Amazon FBA is a program that allows you to store your products at an Amazon warehouse. The company then ships these products to customers on your behalf.
When you use Amazon FBA, the company takes care of product returns, customer service and other details related to orders. You’ll also get access to Prime customers, who are the most valuable segment of Amazon shoppers.
Amazon FBA can be a great option for small business owners who want to expand their reach but lack the resources for expansion. Let’s go over some pros and cons of this model, so you can determine if it’s right for your business.
The Pros of Amazon FBA
Prime Access: Since Amazon Prime is one of the most valuable parts of an ecommerce site, extending it to your own products is an invaluable resource. Without Amazon FBA, you’d need to build a system that offers two-day shipping on all orders. This is difficult and expensive for a small business owner.
Returns Process: The return process is one of the biggest headaches associated with selling online. If you’re using Amazon FBA, you don’t have to worry about this process — it will be handled by Amazon on your behalf.
Wholesale Selling on Amazon: Wholesalers buy directly from manufacturers in bulk quantities and then sell to retailers who then sell to consumers. There are many different types of wholesalers ranging from small independent wholesalers through to large corporate wholesalers.
Customer Service: Customer service is another area where small business owners struggle
The cons of an Amazon FBA model for small businesses include:
1. Amazon takes a percentage of your profits on each sale.
2. You need to price competitively with other sellers in order to attract buyers.
3. You will be responsible for any returns and refunds.
4. You will not get as much buyer feedback or reviews compared to selling yourself on Amazon or your own website.
5. If you’re selling handmade goods, you won’t have much control over the quality of the product when it’s sold directly through the fulfilment centre, which can lead to more bad reviews and returns than if you were selling them yourself directly on Amazon or your own website (where you can make sure they’re packaged well).You’re at the mercy of Amazon. The company can change its policies and practices at any time, which could change everything about how you operate. For example, if Amazon decides to start selling your products directly, it could put you out of business. You might also be affected by changes in delivery and shipping practices. There’s nothing stopping Amazon from shipping your products more slowly or charging more for storage and delivery.
It’s expensive to set up. Getting started with Amazon FBA requires a few thousand dollars in inventory and some startup costs that can add up to $1,000 or more. That can be a tough barrier to entry for some small businesses.
You have to deal with returns and refunds. It’s part of the business model, but dealing with returns and refunds is a hassle for many small businesses. Not only do you have to refund customers’ money and take back defective or unwanted items, but you might end up having to relist them on Amazon or elsewhere in order to try to recover some of your costs.
Amazon FBA can be a useful tool to help your business scale, particularly at the beginning of its life. However, it’s not a one-size-fits-all solution and may not be right for everyone.