Did you know Amazon recently released a report showing that over two thousand people earn six figures or more selling on Amazon?
You can find lots of success as an Amazon FBA seller, but you need to plan properly if you want to do things right. Start an Amazon FBA business, you will have to make an initial investment which can be difficult if you are on a razor-thin budget.
The rewards are plentiful, but I guess the question that comes to mind is, “Is fulfillment by Amazon (FBA) fees worth the cost?“. Our answer? Absolutely! And in today’s article, we will discover why.
Table of Content
- What is Amazon FBA?
- Cost of using Fulfillment by Amazon
- Pros of Amazon FBA
- Cons of Amazon FBA
- Is FBA worth the cost?
What is Amazon FBA?
FBA is short for Fulfillment by Amazon. Amazon enables third-party sellers to sell their products on Amazon by simply using the Amazon platform as a marketplace. The whole fulfillment process includes all product packaging, shipping, and returns, and all customer service is being taken care of by Amazon.
With Amazon FBA you have to pay for Amazon inventory, and orders that are fulfilled by Amazon. For a small fee paid for each unit sold, you can spend time watching Netflix in bed or traveling with your friends instead of wasting it packing and shipping people’s orders. Selling on Amazon FBA is also fully scalable, meaning you can start small and grow your business at a steady pace.
Cost of using Fulfillment by Amazon
If you’re wondering how much it actually costs to get started with Amazon FBA as a complete beginner in 2020, take a look below.
Software: You are going to need software to find the perfect product and do keyword research. You can use a basic complementary version for free, or you can invest in fully-featured paid software like Ranked Record, PPC optimization tools, launching tools, etc. If you buy all these software individually, it would cost you more than 500 dollars per month. So, to save yourself some cash, I suggest you either do the research yourself or subscribe to ZonBase and let them do it for you. ZonBase is an extremely powerful, and cost-efficient tool for Amazon sellers that has every type of software you will ever need to grow your Amazon business
Samples: Once you find your perfect product, it’s time to order your sample. You have to make sure that quality is extremely high and that it looks the way you expect it to. The budget to actually receive an individual unit of product as a sample is $150.
Inventory: Inventory is the most expensive part of the overall process inventory is what you will be actually selling on Amazon. The number depends on the cost of your product, but the minimum budget you should budget to start is around $1500.
Barcode or UPC Code: Amazon recommends getting a barcode or Universal Product Code(UPC) from GS1. Barcode from GS1 will cost $250 per 10 barcodes. But, you will get some cheaper alternative as well, for $40 for 10 barcodes.
Shipping: You can ship your product either by sea or air. By sea, it will take 30 to 45 days but it costs 1/10 or ⅓ of what it costs by air. You have to budget $500 for shipping your products. But, you will save a significant amount of money if you are going to ship them by sea.
Giveaways/PPC: To launch your product on Amazon, you will need the help of Giveaways and PPC marketing. You have to create a strategy with these two techniques to rank on top of the Amazon page. You have to budget $250 for both giveaways and PPC.
Seller Fee: The last expense that we are going to talk about is the professional seller fee which is $39.99 per month. Creating an Amazon seller account will give access to Amazon’s seller central. It is essentially the platform that Amazon created for its independent third-party sellers.
Course (Optional): One optional expense for you might be if you decide to join an Amazon FBA course or one on one mentorship. A good online course costs around $2,000 and individual mentorship is around $25,000.
Total Budget- So the total budget you need to get started with Amazon FBA is $2,787 (excluding course budget).
Pros of Amazon FBA
Here are some of the biggest benefits of using Amazon FBA:
- Painless Logistics and Shipping- Managing your logistics requires human resources and time. The higher your sales get, the more time and money it takes to pack and ship your items. With Amazon FBA, you do not have to worry about logistics and shipping.
- World-class Customer Service- Amazon provides 24/7 customer service management, refunds, and returns to all the Amazon FBA sellers, only the return processing fee is charged in case of any return.
- Unlimited Storage Space- With FBA, you can send your products to Amazon’s warehouse for storage. There is no minimum to the number of products you can store there and whenever any customer places an order, the product is shipped from the nearest logistics.
- Quick Delivery and Free Shipping– Amazon offers same-day or two-day shipping of products to customers. With its hundreds of Amazon fulfillment centers all over the world, it provides quick delivery. Amazon also provides free shipping plans for its customers.
Cons of Amazon FBA
- Competition- Amazon has currently more than 2.5 million third-party sellers actively selling on the Amazon marketplace. The total number of products on Amazon as of April 2019 was 119, 928, 851. With every new seller, the competition increases to make their product rank high on search results.
- Customer relationship is owned by Amazon- With FBA, Amazon provides customer service, returns, and all the direct communication. In this way, Amazon owns all the direct communication.
- Investment- As discussed before, Amazon needs a minimum investment of $2,787 to start your Amazon FBA selling business. If you are looking for an online business and do not have a budget, you can look for some other passive income streams to build. Once you have the budget then you can turn into Amazon.
- Long term storage fees- If your product is consuming space in Amazon’s inventory and has not been sold for more than 6 months. Then, there can be some storage fees that you need to pay. Sometimes you can end up paying a pretty big amount as rent to store your products.
Is FBA worth the cost?
Almost every business in the world needs investment. Just like that Amazon FBA business wants you to have the required budget to start. But, that doesn’t mean it’s not the right business. Amazon is never saturated and never the wrong choice.
Amazon is growing bigger and bigger. It keeps improving itself to provide a great experience to its customers and sellers. Amazon provides great benefits to its customers like the same day or two-day product delivery, good customer service.
It might be difficult to decide whether you should choose Amazon FBA or not. But, if you know what you are doing and building a great strategy. No one will stop you from gaining success and making your business profitable.