Amazon FBA Review
In this Amazon FBA review, based on my own personal experience, I will tell you what you need to know about Amazon FBA, why Amazon FBA is bad, why it’s good, and why it’s one business idea you can pursue.
What is Amazon FBA?
Amazon FBA is the process of selling physical goods on Amazon through Amazon’s inventory and delivery program.
In this process, you work with a manufacturer (most likely in China) to create a product, buy inventory, ship it to Amazon’s warehouses, sell the products on Amazon, and Amazon will fulfill the orders and ship the products to your customers.
Through this process, you are finding a niche within a type of physical good. Preferably a physical product that is already invented and well known so you don’t have to create a totally new invention.
You are simply taking a popular product and improving it. Such as taking a bookcase and making it lightweight and foldable. Taking a baby blanket and making it softer and more durable. Taking an inflatable chair and making it stronger and easier to inflate. Take a product that is already being searched for on Amazon, read the bad reviews, and improve the product to sell a better version of the product that is already selling on Amazon. This is how you find your niche using Amazon FBA.
Now that you understand the process and purpose of Amazon FBA, I’ll dive into what to know about Amazon FBA.
Why Amazon FBA is Good.
Let’s start off this Amazon FBA review by discussing the good. Here are a few pros to using the Amazon FBA program. This is why Amazon FBA is good.
The biggest pro with Amazon FBA, is you are selling on Amazon. Where millions of people are shopping for products every day. You are selling on a platform where people are there to buy products, you don’t have to convince someone to be interested in buying your product. If they are searching for your product on Amazon, then they are likely interested in buying at that very moment.
2) Amazon inventory
Amazon holds all of your inventory. When I sold a product through Amazon FBA, I never touched the inventory. It went right from my manufacturer, to the Amazon warehouse, to the customer. I never had to deal with it.
Amazon makes the logistics really easy. You just sit back, tweak your sales page, and re-order inventory when needed. Amazon handles the rest. Plus, your products get two-day shipping through Amazon.
4) Niche Site
An added bonus, you can create your own niche site to drive people to your website where you are the only product listed. This is just another way to drive traffic to your Amazon sales page.
Why Amazon FBA is Bad.
There are a couple of cons with Amazon FBA, this is why Amazon FBA is bad (I learned the hard way).
1) Upfront cost
The big downside, is you have to pay a lot of money upfront to buy inventory and import the inventory into the United States to the Amazon warehouses. You likely will have to invest thousands of dollars to manufacture and buy the inventory upfront.
Amazon tacks on a lot of fees. There are selling fees, FBA fees, storage fees, etcetera… I didn’t fully understand all of the fees and how they would reduce my profit margin until I began selling through Amazon FBA.
3) Learning curve
It’s a pretty steep learning curve to get started on Amazon. You have to learn a whole new platform of ranking on Amazon and getting reviews. You also have to learn all about working with a manufacturer and importing goods.
My Amazon FBA Review (My Biggest Failure)
No Amazon FBA review would be complete without my own personal experience explained.
I wrote about this over at Failory, where I shared my entire experience in the Amazon FBA Niche. Below is a snippet from the article I wrote for Failory explaining why I failed and lost $16,000 from an Amazon FBA product:
In the end, it came down to profit. I just could not turn a profit. No matter what I did. My marketing effort, trying to rank for my keywords on Amazon, was not working. No matter how many 5-star reviews I got, and no matter how many discounted items I sold, my Best Seller Ranking was not climbing fast enough to rank on the first page of Amazon.
I was in over my head. I chose an expensive product ($20 per unit), I was trying to sell at a premium price ($50 per unit) but no one was buying. The only buyers I was getting were the people buying through JumpSend at a 50% discount. After Amazon fees, I was taking a loss on those JumpSend sales and it wasn’t even helping my organic ranking!
In the end, I sold more inflatable loungers at a discounted rate through JumpSend then I sold organically at full price. I was essentially paying money for people to take these inflatable loungers from me.
After accounting for the initial investment, marketing fees, Amazon storage fees, Amazon sales fees, JungleScout fees, professional photography, and graphic design the end result after selling 500 units of NE Lounger inflatable loungers was a loss of $16,000.
I shut the business down in April 2018 after selling all 500 units (for a loss). The nail in the coffin came when I brought the dilemma to my mastermind group, a group of entrepreneurs I trusted and had been meeting with on a weekly basis for over two years. I asked them if I should re-order more inventory to try and turn a profit, or cut my ties and walk away. I got a lot of great feedback from an outside perspective; it was eye-opening.
The choices were clear, spend another $16,000 and maybe turn a profit or double down on my other online businesses and scale those to reach my goal of $10,000 income per month. It was an easy decision. In the end, I decided not to re-order the next round of inventory. I shut down NE Lounge and walked away with a $16,000 learning lesson.
I can point to a number of reasons why this business failed. First, I suffer from shiny object syndrome. I jumped in too quickly after just learning how to launch an Amazon FBA product. I saw the profit potential, and I was really pushing myself to generate a little extra money so I could leave my 9-5 job and pursue entrepreneurship full-time. I chased the shiny object when I could have doubled down and scaled my successful businesses.
Second, I chose the wrong product. I chose an expensive product to manufacture, one with lots of competition, one that is known to break (and get bad reviews), one that is a fad product that I had never personally used or even heard of before researching niches on Amazon. I should have chosen a simpler item for my first FBA product, one that was less costly and cheaper to manufacture on a per-unit basis. I was in trouble right off the bat when I dropped over $10,000 just to manufacture my inflatable lounger. I put myself in a hole from the beginning. I should have started smaller, and started cheaper for my first attempt. It would have softened the blow of this failure.
Third, I didn’t fully understand Amazon. This was my first Amazon product. I didn’t understand the fees, I was learning about manufacturing, I didn’t understand importing, and I didn’t realize how hard it was to rank a product organically on the Amazon search platform.
In hindsight, there are hundreds of reasons why NE Lounge failed. I am the first to admit, I jumped into this business too quickly. I should have done more research; I should have slowed down. I should have re-evaluated my options, weighed the pros vs. cons, and conducted a better cost-benefit analysis before launching NE Lounge. It was a good idea, I did my research talking to customers, and I entered the market with a better product that met the needs of the target market. But I needed to slow down, take a step back, and re-evaluate the risk of starting a new business on Amazon, a platform that I was unfamiliar with.
I give a full breakdown of this failure in episode 5 of The Entrepreneur Ride Along Podcast.
What to Know About Amazon FBA: Conclusion
In this Amazon FBA review, I’ve broken down what to know about Amazon FBA, why Amazon FBA is bad, why Amazon FBA is good, and even provided a personal case study with my own experience of the Amazon FBA niche.
Here’s my final opinion on Amazon FBA:
To wrap up this Amazon FBA review in one sentence: I do not recommend starting with this revenue stream. It is a difficult and expensive business model, you will need to invest upfront capital to buy inventory, and your profit margin is reduced by Amazon’s numerous fees.
For reference, I paid $10,000 for 500 units of inventory for an Amazon FBA product and struggled to turn a profit. Additionally, it took months to find a viable manufacturer and weeks to understand the logistics of shipping goods from China, through U.S. Customs, to Amazon warehouses.
If done properly, this approach can be incredibly profitable, but it is a difficult revenue stream to start with.
Greg Mercer of Jungle Scout runs a Million-Dollar Case Study every year that shows how to launch a profitable Amazon FBA product. If this is the revenue stream you choose, I recommend following along with the Jungle Scout Case Studies to see if this is the right fit for you.
Ready to Start Your Business?
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Ready to start your business? Pick up your copy of Step One today, and get started building your business.