As a fact, Amazon has millions of customers on its platform, but the seller’s competition is also very high. Amazon seems like a very profitable business to run, and everybody wants to have their piece of the pie. If you are a beginner in this business, you know that you will need a strategy to make it profitable, and if you are a veteran, you probably already know that this is a constant battle to stay on the top.
However, Amazon offers many programs to help sellers boost their business and ease the burden of selling their products. From promotions to shipping on your behalf, Amazon has it all.
You have to decide what to use. But you have to do your research in order not to use money. 66% of the Amazon sellers use their FBA program.
What is FBA?
FBA or Fulfillment by Amazon is one of the popular programs that sellers use. Amazon picks, packages, and ships the item to the customer when the order is made. The seller stores their inventory in the Amazon fulfillment Center, and when you sell the product, they take care of the rest.
Although this eases the burden from the seller, it is not free of charge, and you can lose your money fast and unexpectedly.
How Can You Lose Money with FBA?
You have to be prepared to bring your business to the next level and enroll for FBA. You have to know the downfalls of this step and the benefits. Making your business a successful one is not only going blindly for all Amazon offers. Here are some ways how can you lose money fast.
Amazon FBA Full Cost – Make Your Calculation
A Professional Seller’s Account costs $39.99 a month. This account grants you several options in your seller’s account. Many sellers ask themselves: is Amazon FBA worth it? It depends on are you ready to pay the additional fees and still be profitable.
On top of your seller’s account fees, FBA sellers will be charged additional referral fees and fulfillment fees for every item sold. The seller pays a referral fee for every item sold in the percentage of the total price, shipping cost, and gift-wrapping charges.
Fulfillment fees per unit include picking and packing your product, shipping, handling, customer service, and product returns. The fee is based on your product size and weight.
These fees are based on the dimensions and weight, and the charges may vary. Make sure to calculate all of these fees.
Apart from excellent and optimized product listings, the seller needs to decide what products they will sell on Amazon. Hundreds of products will not do you any good if you don’t have a strategy and you cannot manage all these products.
For new sellers, it is crucial to focus on ten products. You can build your brand gradually and see what is selling fast. This way, you will have time to get some experience and get your business on the right track.
Managing Your Inventory
If you decide to enroll for FBA and think it is an excellent way to manage your business, you will have to think of how many items are convenient to have in the warehouse. Sending too many items that are not sold fast will make you pay additional fees for storage.
The inventory stored for more than 90 days comes with a high cost. So make sure to replenish your inventory but also do not have too many items there that you don’t expect to have a quick turnaround.
Advertising and Promotions
Although advertising is a way to boost your business fast, many sellers do it before they are retail ready. You have to optimize your products and make sure they are prepared to sell before going into an advertising venture. If you advertise and do not sell your products, that will hit your profit margin.
Issues with Packaging
Amazon has very strict guidelines for each category, and the items need to be packaged and labeled correctly. FBA items are processed through Amazon Fulfillment Centers, and they have to be packaged and labeled so that the warehouse should receive them. They have to be packaged separately per item with the labels with the title and a barcode ASIN. In Seller Central, you can find all the requirements. Amazon can label it for you, but it comes with a price-per-unit. In the US, the FBA Label Service is $0.55 per item.
You have to keep in mind all of these costs when making your price. It would be best if you put the cost of labels, boxes, and packaging to get some profit.
Suspended FBA Account
Amazon policy and terms are stringent. If you do not follow them, you can quickly end up with a suspended account and lose a lot of money. Some of the reasons to get your account suspended are the following:
- One seller account. Having multiple seller accounts can raise a red flag with Amazon, and it is forbidden.
- Do not sell low-quality products. Your reviews will have to be above three stars to continue selling.
- Don’t ask for fake reviews. Amazon has a strict policy about this, and you will get a suspended account fast.
- Canceling orders. If you cancel too many orders, it will not be taken kindly by Amazon because Amazon relies on fast shipping and good customer service.
Of course, you can get your account suspended for other reasons, but these are the most common ones.
Amazon FBA is a program that a seller should consider. However, you should be prepared and calculate your costs and make your strategy. This way, you should make sure it is the option that suits you most.