When it comes to selling with Amazon FBA, some people assume there won’t be any cons, and it will be easy to start using the service and everything will go smoothly all the time.
After all, they’ll handle so many things for you, and Amazon is a big, successful company, so they should know what they’re doing, right? Well, having sold using Amazon FBA successfully for a number of years, I have the experience to articulate the major pros and the cons.
There are some great features when it comes to Amazon FBA, but there are also a lot of things to consider when deciding whether or not to utilize it, and if it’s right for your overall business model.
I’m not going to dress it up as the ultimate easy business money-printer for everyone. But for many, it’s a great addition to their business.
So, let’s go through the good and the bad of Amazon FBA.
Pros of Amazon FBA
It’s fair to say the good things about Amazon FBA are actually really good. The major pros are:
- Relatively Easy Setup
- Simple Inventory Management
- Broad Reach
- Huge Cost Savings
Let’s dig into each one of these.
Relatively Easy Setup
Amazon FBA helps you get up and running very quickly. You just need to set up an account, either Individual or Professional, and you will be able to start your Amazon selling immediately.
You can search for a product that already exists on Amazon and become a reseller for it, or apply through Amazon’s Brand Registry program to sell your own unique product.
If the product already exists on Amazon, the product page information is already there, and you just need to set your pricing and inventory levels.
If you’re building a product from the ground up, you’ll need to add images, descriptions, and some critical keywords to create an Amazon product page.
The system then automatically generates you an ASIN (Amazon’s unique identification number) and you’re up and running.
This makes getting started with FBA easy convenient, so you can focus on other aspects of your business.
Simple Inventory Management
Amazon FBA makes it easy to send products to their warehousing for fast processing and to handle the logistics of customer order fulfillment.
Once the processing is done, you can monitor your inventory levels and can also adjust pricing to stay competitive as either a reseller or selling your own branded products.
You can set up different prices for retail and business customers, and get notifications when your inventory is running low. You’re also able to access a lot of reporting information about your sales to make the best decisions for managing your inventory and pricing.
Broad Reach
It’s a bit of an understatement to say Amazon is ‘big’. According to the latest statistics, there are over 300 million purchases made on Amazon every day. So, deciding to use Amazon FBA gives you access to this huge customer base.
Amazon can also enable you to sell globally through their various international marketplaces and help you get localized if needed.
You can sell throughout Europe (Amazon has several different marketplaces within the European Union), Japan, the Middle East, as well as North America in Canada and Mexico.
This broad reach makes starting your selling journey easier through their platform than if you were to do start on your own.
Huge Cost Savings
The final major advantage of using Amazon FBA is the fact that you do not need to manage the shipping, returns, and overall logistics for your products.
All that’s needed might be a few essential tools like boxes, packing tape, or printers to print shipping or product labels.
Amazon FBA also handles returns and prepares returned products to be resold, if possible, typically without any issues.
Their rates are competitive and transparent, and using FBA is a great way to scale as needed.
Amazon also offers extensive shipping partnerships to get your products to customers within a short period of time via their Prime program, keeping your customer satisfaction levels high.
If you want to read more about the pros of Amazon FBA, here are a number of other benefits as well.
The Cons of Amazon FBA
Amazon FBA does have some cons, such as:
- High Fees
- Amazon Doesn’t Tell You What to Sell
- Minimal Training
- Communications Can Be Vague
Let me explain each.
High Fees
Yes, this might sound like the exact opposite of what I just said about competitive rates. Any rates, competitive or not, are only affordable if your product’s margins are high enough. Amazon FBA can hurt a business with low margins, especially resellers who may have thinner margins and who don’t actively find ways to avoid losing money.
There are regular monthly storage fees, and long-term storage fees if you’re products don’t sell fast enough. There are packing fees and labeling fees if your products aren’t sent properly, and there are also advertising costs, which are necessary if you’re launching a new product on Amazon.
Since Amazon’s commission to sell an item is percentage-based, you need to do your homework to ensure you can make money using Amazon FBA.
Amazon Doesn’t Tell You Which Items to Sell
There are some data points Amazon provides about a product’s sales, such as the Best Seller Rank, and there are third-party software tools that can help interpret this data, but it can be hard for newcomers to know which products will sell well and which won’t.
If you don’t know better, any given category’s products may look like they sell well. If you misread the data, you may decide to sell a product that takes a long time to sell or you won’t be profitable with.
If you’re a reseller, competing against other resellers, you’ll also be constantly battling for the Buy Box, and potentially reducing your product’s price just so it will sell.
If you’re trying to sell your own branded product, you’ll have to do extensive research to get enough information to select a competitive and in-demand product, usually by researching products that are hot sellers. None of this is native to using Amazon FBA.
Minimal Training
There’s no formal training required to use Amazon FBA, and in truth, I learned the hard way through trial and error – but I still made it work.
While there are videos you can watch as part of what Amazon calls “Seller university”, and an army of Internet Amazon gurus offering to sell courses to help new sellers understand the ins and outs of Amazon FBA, none of that covers the hidden pitfalls a new seller can encounter when first trying to get started with Amazon FBA.
This can be frustrating as because you’re learning how to use various features of Amazon FBA while simultaneously trying to manage and scale your business.
This lack of training extends to their paid services such as advertising, which is absolutely necessary if you’re launching a new product on Amazon, but is hard to understand.
All of this feels like self-discovery, when there should ideally be an educational component for all aspects of using Amazon FBA.
Amazon FBA Communications Can Be Vague
There are times when you may get a message from Amazon and you need to take action.
This can be for a wide variety of reasons, such as ID verification, inventory or shipment issues, or proof you’re eligible to sell a particular product. Somewhat bafflingly to new sellers, this can happen even after you’ve sold a few items, and you think you’ve already met Amazon’s selling requirements.
In response, you typically have to submit documents to Amazon support to show proof of what they’ve asked you for. Sometimes you have to send these documents over and over again, getting different or contradictory responses.
Also, if you decide to sell globally, there can be different rules to follow within each marketplace, which may lead to more vague communications, as well as sometimes being temporarily banned to sell in a region until everything is resolved.
Amazon FBA support needs improvement, because the automatic fail-safes Amazon has developed to handle seller issues don’t always work. Vague communications are a symptom of this poor support structure.
Those Are the Major Pros and Cons of Amazon FBA
I consider myself a veteran seller using Amazon FBA, and despite the cons I just listed, I’m still happy I started selling on Amazon. You can see from my own journey that it hasn’t always been easy, but every day has been rewarding and worth the effort – and my business (and happiness) has grown exponentially since I started.
If you’ve ever wondered what the pros and cons of selling with Amazon FBA are compared to a working a regular day job, check out this post.
Want to know which tools I use in my Amazon business every day? See the full list here.