Starting an Amazon FBA business seems like a great idea. Based on the results you see in YouTube ads and from people on Instagram, Amazon FBA is an easy way to make money from home and fast.
But before you sell on Amazon, there are a variety of pros and cons to consider that can help you avoid starting a business that won’t work for you.
How do you make money on Amazon FBA?
To make sure we are all on the same page, here is a basic overview of Amazon FBA and how it works for you as a seller:
- Find items at a reduced price that are selling for more on Amazon.
- Determine this by checking the price and sales rank on Amazon.
- Once you find an item to send in, you indicate to Amazon that you are sending in that specific item.
- Prepare the shipment and send it off.
- Amazon takes care of everything from storage to shipping and customer service
- Simply get paid when the items sells.
For Amazon’s explanation of how FBA works, check out this video.
This seems easy, enough right? Well it’s not as simple as you’d think. Below I share with you my experience selling on Amazon FBA and then the pros and cons I found.
My experience with Amazon FBA
When I first started looking for ways to make money from home, I stumbled upon ebay and soon after Amazon FBA.
I started ebay and loved it, but I couldn’t ignore the money that people were making being FBA sellers. It was unbelievable and the process seemed so easy. Find items that were profitable on Amazon using their seller App and then create a shipment, send it in and wait for the money to roll in.
So I tried it.
I went to thrift stores scanning all of the books with the app looking at sales rank and profit margin. After scanning a hundred books, I might find 2 or 3 that were going to give me a few dollars profit. Then I tried retail arbitrage where you try to find clearance items in retail stores that sell for more on Amazon.
This led to more scanning only to find most items were in restricted/gated categories (aka I couldn’t sell them) or the profit margin was very slim.
I’d seen people make money with Amazon so clearly I must be doing something wrong. That’s when I found Kristin and Amy at Mommy Income.
They were two moms with successful Amazon FBA businesses and they were sharing their advice and insight. I listened to everything they said and I learned more about how to actually find things that were profitable and how to create bundles. At this point, this was actually working. I was finding things and actually making money with Amazon FBA.
Honestly though, I didn’t love it.
While Amazon FBA wasn’t for me, it might definitely be for you.
To help you decide before jumping in, consider these pros and cons of what having an Amazon FBA business is like so you can decide if it’s really worth it to sell on Amazon.
Is It Worth It to Sell On Amazon FBA?
The answer to this totally depends on you, your interests and what you’re goals are for your life and business. Here are the list of pros and cons to help you make that decision.
1. Don’t have to store inventory.
This one’s a big one for most people.
When you sell on other platforms, like ebay, you have to store all of the inventory yourself. If you don’t have a lot of space or maybe just don’t want to have inventory sitting around, then this can make selling on Amazon very appealing.
You just send the items to Amazon and they store them in their warehouse until it sells. Pretty nice feature.
2. Little to no customer interaction.
For the most part, you don’t have to deal with any customer questions or concerns because there isn’t really a good way for them to contact you. Most people don’t even realize that their product isn’t coming from Amazon and is instead being sold by a small business. Technically, they can ask you questions about an item but it’s not easy to navigate so it doesn’t happen often.
3. Don’t have to keep up with every single order to ship it.
Once you ship your inventory into Amazon, they take care of shipping it out from there. This is a big difference from other selling platforms, like ebay, where you have to ship every single order yourself. This requires keeping shipping supplies on hand and having an understanding of how to ship items at a reasonable price. Since Amazon takes care of it, this saves you a ton of time.
4. Can sell in volume.
Technically, you can do this on most e-commerce marketplaces but due to how popular Amazon is, you can sell a high volume of items very quickly.
It’s not unheard of to send in 10 or 20 of an item and have it sell out within a few days. Of course, that depends on the popularity of the item, but you get the idea. This is how a lot of people make their money with Amazon FBA. Being able to sell lots of items at a lower profit margin can add up really quick.
5. Lots of available data to make educated buying decisions.
Within Amazon’s Seller app, they allow you to check an item’s sales rank, the current price it’s going for and how much you will get if you sell it at a specific price. This allows you to have a good idea of the profit you’re looking at and how fast the item will sell (lower sales rank means it’ll sell faster). This can be really helpful to know how long your money will be tied up in something.
1. Finding profitable inventory.
As a beginner, this was the hardest thing for me about Amazon.
There’s quite a bit of work that goes into scanning and searching for profitable items. You can scan through tons of books and tons of items in a retail store and find only 1 or 2 that are profitable. It’s not impossible since there are plenty of people that do it, but there’s definitely a learning curve in figuring out what kinds of items will probably sell.
2. Profit margins are often lower than other reselling sites.
On most of the items sent into Amazon FBA sourced from either thrift stores, garage sales or retail arbitrage, the profit margins were rather small. For instance, I might find something for $1 that can sell $6 and my profit might be about $3. This works great if you can do it at scale, but as an ebay seller, I was used to margins like find something for $1 that I could sell for $10-$15. This one is definitely a personal preference but for me it was a con for sure.
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3. Gated categories prevent selling a lot of items.
When you find a potential item for FBA, you often will check what it’s ranking is and how much it’s going for using the Amazon Seller App. If an item is gated, it will show up with a restriction warning. There are tons of categories that are restricted and lots that aren’t as well.
This part of selling on Amazon FBA was definitely frustrating to me. I would often find really great deals on items that I wasn’t’ cleared to sell and honestly couldn’t figure out how to get ungated.
It’s not impossible to get ungated or to find items that are already ungated, but this is something to definitely consider about Amazon FBA.
4. Amazon fees are rather hefty.
The fees for doing Amazon FBA can be rather expensive compared to most other online marketplaces, but since they are doing all of the work for you, it makes sense.
Their prices are fixed and if you can find an item with a high enough profit margin, then these fees really aren’t that bad. They include everything involved with the order being fulfilled including the customer service for a reasonable price. The issue simply comes when you are selling an item for $5 and the fee is $3 and you spent $1 in the first place.
It’s all a numbers game that you have to really pay attention to as a seller.
5. Preparing items to be sent to Amazon can be tricky.
When you send items into Amazon for them to store, you have to follow their rules on shipping them. Once you get the basics, it’s relatively easy to send in smaller, non-breakable items but sending in bulky or breakables can be a little more vague.
Final ThoughtsThere you go. The pros and cons of starting an Amazon FBA business. One thing that’s important to note is a “con” for one person may be a pro for someone else. And honestly, most of the cons can be resolved really easily by taking a thorough course from someone that’s already figured it all out. There are lots of different resources out there for learning various ways of running an Amazon FBA business. My favorite course is FBA Today by Kristin Ostrander and Amy Feierman at Mommy Income. Not only have these women built successful 7-figure eBay businesses, but they did it while being home with their kids. In their course they break down all of the details of starting a successful Amazon FBA business in a way that’s very easy to understand. In addition, they have a weekly podcast, YouTube channel, and Facebook community to help you learn the business and really get success.
Quick recapAmazon FBA sounds like a dream come true but it isn’t for everyone. Consider these pros and cons to help you decide BEFORE plunging in. Pros
- Don’t have to store inventory.
- Little to no customer interaction.
- Don’t have to keep up with every single order to ship it.
- Can sell in volume.
- Lots of available data to make educated buying decisions.
- Finding profitable inventory.
- Profit margins are often lower than other reselling sites.
- Gated categories prevent selling a lot of items.
- Amazon fees are rather hefty.
- Preparing items to be sent to Amazon can be tricky.