Amazon FBA Review: Good Business Idea Or Not?
What Is An Amazon FBA Business?
Running an Amazon FBA (Fulfillment by Amazon) business allows you to list, market, and ship your own product line through Amazon.com.
Responsibilities may include product research, sourcing suppliers (such as through Alibaba), creating product listings, and marketing your products.
Amazon will act as your warehouse. And they’ll handle the logistics–packing, shipping, and customer service for any orders you receive.
This is not the same as being an Amazon Associates affiliate.
The Pros Of Running An Amazon FBA Business
Selling your product line through Amazon allows you to tap into Amazon’s customer base and infrastructure.
You could potentially reach thousands, or even millions, of customers that are ready to hit that “1-click buy now” button.
Plus, with Amazon handling fulfillment, you’re able to potentially scale without issue… with just a small team or even as a one-person operation.
The Cons Of Being An Amazon FBA Seller
Sizable Upfront Investment
To become an Amazon FBA seller, you’ll need capital for product research tools, your actual product line, shipping your product, and marketing.
As of writing this, top of the line product research tools for Amazon are typically billed yearly at around $468.00.
Cost of manufacturing and supplying your product will vary on what you end up selling. Most sellers source their products from China to reduce costs.
This doesn’t include any costs for developing stages of prototypes if you’re actually looking to improve products that will sell better.
Next, you’ll have to ship your product to Amazon’s warehouses. This can be done by boat, air, or sometimes train. Costs will vary on your product and shipping method.
Then, you’ll need to do quality control. If you’re not doing this yourself, you’ll pay middle-man fees for having someone else double-check the quality of each shipment.
Lastly, you’ll likely have to pay for marketing for product exposure. Most top sellers invest in Pay-Per-Click marketing platforms on Amazon, Google, and/or Facebook.
Challenges With Suppliers & Shipping
Finding reliable, high-quality, and responsive suppliers can be challenging.
If you plan to use overseas suppliers to reduce costs, then you may also run into language barriers.
Beyond that, you may experience trouble with customs. For example, imagine paying for a pallet of product and then having it rejected in customs. It happens.
Challenges With Marketing & Inventory
You’ll also have to create your own product listings (or pay someone else) to do it.
From there, you’ll have to learn the Pay-Per-Click game to gain product exposure. This involves risking more capital to see how well your product does.
Other moving parts that affect your marketing campaign include your copywriting skills, product differentiation, offer types, and more.
At this point of the process, you’re still not guaranteed a home-run. And any inventory that doesn’t sell will incur inventory storage fees.
You’ll also need to learn how to manage cash flow.
You’ll need a process for researching, testing new prototypes, buying stock, adding new listings, and marketing them
Lack Of Control
As an Amazon FBA seller, you’ll be reliant on Amazon’s platform.
And Amazon FBA policies are always changing. And sometimes the policies are not in favor of Amazon FBA sellers.
Having Amazon as your only selling channel can put your income stream at high risk.
Plus, Amazon also controls practically every area of customer interaction. You may not have access to your actual customers, which can prevent you from maximizing communications and customer value.
Is There A Better Business For Beginners Than Amazon FBA?
For beginners with less experience and less capital, I’d suggest Digital Flipping.
You can start with as low as $21, and make hundreds or even thousands of dollars. This can be a better alternative, or even help fund your future Amazon FBA business.
Plus, it’s sort of similar to Amazon FBA but with less moving parts and far less of a learning curve.
What Is Digital Flipping?
With Digital Flipping you simply go straight to buyers looking for a service (such as website design) and then outsource that work to an expert.
Then you profit the difference.
It’s not as scalable as Amazon FBA, but it has far less moving parts where things can go horribly wrong and put your entrepreneurial career on hold.
Plus, starting capital can be as little as $21.00.
In closing, Amazon FBA can be a solid business. But like all real businesses, there is a process behind it. It’s not an overnight success event.
However, it is what I consider to be a much more advanced business that I would not recommend to beginners or those with smaller budgets. If you fall into that boat, then I’d recommend you start with Digital Flipping first and then branch off once you gain capital and experience.
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