Are you interested in learning about the Amazon FBA pros and cons? It’s a good idea to have an overview of the benefits and weaknesses of pursuing this business model. This ensures that you’re able to make up your mind about whether it’s the right choice for your skillset.
89% of Amazon sellers use the FBA program, so it’s the most popular way of selling products on the biggest e-commerce platform on earth. With such high usage rates, you’ll see that there is a good reason to give Amazon FBA a try for yourself.
Amazon FBA Pros
Let’s start by looking at the advantages of Amazon FBA. Keep these top of mind when deciding if this is a business model that’s worthwhile.
Amazon Brand Name
Marketing is one of the toughest aspects of launching and running an Amazon business. In fact, it can eat up a significant part of your start up funds. Fortunately, when selling on Amazon, you’ll take advantage of the famous brand name. The e-commerce platform does the hard work of driving millions of daily visitors to many niches.
In comparison, if you plan to launch a business on your own website, then it can take a while to build a brand reputation.
Hands-Off Approach
Amazon FBA handles the manual labor, which includes storage and packing your goods. This means that you can scale your business as a single business person. It’s perfect if you prefer to work on the computer and don’t want to manually handle your goods.
You can send products starting from the factory to Amazon FBA warehouses. However, you may want to hire the services of a quality inspection company to ensure the products are of good quality.
Low-Barrier To Entry
Amazon FBA has a low barrier to entry, so it’s available for many business owners. Firstly, you can start with just a small number of units to see how the program works. There’s a small monthly fee that you’ll need to pay, but the Amazon FBA fees are taken after you make a sale.
Also, you don’t have to be in the same country as you plan to sell in. For example, you can sell on the United States Amazon marketplace and reside in Europe or many other pre-approved countries.
Automation
The Amazon FBA business model allows for a lot of automation. That’s because Amazon does a lot of the extras, including customer service and handling refunds. Once your stock is in Amazon warehouses, you simply need to monitor sales and make sure that there are no error messages in your Amazon seller central dashboard.
Good Customer Experience
Amazon does a great job of quickly processing orders and cutting down the delivery time. Amazon Prime members can enjoy next day delivery for many products and your ones might be among them. Therefore, if you choose to sell with Amazon FBA you are going to provide customers with a consistent delivery experience.
Increased Buy Box Chance
To increase your odds of winning the buy box, you need to have positive metrics such as a quick delivery speed and fulfill orders within a few days of the purchase. However, for many of the KPIs that contribute to winning the Buy Box, you get top marks automatically by taking part in the FBA program.
Therefore, FBA sellers have an advantage over FBM sellers. The latter simply refers to sellers who fulfill orders using their own shipping method and not Amazon warehouses.
Amazon FBA Cons
It’s important to have a balanced overview of the Amazon FBA program by taking into account the negatives. These will help you get the right expectations and possibly prepare to overcome the challenges.
Fees
The fees associated with Amazon FBA can build up if you aren’t careful. For example, Amazon applies a slow moving stock fee if you keep products at their warehouses for longer than one month. Hence, it’s a good idea to have a complete overview of the fees to understand your costs.
You’ll need to factor in the fees when calculating profit to ensure you can find a good product selling opportunity.
Packaging
You don’t have control over the packaging that is applied to your products. That’s because Amazon will use its own packaging with the Amazon brand name. It means you cannot use your own branded packaging, which reduces your potential to build a standalone brand that’s not reliant on Amazon.
Terms and Conditions
There is a long list of terms and conditions that you have to follow when selling on Amazon with the FBA program. This includes things like having certifications for specific product categories. Also, Amazon may take your listing down and ask for specific actions before you can continue selling products. In some cases, you may no longer sell your products, and you’ll have to choose stock liquidation.
The fact that you need to abide by the rules set by the Amazon FBA program means that you have less flexibility to execute your own vision. Therefore, you may want to avoid Amazon FBA if there are rules that are a deal-breaker for you.
Amazon FBA Pros And Cons Final Thoughts
To conclude, the Amazon pros and cons in this article should give you enough food for thought to decide. Overall, with so many new business owners trying Amazon to make their riches, there are more pros than cons.
However, don’t forget to appreciate the negatives since they might be too much to handle, given how you like to set up a business. For example, if you don’t want to pay the high Amazon FBA fees, then you may want to start your own e-commerce website.
Finally, regardless of whether you choose Amazon FBA or not, you’ll need to create an LLC to increase your chances of success. Here at Business Anywhere, we offer competitive business registration services.
