Amazon has significantly grown over the past decade. More people are getting interested in selling on Amazon due to the positive feedback from many Amazon sellers. However, both new and experienced sellers have one question in mind – is Amazon FBA worth it 2022?
In this article, I will discuss what the competition looks like on Amazon, if it’s hard to find products and tips on finding the right product to sell, why it’s beneficial to use Amazon FBA, and the downsides.
Read the full article to find out if you can make a living out of Amazon FBA.
How Competitive is Selling on Amazon in 2022?
Research has shown that 76% of Amazon sellers find Amazon to still be profitable despite the challenges in the supply chain. Selling on Amazon can be very profitable, but it can also be quite costly and time-demanding.
Amazon’s revenue in 2020 was $386 billion, while it was $280 billion in 2019. Third-party sellers will account for nearly half of that revenue. 92% of those third-party merchants use Fulfillment by Amazon (FBA) to run their Amazon business.
While the competition on Amazon and other e-commerce platforms has grown, so has consumer desire for online buying – 62% of consumers begin their product searches on Amazon.
It’s hard to give a definite number on the success or failure rate for new Amazon sellers. However, it takes a lot of hard work, patience, and studying to be successful in Amazon.
Also, almost all Amazon sellers whether new or seasoned ones will experience failure at one point. It’s all up to them how they will take this experience. Whether to accept defeat or continue working their way up to success.
The competition is still tight this 2022 since most people still prefer to shop online rather than visit physical stores. That being said, there is still more room for opportunities in the Amazon FBA business.
How Hard is it to Find Products?
Finding the right product to sell on Amazon is one of the most challenging parts for sellers. One common mistake that most sellers make is choosing products that sell like hotcakes.
What they don’t realize is that the competition is stiff on products that are too popular. If that’s the case, then maybe choosing a niche product would be a good idea? Well, not all the time, as people may not even need the product you’re selling, or worse they haven’t even heard of it.
This is why finding the right product can be challenging. Product research would involve a lot of time, research, and analysis. Luckily for you, here are some tips on how to find the best FBA Amazon products.
What are the Benefits of Amazon FBA?
To find out if Amazon FBA is right for your business, here are some of its benefits.
Uncomplicated Logistics and Shipping
One of the best things about Amazon FBA is that you don’t have to worry about shipping and logistics because Amazon will take care of it for you. All you have to do is ensure you have enough products on stock and track your listings.
Amazon will handle the fulfillment from start to finish. While it may cost you some money, all the hassles from packing to delivering the products to your customers will be worth it.
Discounts on Shipping Rates
Since you’re working with Amazon, one of the world’s largest fulfillment companies, you’ll save money shipping through the FBA platform. As a result, even if you’re paying fees, they may be lower than you expect when you consider the shipping savings. It would still be less expensive than running your own shipping and fulfillment operations.
Customer Service
FBA sellers have access to Amazon’s own customer service. You may also use their FBA platform to handle your own customer support needs. This means you don’t have to worry about all customer’s inquiries and complaints since Amazon’s customer service will do that for you.
Management of Returns
Since returns and refunds are part of the overall fulfillment process, returns from customers are handled by Amazon FBA. Managing returns and refunds can be time-consuming, and leaving it to Amazon means less work for you and more time to do other things.
Faster Delivery
Products in FBA receive the Prime badge automatically, making them eligible for Prime free shipping (to the customer) and faster shipment timeframes.
Bigger Storage Space
Here’s where Amazon’s FBA business shines. Because Amazon has warehouses all across the country that can hold a lot of products, you virtually have unlimited storage space. You don’t have to worry about getting a warehouse to store your items.
Related Reading: What is Amazon FBA: Complete Amazon FBA Guide in 2023
What are the Disadvantages of Amazon FBA?
Just like any other business model, Amazon FBA has disadvantages. Here are some of them.
Cost
While FBA is a useful tool, it comes with a price. Not everyone may have that much money right away to afford the fees to use Amazon FBA. Because of the way fees are calculated, this program is not appropriate for low-cost items. Amazon has a helpful FBA calculator that can help you decide if it’s a good idea for your business.
Requirements for Product Preparation
Amazon has its standard and list of requirements for all the products that are sent into its warehouse. Before you send in the products, you need to ensure that you follow their requirements. This includes proper labeling and packaging as well as following the guideline of FBA inventory warehousing.
It may seem simple enough, but some details can be confusing and tricky.
Fees for Long-Term Storage
If your products have been sitting around Amazon’s warehouse for a long time, they will charge you long-term storage fees. While it may not be a big deal, you’ll have to consider them in your budget to make sure that FBA is still profitable for you.
Aside from the fees, if you have products stored that are not actively for sale, Amazon will also charge you for it, and they can adjust your metrics negatively. However, you can always have your products shipped back to you.
Payment of Amazon FBA Fees
You can’t put off paying what you owe Amazon. You can’t utilize the proceeds from the next sale to cover the costs of the previous one. Before making any payment to you, Amazon will deduct all costs payable to them. But what if you don’t have enough money to pay the fees in your account? To pay off the remaining balance, you’ll need to supply a credit card.
Can You Make a Living Out of Amazon FBA?
The average profit for new Amazon sellers is around $42,000 per year. Though there are a variety of ways to sell on Amazon, the Fulfillment-by-Amazon (FBA) program is the most popular.
Selling on Amazon, like any other business, has some expenses and fees on the seller’s end, but what makes Amazon FBA so enticing is that it simplifies this process for sellers.
The monthly sales an Amazon seller can make in a month would be around $1000. But for super-sellers, they can make more than $100,000 monthly sales.
While sales are a good indicator of a robust Amazon business, they don’t tell the whole story about how much money an Amazon seller makes.
The larger the profit margin, the better, yet new small businesses frequently struggle to break even in their first few months. Amazon merchants, on the other hand, enjoy comparatively substantial profit margins.
Around 38% of Amazon sellers have made more than $25,000 in lifetime profits. This is not bad, especially for those who started it as a side hustle. Around 6% have become millionaires solely from their Amazon enterprises.
Conclusion
So, is Amazon FBA worth it in 2022? Considering the opportunities and competition in Amazon, 2022 seems like a good year for Amazon FBA sellers. While there was an increase in online shopping particularly on Amazon in 2021 due to the pandemic, it seems like more people will continue to shop online. Although there are still challenges with the supply chain, it looks like there will be some improvement in 2022.
Competition is a good driving force for innovation, which is why both new and experienced sellers will shift their business strategies this 2022. With the proper mindset, tools, planning, and following the tips above, selling on Amazon can still be profitable.
What do you think of Amazon FBA in 2022? Share your thoughts in the comments below. Still confused about Amazon FBA? Visit my Amazon FBA course page and enroll! I’ll share some secrets that no other FBA course creators teach!