Even though Amazon sells many of its products, a large percentage of total sales stem from third-party sellers. With so many approved sellers to compete with, it’s only natural to wonder, is Amazon FBA dead?
As a private label seller, I am starting to hear this question more often, which is why I am sharing my thoughts on whether Amazon FBA is still worth it.
Does Amazon FBA Still Work?
Fulfillment by Amazon (FBA) skyrocketed in popularity because it cuts out many grunt work for online sellers.
Instead of spending time picking, packing, and shipping products, online sellers can spend more time focusing on business expansion and marketing operations.
Along with the clear benefits of adopting the FBA model, Amazon receives high traffic levels every day. It is also an established brand with a massive base of loyal customers.
These are all obvious reasons to set up shop on Amazon.
However, a lot has changed over the years, and it seems that many sellers are finding it more challenging to reach their sales goals.
This could be linked to market saturation, higher promotion costs, or even the fact that some shoppers no longer need to pay for shipping. The result is more fees for sellers.
With this in mind, you have to wonder whether Amazon FBA is dead.
If we took a step back into the past, we would be met with fewer FBA sellers, products, lesser quality listings, and a higher shipping cost.
Today, an increasing number of Amazon FBA sellers has resulted in more competition. Shoppers now have several sellers to choose from when browsing for one product.
However, not every seller finds the same success.
As you can see below, 38.2% of Amazon sellers make less than $25,000 in lifetime profits.
Just because more and more people are selling on Amazon, it doesn’t mean that they all know what they are doing!
Only 5% of Amazon sellers make more than $1,000,000 in lifetime profits; you can find more interesting facts in this article.
If you want to succeed on Amazon, you’ll need to take it seriously.
Amazon is just like any platform; you need to use substantial marketing expertise and find a way to make yourself different.
That’s been the key to our success.
Some people think that signing up as an Amazon FBA seller has become more challenging, this could be true, but it doesn’t mean that you can’t succeed.
Can You Still Make Money on Amazon FBA?
Whether or not you can still make money on Amazon FBA depends on your business.
You need to be selling a good volume of a product at a healthy profit margin.
We will only go ahead with a product if we know we can achieve at least ten sales a day, we will want to be making at least a 30% profit margin.
This is all very possible if you know what you are doing.
Using the Amazon FBA program has made a difference to us; it has allowed us to focus on the product offering and branding experience.
Amazon handles a lot of the operations whilst we can focus on the customer.
One of the critical benefits of FBA is that it enhances the customer experience.
A customer will get what they want very quickly, and if they aren’t happy, they can return it, hassle-free.
This increases customer loyalty and sales.
This doesn’t mean you can be removed entirely from your business though.
You still need to keep track of inventory and provide some customer support (Amazon requires you to respond to customer messages 24 hours).
On the flip side, Amazon FBA can be more costly.
So, how do you decide whether it is worth your while?
If you can store and ship products effectively, the Amazon FBM program might make more sense to you.
Whichever path you choose, you need to start by deciding on the products you want to sell.
I often recommend that new sellers with a tight budget start out small but strategically decide whether FBA is worth their time and effort.
Read through my guide on how to start an Amazon store on a tight budget if this applies to you.
I believe that it is still possible to make money on Amazon FBA, but the old methods that once worked, no longer apply – more on that later.
Is Amazon FBA Oversaturated?
Based on the fact that there is a high level of competition on Amazon FBA, does this mean it is oversaturated?
Based on a report by Statista, in the first half of 2019, less than 60% of paid units were sold by 3rd party sellers.
This means that even though there are more sellers than ever before, there are also more buyers.
Amazon is also always expanding, which attracts more buyers globally.
This could mean that some sellers may need to tap into international markets to earn more.
I’ve always thought of it like this; if people say that a market is saturated, it usually means that a lot of people are having success.
If other people are having success, you can too. You need to make the customer experience unique!
Why the Old Methods No Longer Work
Back when FBA wasn’t as big a deal and Amazon didn’t have its current restrictions and policies, it was a lot easier to generate sales.
This was due to one particular reason; it was much easier to manipulate product listings with incentivised reviews.
What many sellers used to do was send a few products to people at no cost in exchange for a sterling review.
This not only boosted the position of product listings in search results, but it created a favourable image in the eyes of potential customers.
This wasn’t going to last for long!
This is not to say all these products weren’t necessarily worthy of a 5-star review; it’s just that it was damaging the reputation of their platform in Amazon’s eyes.
Black hat sellers were taking advantage of this by boosting products that weren’t that good, if you sell a product on Amazon, make sure the customer will be happy with it.
Doing away with incentivized reviews is just one of the changes Amazon put in place to ensure every seller has a fair chance to stand out from their competitors.
Today, making a profit as an Amazon FBA seller requires a more in-depth strategy.
A strategy that focuses on selling the right products, creating attractive product listings, marketing those listings, and continuously optimising.
We also spend a lot of time building our audiences outside of the Amazon eco-system; social media is a great way to do this.
How to Succeed with Amazon FBA in 2021
I could share many tactics with you about how to succeed as an Amazon FBA seller in 2021, but we would be here a few months.
If you plan to launch a private label brand, I highly recommend focusing as much time and attention as you can on growing a community away from Amazon.
From email lists and Facebook groups to building an Instagram following, building a strong brand outside of Amazon can help you excel on Amazon.
Our Private Label Training Program shows you exactly how we build brands around hyper-focused customer types.
If you don’t feel like signing up to the training, at least watch this video! It will help you understand how we build and scale private label brands.
In closing, Amazon FBA is not dead, but it does require a new approach and consistent dedication to earn the profits you’re hoping for.
Amazon FBA is not a get rich quick scheme; you will need to put in the work and build on your knowledge.
You can never stop learning, so be sure to keep resources like eBusiness Boss in a bookmarked folder.