Amazon is the world’s largest online marketplace. It is known for its expansive range of products. But, not all those products are sold by Amazon. Third-party sellers offer their own used or new products on the marketplace. This is in addition to products sold by AMZ itself. And as of 2021, about 55% of sales on Amazon come from independent third-party sellers. If you’re considering joining the platform as a seller, then you’ve probably been asking “Is Amazon FBA still worth it in 2022”? Keep reading to find out.
FBA is one of AMZ’s fulfillment options. Third-party sellers can either store their inventory and fulfill orders to customers themselves, or they can also outsource the responsibility to AMZ through the FBA program. FBA has afforded sellers a host of benefits and helped them scale their business. But it comes with its costs and challenges.
This raises the question: Is Amazon FBA still worth it in 2022?
We’ll talk about the factors to consider when determining whether FBA is the right fit for your business. First, let’s take a look at how Amazon FBA works.
Amazon FBA: How Does It Work?
Step 1: You send your inventory to an AMZ warehouse, also called a Fulfillment Center. If you are a private label seller, your supplier can ship your products to the Fulfillment Center. AMZ will let you know which of their 175 Fulfillment Centers you should send your inventory to.
Step 2: After AMZ receives your inventory, the warehouse employees will sort your products. Then they’ll store them with a tracking code.
Step 3: When a customer places an order, AMZ picks and packs the item.
Step 4: Amazon ships the item to the customer using their chosen shipping method. Amazon also provides you and the customer with tracking information.
Step 5: After the transaction, AMZ manages customer service. This includes inquiries, returns, refunds, and exchanges.
Step 6: After deducting FBA fees, they pay you available funds every two weeks.
Is Amazon FBA still worth using?
Statista reports that over 73% of top sellers in the U.S use FBA, as of December 2018 (Source). FBA has been found to optimize fulfillment for sellers. It also helps to increase customer conversion rate.
This is because the FBA program grants eligibility for Prime free shipping. As a result, FBA is widely used, giving rise to stiff competition among sellers, and increased fees. This has made sellers weigh the costs and benefits of the FBA program. All this is in a bid to answer the question, “Is Amazon FBA worth it in 2022?”
In reaching your conclusion, here are some factors you should consider.
To handle fulfillment and customer service on your behalf, AMZ charges FBA fees. These fees are adjusted yearly, and these adjustments are usually higher. As of June 2021, the least fulfillment fee per unit, which was $2.50, is $2.70. This applies to the smallest size of products with a shipping weight of 6 ounces or less. So, packaging weight no longer applies.
AMZ also charges higher fulfillment fees for clothing items and dangerous goods.
With this information, you can have a better idea of how much you will have to pay for your items.
You will also have to pay monthly storage fees. This costs $0.75 per cubic foot from January to September. It costs $2.40 per cubic foot from October to December (for small non-dangerous goods).
Product Type and Size
FBA is more suitable for some types of products than others. Large products that are low-priced may incur expensive storage fees. Even worse if they do not sell quickly due to low demand. If you’re selling small items that sell quickly, then FBA is worth a shot.
Your Work Schedule
Even though selling on AMZ is a great side hustle, it still requires some level of commitment. Letting AMZ handle fulfillment for you will take the hassles of running a business off you. Hence, freeing up time for you to focus on other priorities. So if you’re a busy person with many commitments, then FBA is still worth it.
But, there are still some tasks you have to handle if you use FBA. First, you’re responsible for calculating the number of items you should send. Although this task may seem easy, a delicate balance must be struck. Your inventory has to be the right amount. Avoid having too little inventory available so that you end up running out of stock. Also, avoid having so much that you end up paying expensive storage fees.
You’re also responsible for preparing and packaging your products. You should do this in line with certain requirements before shipping them to AMZ’s warehouse. If your products arrive at the warehouse without proper packaging, AMZ will handle them. But you’ll end up incurring another fee because their service is not free.
Availability of Storage Space
If you don’t have enough space to store your inventory, Amazon FBA is the ideal solution for you. The sheer size of AMZ’s warehouses means you can get unlimited storage for your items. This is a benefit you may not get if you pay for your own warehouse. Besides, using Amazon FBA is more cost-effective than paying for your warehouse. This is because there are no upfront costs. Amazon FBA uses a pay-as-you-go model whereby fees are charged to your account.
Lower Shipping Costs For You And Customers
If you use FBA, customers who are Prime members get free two-day shipping for their orders. If there’s one thing customers love, it’s fast and free shipping. So this can give you an edge over competing sellers. If you pay fees to AMZ to handle shipping on your behalf, they’re ultimately cheaper than shipping costs. Especially those you’ll incur if you fulfill orders yourself.
Sales tax concerns
Using Amazon FBA can make sales tax compliance thorny for sellers. Sellers have to pay sales tax to the state where their fulfillment center is located. Some issues may arise when AMZ moves a seller’s goods from one fulfillment center to another. Sometimes, sellers are not informed about the change in location.
