Amazon FBA in 2022: the advantages... and disadvantages?

In 2020, Amazon had more than 3 million active sellers on its platform, and an estimated 89% of users preferred to buy a product on the marketplace rather than on an e-commerce site.

A purchasing solution that is fierce and terribly efficient!

So, whether you are a beginner or an experienced seller, Amazon offers the FBA or Fulfillment by Amazon solution: a service that allows you to sell your products with a lighter mind. Although you will have to make sure that you always have stock on hand, you will no longer have to manage it in your warehouse and this includes the preparation of your orders, the management of your returns as well as the customer service.

On average, sellers who opted for this sales model recorded an increase of almost 36% on their sales.

What is Amazon FBA?

Launched in 2009, this model is initially aimed at small and medium-sized businesses and provides them with a real alternative for logistics outsourcing, thus guaranteeing real savings in time and money.

Fullfilled By Amazon allows merchants to store their products in Amazon's distribution centers. The marketplace then takes care of order preparation, packaging, shipping, customer service and eventual returns management.

However, some conditions must be respected: your products must not exceed 30 kg, they must not be considered as prohibited or dangerous products, you must indicate your local VAT number and prove that you are a professional seller.

If you meet these conditions, you just have to create your account in a few clicks on the Amazon Seller Central page and start your business in the best conditions!

What are the main benefits of the Amazon FBA?

The first advantage, which is not negligible, is the savings in terms of resources: both in terms of time and manpower. Indeed, as we mentioned earlier, Amazon takes care of all the logistics for you: you just have to create your catalog, send your inventory and that's it! The number one marketplace also offers you a reliable customer service, available 7 days a week, to guarantee an optimal customer experience for all its users.

Amazon also lets you refer to its FBA fee schedule. Depending on the type of product, its weight and size, you can easily calculate the cost of this service. All you have to do is add up the shipping and storage costs as well as all the optional services (returns, labeling, packaging, etc.). This amount will of course be charged to you in the currency of your account on Amazon's Seller Central. If your product already exists, you will also be able to find this information. Just go to the Seller Central calculator to generate a complete simulation.

Another considerable advantage: thanks to Amazon's FBA, you will be able to benefit from fast delivery, within 24 hours, thanks to the Amazon Prime service. An option that represents no less than 200 million subscribers worldwide in 2021. As a guarantee of quality, the marketplace provides you with great visibility, a very high number of visitors and a certain legitimacy. Having the "Amazon Prime" badge on your product page is a way to gain the trust of your customers!

Finally, a more technical benefit concerning your product page: this model allows you to win the famous Buy Box more easily! Indeed, this purchase button allows Amazon users to place your product directly in their shopping cart. A must-have if you want to perform on Amazon: it is estimated that more than 80% of purchases are made through this lever. A "Call to Action" not to be neglected to perform on Amazon.

What about the disadvantages of Amazon FBA?

But are there any real drawbacks to selling in Amazon FBA? Although Amazon's FBA service is very attractive for sellers, there is always a "downside".

In the context of this service, we will focus more on the notion of "constraints" which you should be aware of before starting the adventure on Amazon. Thus, in addition to the costs related to the subscription and the various Amazon services (storage, shipping, sales costs related to the category, etc.), the main constraint of this service will be the ability to generate acceptable and sufficient margins to continue to be profitable in the long term.

On some products with low face value or with sizes/weights that involve high FBA fees, the "shipped by Amazon" model does not seem to be sufficiently suitable.

Don't worry, there are ways to get around this risk, we explain!

• If you have a small, inexpensive product, you can apply to be included in the Small and Light program. By selling through the Small and Light program, you can improve your margins and thus save more money for you and your customers by lowering - sometimes considerably - the costs. So what are the criteria? Your product must weigh 225 g or less, be 33 cm x 23 cm x 5 cm or less and be priced at 10 € or less.

• What if your product doesn't meet the eligibility criteria of this program? Our solution: batch creation! Creating a new product offering will allow you to amortize your FBA fees. If several products are sent, you will only be charged the sales fee once.

Last but not least, Made by Bizon tips: you will be able to study and test your products with a "minimum order quantity". This manipulation linked to Amazon's FBA service will offer the consumer the possibility to order a product only from a quantity defined beforehand. An offer that may be a bit disappointing for some customers but that could reduce shipping costs per unit sold, save time and costs related to the creation of multi-packs and, group sales and reviews in a single product file.

Keep in mind: there has been a recent push for stricter regulations and high standards for each new listing, including labeling of unique products.

The marketplace can also impose a stock limitation, which is sometimes drastic. This could have an impact on your sales since this regulation can affect the number of units and the volume you can have in the warehouse. Amazon reserves the right to regularly review this limit, which can have serious repercussions on the availability of your products.

Finally, since the platform takes care of all the logistics, as a seller, you will have to submit to decisions related to returns and refunds from your customers. You may find that the marketplace is too lenient with its decisions, without being able to control the final verdict.

This rule introduced by Amazon shows a serious willingness to structure the inventory of products shipped by the marketplace through its warehouses but also, its willingness to make the user experience a real priority.

In conclusion?

As we have seen, selling on Amazon and going through the Amazon FBA service can quickly rhyme with developing your sales and activating your brand and your visibility via the platform.

Be careful, however, to take your pen and paper and calculate the expenses related to this service to ensure that you generate the desired margins.

Amazon imposes its own rules and you will have to know them, accept them and above all, have the ability to adapt when the cards are shuffled. This will ensure that you always have a plan B and can land on your feet.

To remember: Amazon also offers another option to FBA when you select the "Seller" mode: FBM or Fulfillment by Merchant. This allows you, conversely, to keep control of every step and condition of the sale.

Still not sure if this model is right for you? You don't know where to start?

Amazon seems too high a mountain to climb alone?

Our Bizon experts direct you to the path of fortune, follow the guide, we help you to perform on Amazon!