphoria has faded, and it has become clear to most that earning money with Amazon FBA in the long term requires a lot of work and certain expertise.
On one hand, the increasing competition settling on the platform is one of the challenges for FBA sellers. Additionally, Amazon as a superpower actively participates in sales and acts as a seller. Furthermore, a large portion of the offered products is now sold by multiple sellers, and the pressure of competition continues to rise. Accordingly, the so-called Buy Box, based on experience, is becoming increasingly difficult to win even with Amazon FBA.
Now to the point: Is Amazon FBA still worth it?
Now you have all the current information on this topic. But there is still one question left: is Amazon FBA profitable for you or not? Most companies and experts answer this question with enthusiasm: “Yes, of course!”
The correct answer is likely to be: “It depends on the circumstances.”
If you are selling on Amazon professionally, you cannot do without using FBA. Time savings and increased chances of winning the Buy Box for those selling products clearly speak in favor of using Fulfillment by Amazon. But how can you get the most out of this concept?
In the end, it doesn’t matter whether you are selling a product or your own brand. The fact remains that it is currently extremely difficult to find a new product that is not already being sold on Amazon. There are simply too many people selling all kinds of products and specializing in every conceivable niche. On the other hand, there has never been as many online shoppers as there are now. And here’s the thing: all these potential customers are looking for the same thing. Namely, a good product that is accompanied by an ideal customer experience.
The key phrase here is “Customer experience”
A flawless product is practically a basic requirement. But the ideal customer experience—beautifully referred to in English as “Customer Journey”—is not encountered as often and is remembered just as much as the quality of the product.
Of course, with Amazon FBA, you do not have the opportunity to communicate directly with your customers. Amazon does that for you. However, you can use the time saved to, for example, work on your listing. You can, for instance, order high-quality photos of your products, improve your product descriptions, or work on your pricing strategy. Especially on such a huge platform as Amazon, it is ultimately the unique selling propositions that drive purchases.
So, is Amazon FBA worth it for you? It depends. How can you prove to customers that your store is better than the competition? Do you have the best price? Are you selling an extremely practical bundle? Are your images simply more beautiful than those of your competitors, and do they convey the feeling that the product gives to a person even when scrolling on a smartphone?
Well-executed factors are exactly what justifies Amazon FBA. Those who sell mediocre products without FBA will continue to sell mediocre products even with Amazon FBA.
The problem with FBA errors
Errors also occur at Amazon during order fulfillment. FBA errors are difficult to identify manually or at very high costs. FBA sellers on Amazon often lose a lot of money if they do not claim their deserved reimbursements. Usually, there is a lack of knowledge and the necessary time to manually analyze every detail, gather the required reports, and interpret the errors. SELLERLOGIC makes FBA errors visible and supports you in preparing data, documenting cases, and the tedious communication with Amazon. Use the unique tool now: SELLERLOGIC Lost & Found.
Conclusion: Amazon FBA – user experience of the program
Amazon FBA sellers receive some exclusive advantages compared to other sellers on marketplaces, such as significant simplification of operations, fast and seamless delivery through Amazon warehouses, as well as associated cost savings since there is no need to rent or build their own warehouse. Thus, it is possible to create an e-commerce business with relatively small startup capital.
However, there are also some drawbacks that Amazon FBA brings with it based on experience. The seller loses the ability to communicate directly with customers, as all order fulfillment is handled by Amazon. Additionally, Amazon also makes mistakes, and sellers who do not take care of their reimbursements may inadvertently lose a lot of money.
However, experience has shown that with good preparation, especially with accurate calculation of incurred costs and weighing opportunities and risks, nothing prevents a profitable and successful Amazon FBA business, and high profits can be achieved. Bad experiences with Amazon FBA, as can be read on many forums, have been encountered by every seller. The motto here is “Keep calm.”
Image credits in order of appearance: © Mike Mareen – stock.adobe.com / Screenshot @ Amazon / © photoschmidt – stock.adobe.com / © Mike Mareen – stock.adobe.com
