Is Amazon FBA Worth it?

Jerrika Cox

Is Amazon FBA worth it? Keep reading to get the answer to this important question.

Many sellers who join Amazon decide to simply make an individual account and ship their own products. This saves them money at first and it can make getting used to using Amazon for their online sales an easier process at first.

However, as a business grows, shipping will always become a big time commitment that many businesses need to outsource. Not everyone who is selling on Amazon realizes that Amazon offers fulfillment services through their Amazon FBA program. This can be a great solution to your shipping needs if your business is at the right stage.

If you want to learn more about whether or not Amazon FBA is worth it, read on!

How Does Amazon FBA Take Care of Your Needs?

FBA (Fulfillment by Amazon) is their version of a fulfillment and shipping solution that is normally offered to online sellers through a third-party entity. The other option for small businesses selling online is to fulfill their own orders and take care of their own returns as well.

When you are using Amazon FBA, the process offers benefits that other third-party fulfillment companies can offer. This is how the FBA process on Amazon works:

  •         Sellers prepare their items
  •         The seller sends the products to Amazon directly. For those selling wholesale, there is the option to have the wholesaler send your products to the nearest Amazon warehouse. In many parts of the US, this is not a great distance.
  •         A buyer purchases an item
  •         Amazon prepares, packages, and ships the product to the buyer per the instructions that you have given them as the seller.
  •         Amazon promises per the contract they have with you for FBA that they will send the parcel out and that it will get to the buyer within 2 days in excellent condition.

The 2-day turnaround is a really attractive part of this FBA process since many third-party fulfillment companies cannot promise this quick turnaround.

Amazon Logo

What Are the Fees?

This is an important consideration for some sellers and you need to know that the FBA program deducts 15% from your sales to cover your fulfillment services. Amazon will also deduct a fee for shipping and handling. This cost is often quite low with Amazon on your side, but for some products, it still might not be low enough to make sure that you are not paying too much for shipping.

There is also a $1 fee per product that is applied for individual accounts for these services. A professional seller account will be charged a $40 monthly fee for their subscription which covers this cost.

How Does This Compare to Fulfillment By Merchant?

This is the big question and for some businesses, it can be a bit of a toss-up as far as which method of shipping is the best. This is often the case for businesses that are just about to outgrow their own ability to fulfill their own orders, but are not quite at the point where FBA makes sense for them. There are some considerations that can help you determine if FBA is right for your business needs.

1.       How Much Product do you Sell?

This is the first and most important consideration that you need to think about when choosing whether or not to use FBA for your business needs. Amazon recommends that you do not use FBA unless you sell more than 40 products a month at minimum.

This is just a suggested number as some products do not have a very high margin and you might need to be selling even more than 40 products to justify the added costs that might come along with making the switch to FBA.

2.       How Fast Do You Sell?

The FBA method of fulfillment works best if you sell fast or if you sell large products that need custom shipping processes that might be taking up a lot of your time.

You will find that being able to keep up with a rapid pace for your incoming orders can be daunting, and this is the tipping point where many businesses make the switch. Happy customers are able to get access to the products they have ordered promptly, and this can be very easy when you work with FBA.

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3.       Stock Management

If you have a large storage space and are not finding that managing your supply of stocked items is a difficulty for your business, you might be better off keeping your shipping and fulfillment processes in house.

However, if you are not able to store very much product at your business location and you are having issues with keeping items in stock, you might want to look into FBA for these solutions.

Amazon will be able to stock the products that are needed for your sales and they can even work with a wholesaler to store goods that are sold by your company but are sourced from their location.

4.       Returns

While it might not be a big part of your time considerations or cost management worries at first, returns can be a big time investment as well as a financial burden.

If you sell items that are likely to be returned due to fit, such as clothing, you might want to look at FBA as soon as you think you are selling enough product to make it a good choice. Being able to have Amazon handle your returns can save you lots of money and time over the course of a year.

How Much do Amazon Sellers Make

Is Amazon FBA Worth it?

Overall, Amazon FBA can be very beneficial even to smaller businesses that are just starting to outgrow their own ability to handle their shipping needs.

There are limited cases where this might not be an ideal situation for your stocking and fulfillment needs, but most small businesses as well as larger companies, find that Amazon’s FBA program is well worth utilizing.

If you need help getting your Amazon FBA process set up or you want advice about the best ways to manage fulfillment processes, we can help! Contact us today for assistance with your Amazon FBA needs and we can help you to make your business a success!

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