If you’re looking to start a business that can generate more income and more financial freedom in your life, then you’ve probably looked at the Amazon opportunity.
It attracts a lot of attention for reasons which we’ll get to. But with the growing popularity of starting an online business, is Amazon FBA still worth it?
Spoiler alert: yes.
Building an eCommerce brand that takes advantage of the enormous traffic on Amazon is still one of the clearest, most predictable routes to financial freedom in the 2020s.
But there are some important things you should first understand. In this article, we’ll take a look at exactly what they are so you can decide if an Amazon FBA business is the right opportunity for you.
The pros and cons of selling on Amazon
Like any business model, an Amazon FBA business comes with a range of pros and cons.
Here are a few of each that you should consider.
- Reach Amazon’s audience: With over 300 million active users, Amazon FBA is a huge platform with a vast audience. This can be a great opportunity for businesses looking to reach more customers without expensive marketing campaigns.
- Borrow Amazon’s trust: The world already trusts Amazon- and stores their credit card info with them. Amazon sellers can leverage that trust to achieve industry-high conversion rates.
- Utilize Amazon’s network: If using the Amazon FBA program, products will be shipped from an Amazon warehouse. This minimizes the time an Amazon seller has to spend on each order and maximizes their growth potential.
- FBA fees: As an Amazon FBA seller you will need to pay referral fees and fulfillment fees to Amazon. Without a proper understanding of unit economics, this can seriously affect profit margins.
- No customer data: The Amazon marketplace allows you to sell products to buyers, but doesn’t allow you to collect their information and build your own audience – you need to build that outside of your Amazon FBA efforts.
- Competition: Competing products will be displayed directly on your listing meaning you have to fight for every sale.
Is Amazon FBA too saturated now?
There’s no denying it; the competition for Amazon sellers has grown in the past couple of years as more sellers register on the platform.
The great news, though, is that more and more buyers continue to flood onto the platform too.
Amazon’s Prime membership has risen to over 150m worldwide, with its revenue increasing by almost $100billion per year in recent years.
That’s millions more buyers spending billions more on Amazon – ready for new sellers to come in and claim in order to launch and scale a successful Amazon business.
The impact of this increased demand has surprisingly led to Amazon US actually being labelled as the least competitive marketplace in a recent study.
And don’t forget, over half of the sales on Amazon are by third-party sellers meaning the opportunity continues to grow for you.
All this suggests that rather than being saturated, the Amazon marketplace is instead sophisticated.
It’s a mature market with a healthy amount of competition which is actually a good sign. The existence of a good amount of competition verifies that this is a legitimate opportunity to build a real business and create true financial freedom.
What do I need to do to succeed on Amazon?
Despite the competition, it is still very much possible to succeed with Amazon FBA.
Our members inside BBU continue to launch products with great momentum and smash through the $10k, $100k, and $1million revenue thresholds.
The key is to approach selling on Amazon in the right way in order to out-sell and out-last the competition to build a profitable online business.
Here are the five things you need to commit to if you are going to make selling on Amazon worth it for you.
1/ Don’t be an Amazon seller
First and foremost this is a mentality business.
We use terms like “Amazon sellers” and “Amazon business” because they are widely recognized terms. But from a mentality perspective, they are labels you shouldn’t adopt when selling products online.
Instead, you should consider yourself an eCommerce business owner, or a brand builder who just so happens to sell on Amazon.
By putting yourself in the “Amazon seller” pigeonhole, you’re setting yourself up for a hard time from day one.
Amazon sellers look to sell random products to whoever will buy them. Brand builders understand they are solving the problems of a specific group of people with their products.
It’s this distinction that creates the opportunity to build a real, thriving online business rather than launch “me too” products that don’t stand out and ultimately don’t generate a profit.
2/ Know thy numbers
Speaking of profit, it’s absolutely essential that you go into this business with a clear understanding of your numbers.
A maturing market can lead to profit margins being squeezed as more sellers compete on price.
If you rush into selling on Amazon and don’t take the time to learn the FBA process and the associated Amazon fees, shipping costs, storage fees and so on, you can end up not turning a profit and looking for an early exit.
But any good eCommerce consultant or training community – like Brand Builder University – will teach you the product research process and ensure you account for all necessary Amazon FBA fees.
By understanding your unit economics at a granular level you can maximize the opportunity Amazon FBA provides and give the best chance possible for e-commerce success.
3/ Put your money where your mouth is
Is Amazon FBA worth it if you’re looking to launch a private label brand with $1,000 or less? Probably not.
The times have changed, and if you want to make a real success of this business you should take it seriously both with your time and your money.
To sell on Amazon is no longer a “stab-in-the-dark” business model like it was some years ago. Selling on Amazon used to involve a lot of trial and error to validate product opportunities.
Now you can access tools like Helium 10 that will pinpoint specific data points enabling you to verify proven demand before you put a dollar down on any private label product.
With these kinds of product research capabilities, new Amazon sellers should look to back themselves with a good starting budget to give the best chances of success.
If you don’t have several thousand dollars available (or aren’t willing to invest it), that’s ok – but perhaps you should consider a less capital intensive model like dropshipping, online arbitrage, or wholesale.
4/ Be remarkable; not invisible
In his book Purple Cow, Seth Godin implores marketers to do something that stands out – just like a purple cow would in a field of normal cows.
He goes on to say that “if you’re not remarkable, you’re invisible.”
Whereas some years ago it may have been enough to identify high demand, low completion products and throw a listing up to start selling on Amazon, that simply won’t cut it anymore.
Instead, during product research, you must identify clear opportunities to differentiate your products from the competition in order to stand out and win the sale.
The Amazon platform is unique from your own website or online store in that your competitors will be listed all around you, so without clear points of differentiation you will blend into the crowd and struggle selling on Amazon.
This aspect alone is enough to separate the successful from the unsuccessful Amazon FBA sellers. Those that work hard to create good products to stand out in the market will win the war of attention.
5/ Play the long game
Finally, you have to be willing to be patient.
Instead of focusing on what you can make in 3 months, you should be focusing on what you can make in 3 years.
A lot of new Amazon FBA sellers come into the business looking to make quick cash, quit their job, and immediately upgrade their lifestyle.
Unless you have a significant start-up budget it is very unlikely you’ll be able to draw a liveable income in the first 3-6 months.
Even if you can, doing so would be discouraged as taking funds out of the business at this early stage can stunt its growth and rob you of the greatest opportunity in e-commerce – building a brand you can sell.
A better approach would be to play the long game and understand any new business venture requires the investment of time and money coupled with a large amount of patience.
Stay committed to taking small steps every day in order to compound your efforts over time and you too can join the growing number of online sellers making more money on Amazon than they ever could in a traditional job.
Just be prepared for it to take time!
So, is Amazon FBA still worth it?
The most accurate answer is probably “it depends.”
Ultimately, you have to consider what type of approach you are willing to take.
If you’re looking for a quick, easy way to make some cash – this probably isn’t for you.
If you’re not willing to put the work in to follow the five steps laid out above, this definitely isn’t for you.
But if you’re someone who will work hard, not take no for an answer or take the first excuse to quit that comes your way, then selling on Amazon FBA is most definitely still worth it.
It remains to be one of the clearest, most predictable routes to a 7-figure business in the 2020s.
We’ve had hundreds of first-time business owners come through our Brand Builder University program, start selling on Amazon FBA and create real meaningful income.
More importantly, they are building real assets that can one day be sold in order to create true financial freedom.
If they can do it, why can’t you?
Want to learn more about what it takes to sell on Amazon successfully? Check out our free Amazon Masterclass and get started today!