Pros and Cons of Amazon FBA

Ever since I started using Amazon’s FBA (Fulfillment by Amazon) program, I’ve been excited whenever I have the opportunity to tell someone new about it. Still, I realize that it isn’t for everyone and after a recent conversation I had with someone who is trying to expand their business, I realized that while I often discuss the merits of FBA, I haven’t always commented on the downside of the program. So, without further adieu, here are some pros and cons that can help you decide if using the FBA program is right for you.    

Customer base:

Pro: Selling on Amazon allows you to tap into a massive ready-made customer base. Since Amazon’s marketplace is globally known, you have a much better chance of someone finding your products than if you try to sell them on your own website. Buyers also know that both the buying process and the return process are hassle-free, so they are more willing to take a chance and purchase a product from you online.

Con: Your brand name means almost absolutely nothing on Amazon. It’s harder to get return customers because the buyer doesn’t think about the product coming from you or your company. In their mind, they are actually purchasing the product from Amazon itself. They may buy something from you once, but unless it’s a one-of-a-kind product or you’re selling your items at rock bottom prices, you probably won’t see that customer again.

Storage space:

Pro: You can sell hundreds or thousands of items and you never have to worry about where you are going to store all of them. Simply locate the items you want to sell, pack them up and ship them to one of Amazon’s warehouses. When the item sells — they handle the rest.

Con: Although you don’t have to pay “rent” for an item that is sitting in your own house, there is a monthly fee to Amazon for storing the items in their warehouse. This can also affect profits if items sit around and don’t sell quickly.

Competition:

Pro: Unless you are selling a one-of-a-kind product line, you are going to have competition. The difference is that since you are selling your products through Amazon, the items are going to get a whole lot more exposure than they would if you were selling them on your own website. This means that if you price it right, it has a pretty good chance of selling.

Con: If you have a “hot” product line, Amazon may actually start selling the same product line and may start competing against you, possibly at a lower price. Although Amazon relies on sellers to provide inventory for their marketplace, it is important to remember they also sell similar products themselves. It is even possible that you might alert other sellers that there is a good niche out there that they might not be aware of. This is usually not a problem initially if your product line is selling through a smaller venue.

While the bottom line is that there are some things not to like about the Amazon FBA program, in the end I still have to recommend Amazon for those who want another venue besides eBay and are ready to expand their business. It just makes good marketing sense!

This guest post was contributed by Kat Simpson. Kat is a trusted eCommerce author, speaker, educator, and entrepreneur. Kat Simpson has been a successful eCommerce merchant for over 10 years; is an eBay Education Specialist and Gold Level PowerSeller, as well as a successful Amazon merchant. Currently Kat is the hosts the popular weekly eCommerce Podcast That Kat Radio and an active Facebook Group ThatKat.

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