Amazon, the world’s largest online marketplace, is known for its expansive range of products. However, not all those products are sold by Amazon. Third-party sellers offer their own used or new products on the Amazon marketplace and products offered by Amazon directly. And as of 2021, about 55% of sales on Amazon come from independent third-party sellers.
These third-party sellers either store their inventory and fulfill orders for customers themselves, or they outsource the responsibility to Amazon for a fee through the Fulfillment by Amazon (FBA) program. Amazon FBA has afforded sellers various benefits and helped them scale their businesses. But it comes with its own costs and challenges. This raises the question: is Amazon FBA still worth it in 2022? We’ll answer your questions in this Amazon FBA review.
Before we dive into the factors to consider when determining whether Fulfillment by Amazon (Amazon FBA) is the right fit for your business, let’s take a look at how Amazon FBA works.
Amazon FBA: How Does It Work?
Step 1: You send your inventory to an Amazon warehouse, also called a fulfillment center. If you are a private label seller, your manufacturer or supplier can ship your products directly to the fulfillment center; AMZN will let you know which of their 175 fulfillment centers you should send your inventory to.
Step 2: After Amazon receives your inventory, the warehouse employees will sort your products and store them with a tracking code.
Step 3: When a customer places an order, AMZN picks and packs the item.
Step 4: AMZN ships the item to the customer using their chosen shipping method. They also provide you and the customer with tracking information.
Step 5: After the transaction, AMZN manages customer service, such as inquiries, returns, refunds, and exchanges.
Step 6: After deducting Amazon FBA fees, AMZN pays you available funds on a bi-weekly basis.
So Is Amazon FBA still worth it in 2022?
Statista reports that over 73% of top Amazon sellers in the U.S use Amazon FBA, as of December 2018 (Source). FBA has been found to optimize fulfillment for sellers and increase customer conversion, especially 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 Amazon sellers weigh the costs and benefits of the FBA program 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 fulfillment 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, which cost $0.75 per cubic foot from January to September, and $2.40 per cubic foot from October to December (for small, non-dangerous goods).
Apart from storage and fulfillment fees, you will also have to pay referral fees. Referral fees are charged by percentage and vary by category, often ranging from 8% – 45% depending on the product category.
Product Type and Size
FBA is more suitable for some 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 quickly, FBA is worth a shot.
Your Work Schedule
Even though selling on AMZ is a great side hustle, it still requires some commitment. Letting AMZ handle fulfillment for you will take the hassles of running an FBA business off you. This frees up time for you to focus on other priorities. So if you’re busy with many commitments, FBA is still worth it.
But, there are 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 you run 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 incur 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. The sheer size of AMZ’s warehouses means you can get unlimited storage for your items. You may not get this benefit 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 other 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
Amazon FBA can make sales tax compliance thorny for sellers. Amazon sellers must 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 location change.
Quality customer service
With FBA, you leverage AMZ’s efficient customer service. Your customers also gain from the standard customer return policies, though you may have to pay a return processing fee. But it’s worth the cost of having AMZN manage the stressful return process for you. AMZ will also handle customer inquiries, refunds, and exchanges on your behalf.
Benefits of Amazon FBA
- Extra Income Source: Nowadays, the importance of having a side hustle cannot be overemphasized, and more people are setting up eCommerce businesses for this reason. Since an Amazon FBA business allows you to outsource major business tasks to AMZN, it is a great way to earn passive income. Besides, 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 and have your orders fulfilled promptly on your behalf. This way, you won’t have to worry about order fulfillment. In contrast, if you opt for the Fulfillment by Merchant option, you’ll have to bear the cost of storage and shipping. And these costs can put a strain on your FBA business, especially if you are a new Amazon FBA seller on a budget.
- Access to a Large Customer Base and Solid Reputation: There are over 300 million active buyers on AMZ, and selling on the platform gives you access to all these people. Also, using FBA further increases your chances of making sales. This is because your products carry AMZ’s logo and packaging, thus making customers more inclined to buy from you. If you have asked, “is Amazon FBA worth it”? Now you know that access to a large customer base makes it worth it.
- Amazon Prime: Products sold via Amazon FBA are automatically Prime-eligible. As a prime-eligible seller, you gain access to sell to Prime subscribers and this can increase your chances of making sales.
- Returns: All returns and refunds will be processed and managed on your behalf. The process of managing returns and refunds 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, but It is not a free service. So you will need to take note of all the fees involved. Also, 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 Amazon sellers. AMZ then picks random products and ships them to buyers when an order is received. As a result, product quality may vary from customer to customer. If a buyer receives a substandard product, they’ll likely leave you bad reviews, and your Amazon business will bear the brunt.
- 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. On the flip side, you may also 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 because your products carry AMZ’s logo and packaging. Only private label sellers sell products using their own branding.
- Competition: Over 2 million active sellers sell on AMZN, so the competition is fierce. And if you want to make headway in the marketplace, you must be willing to do the work. Research and listing optimization are the major aspects that you’ll have to focus on. The good thing is, that these processes can be automated using AMZ software.
So, is it worth it to sell on AMZN? Absolutely. The benefits far outweigh the costs, and if you use the Fulfillment by Amazon model alongside AMZN software, you can automate your business and earn passively.
Best AMZN Software For FBA Sellers In 2021
Is Amazon FBA still worth it in 2022? Of course. But sellers who want to make the most out of their eCommerce businesses must learn to automate their business processes. To build a sustainable online business, you must dedicate ample time to executing complex tasks like product research, keyword research, and listing optimization. These processes are not only complex, but they can also be time-consuming and exhausting, especially for beginners who are trying to navigate the marketplace.
As a result, more sellers have switched from manual execution to using AMZN software. So, with AMZN businesses, the journey doesn’t end until all business processes are fully optimized for results. However, choosing the best AMZ software is often challenging because there are so many options. But here’s one we recommend – ZonBase.
ZonBase is the best AMZ software for sellers who want to automate AMZ business processes from scratch. The software offers a complete set of 13+ seller tools for executing business tasks, and sellers will no longer have to struggle to succeed on AMZN. ZonBase’s suite of tools contains four product research tools, three keyword research tools, and two listing optimization tools. In addition, the software offers PPC tools, a sales estimator, and a photo enhancer tool.
As a seller, you have access to all the tools you’ll need at your fingertips. With this AMZ software, you can run your own online shop without having to handle all the business tasks yourself.
Is Amazon FBA still worth it in 2022? You must weigh the benefits and costs based on your business model and goals. With FBA, AMZN handles the more complex business tasks for you so you can focus on scaling your Amazon business. Your customers also receive top-notch customer service, which could convert them into repeat customers.
The major drawback of FBA is the cost. If you’re not careful, the Amazon FBA fees may eat into your profit margins. Also, having AMZ manage fulfillment does not completely free you from monotonous tasks. You may also have to handle some customer support.
Yes, Amazon FBA is worth it in 2022. Its wide usage is proof that the benefits far outweigh the costs. As a new seller, you should calculate the cost of using FBA. Also, test the program with a few products first to see if it fits your business well. If you have read this Amazon FBA review to this point, you have all the information you need to start your Amazon business.
To build a successful Amazon FBA business, use Zonbase. With ZB, you can research winning products and optimize your product listings. You can even set up PPC campaigns, and more.