Quality customer service
With FBA, you get to leverage AMZ’s efficient customer service. Your customers also gain from the standard customer return policies. You may have to pay a returns processing fee. But it’s worth the cost of having Amazon manage the stressful process of returns for you. AMZ’s will also handle customer inquiries, refunds, and exchanges on your behalf.
Benefits of Amazon FBA
- Passive Income Space: Nowadays, the importance of having a side hustle cannot be overemphasized. An AMZ business is a great way to earn passive income. This is because you can outsource some business processes to AMZ. You can also automate the rest of the processes using AMZ software. If you do this, you won’t have to work round the clock, you can earn from anywhere in the world.
- Vast Storage Space and Seamless Order Fulfillment: FBA allows sellers to outsource storage to AMZ. In other words, you can store your inventory in AMZ’s fulfillment centers. Your orders will be fulfilled promptly on your behalf. Hence, you won’t have to worry about fulfillment. If you opt to use the Fulfillment by Merchant option, you’ll have to bear the cost of storage and shipping. These costs can put a strain on your business, especially if you are a new seller on a budget.
- Access to a Large Customer Base and Solid Reputation: There are over 300 million active buyers on AMZ. Selling on the platform gives you access to all these people. Using FBA further increases your chances of making sales. This is because your products carry AMZ’s logo and packaging. As a result, customers will be more inclined to buy from you.
- Amazon Prime: Products sold via by FBA are automatically eligible for Amazon Prime. As a prime eligible seller, you gain access to sell to Prime subscribers. This can increase your chances to make sales.
- Returns: All returns and refunds will be processed and managed on your behalf. The process can be very long and cumbersome, so being able to outsource it is great.
Disadvantages of Using FBA
- Cost: Using FBA is not a bad idea, especially if you can afford it. It is not a free service. So you will need to take note of all the fees involved. But, if you are on a budget, this fulfillment option may not be the best for you.
- Co-mingling: AMZ stores similar inventory together. In other words, your products are stored with similar products from other sellers. AMZ then picks random products and ships them to buyers when an order is received. As a result, your product quality may vary from customer to customer. If a buyer receives a substandard product, they’ll likely leave you bad reviews. Your business will bear the brunt, not AMZ.
- Inventory Uncertainties: During busy seasons like the holidays, it’s hard to determine how full your inventory needs to be. As a result, you may run out of stock and miss out on sales. Also, you’ll incur extra costs if your inventory sits for too long in AMZ’s fulfillment centers.
- Limited Brand Control: Selling on AMZ means giving up control of your brand. This is because your products carry AMZ’s logo and packaging. Only private label sellers can sell products using their own branding.
- Competition: There are over 2 million active sellers on AMZ. The competition is fierce. If you want to make headway on the marketplace, you must be willing to put in the work. Research and listing optimization are the major aspects that you’ll have to focus on. AMZ software can help you automate these processes and get the best results.
Best AMZ Software For FBA Sellers In 2022
Zonbase is the best AMZ software available on the market in 2022. It is software tailored specifically for AMZ Sellers. It offers a complete set of high-tech tools to tackle all your seller needs. The software offers valuable research and listing tools. Besides this, there is a sales estimator and photo enhancer tool available.
Sellers have access to 13 different tools through Zonbase. The tools focus on three core aspects. These are product research, keyword research, and listing optimization. You do not need to install Zonbase on your computer since it is cloud-based software. It also offers a Chrome Extension tool. The tool assists sellers in researching products on Amazon.
There are four product research tools available in ZB. These tools work together to bring you the best product options for your store. You also gain access to three tools for effective keyword research. These keyword tools will help you spy on your competitors’ keywords. Then you can improve your listings with your new-found keywords. ZB listing tools are highly efficient. With them, you can be sure of a significant increase in your conversions.
As a seller, you have access to all the tools you’ll need at your fingertips. With ZB, you can run your AMZ business without stress.
Is Amazon FBA still worth it in 2021? You have to weigh the benefits and costs, based on your business model and goals. With FBA, AMZ handles the more tedious tasks of your business. It also allows you to focus on scaling your business. Your customers also receive top-notch customer service. This could convert them into repeat customers.
The major drawback of FBA is the costs. The fees may eat into your profits. Also, having AMZ manage fulfillment does not completely free you from monotonous tasks. You may also have to handle some customer support.
Amazon FBA is worth it in 2021. Its wide usage is proof that the benefits far outweigh the costs. As a new seller though, you should calculate the costs of using FBA. Also, test the program with a few products first to see if it is a good fit for your business.
To build a successful FBA business, use Zonbase. Especially if what you want is an all-in-one software that meets all your seller needs. With ZB, you can research winning products and optimize your product listings. You can even set up PPC campaigns, and more.
Sign up for a free trial.