The two reasons you should not sell via Fulfillment by Amazon (FBA), and stick to Fulfilled by Merchant (FBM)
The Great FBA Vs FBM Debate
The conversation around selling on Amazon is polarized by two sentiments:
On one hand those, who oversell the ease of setting up and running an FBA (Fulfillment by Amazon) business.
On the other, those who downplay the huge benefits of FBA.
Let’s talk about the first one: The downsides of FBA, and when you should continue to sell FBM.
Reason To Not Sell With FBA: Part One
You should not sell via Fulfillment By Amazon if you’re doing low volume
My monthly overhead just to keep the FBA (Fulfillment by Amazon) pirate ship afloat is over $700. That includes monthly subscriptions for a scanning app, FBA listing software, labels, unlimited data plan on my phone, and FBA storage fees, packing tape, boxes, an Amazon Pro-Merchant account, insurance (required by Amazon for FBA sellers), internet service, gas, and shipping costs.
If you’re debating FBA vs FBM, ask yourself: Can you turn a profit when you’re spending $700 a month on your current business?
Reason To Not Sell With FBA: Part Two
You should not sell via Fulfillment By Amazon if you can’t afford startup costs.
Starting an FBA business is going to be about $300 out of the gate. That includes a barcode scanner, label printer, app cost, labels, and more.
If you don’t have at least $300 to invest, then the FBA vs FBM debate is settled: Stick to Merchant Fulfilled.
Reason To Not Sell With FBA: Part Three
You should not sell via FBA if you’re not committed to the Amazon selling business.
For the above reasons of startup costs and monthly overhead, if you’re not 100% committed to selling on Amazon, then don’t start selling with FBA.
Here’s what you don’t want: To invest a bunch of money in a business, commit to a few monthly payments, and then bail on the business.
FBM is a fine way to test the Amazon selling waters before going all-in.
FBA vs FBM: Endnote
And that is it.
If one of those three apply, then dive in to FBA. Glorious things await you on the other side…
-Peter Valley
Hi Peter,
While all these are valid concerns, I have to disagree with you re. the sales volume needed to start the use of FBA (Fulfillment by Amazon). First of all, if you are already selling on Amazon, you are already paying for the Merchant account. There is no extra setup costs for FBA (Fulfillment by Amazon). Second, what’s with the smart phone and unlimited data on it? I’ve been selling on Amazon for almost 4 years now, doing FBA (Fulfillment by Amazon) for 3 years and did just fine with my free Google voice account. Same goes for the barcode scanner, my store has over $300K in annual sales, and I still do just fine without one. Definitely not a startup must, though it makes things a lot easier in the long run.
What’s really important when choosing whether to go FBA (Fulfillment by Amazon) or self-fulfill your Amazon orders is one’s understanding of all costs and hidden fees associated with both. Fulfilling orders by Amazon can be a little cheaper than packing and shipping yourself, or can be more expensive, especially if you account for the costs of shipping the items to Amazon (which is really inexpensive, though) plus storage fees.
FBA (Fulfillment by Amazon) takes the burden of shipping each item to the end customer, but requires correct preparation of shipments to Amazon, which also require time and effort. At the end of the day, I’d rather send a box of tiny things for Amazon to sell for me at a $0.2 margin, than pack and ship dozens of them myself. If you look at it this way, FBA (Fulfillment by Amazon) allows to you effectively *add* volume to your sales. It’s chicken and egg, I guess 🙂
All good points. With the cell / data plan, I was referring to the model I outline in Amazon Autopilot, in which sellers go out “in the field” and scan items to determine their FBA (Fulfillment by Amazon) value (using an app like ScanPower, for example). This model does require a smart phone and unlimited data. I think we are almost certainly using FBA (Fulfillment by Amazon) in very different ways.
Thanks for reading.
I think it’s misguided to insist that an FBA (Fulfillment by Amazon) component is not appropriate until one can put $700 a month into one’s business. FBA (Fulfillment by Amazon) in and of itself is not a business, it’s only a fulfillment service that happens to include the most dynamic sales platform on the planet.
There are ways to incorporate FBA (Fulfillment by Amazon) into smaller volume businesses. The issue is whether or not the products have a large enough profit margin to pay the FBA (Fulfillment by Amazon) fees and still make a good ROI, along with a sales rank that will allow the product to move out of the warehouse without incurring too much in storage fees to still be profitable.
There are many successful business owners who use FBA (Fulfillment by Amazon) without doing the heavy scouting that requires the scanner and the monthly expenses. Some of those people intend to ramp up their businesses to include more scouting with a scanner, while others are moving towards sourcing from wholesalers at trade shows, while still others have discovered certain thrift shop items can bring a huge return when packaged for FBA (Fulfillment by Amazon).
There is no wrong way to use FBA (Fulfillment by Amazon) as long as it fits your business objectives,is profitable, and doesn’t violate any of Amazon’s terms of service.
Right. Good points, however I felt that because this site is focused on books and media, that it was implied the info I was providing in this post was specific to that model.
First off, Peter I have Amazon Autopilot and I feel that you have written the best book out there on FBA (Fulfillment by Amazon) leaving nothing back.
Second, I would like to add one of my solutions to the in-the-field scanning. I didn’t purchase the top-of-the line scanner that all the guru’s are affiates for (you know, the one that rhymes with ‘Cereal Oh.’) i purchasedd a lessor know brand for under $100 that works just fine. And as for the smartphone with unlimited data? I got an ipod off of ebay for $79 and a mifi card with an unlimited data plan for $96. All told, $175 or less than $20/month. And after the first year, I’ll just pay the mifi annual thereby paying about $8/month for the year. Add in a Skype account (which runs off the mifi as well), it makes for a very affordable option!
Tony
Thanks for the kind words.
This is an interesting setup. Would you be interested in writing a quick guest post giving all the details?
I started selling on Amazon FBA with $0. I already had the smart phone and unlimited data, so that wasn’t an extra cost for me. I started with an individual account, so I didn’t pay the pro-merchant fee. I haven’t paid for any additional subscription services or scouting app. I use Amazon’s free Amazon Seller app for sourcing. I don’t have a barcode scanner, but that it is on my list of things to buy in the near future.
For my first shipment, I sent in used items that I already had around the house and that others gave to me. I also used boxes, packing material, tape, etc… that I either got for free or already had. As far as labels, I also got some of those for free as well and borrowed a laser printer to print.
Even shipping costs for my first shipment were deducted from my Amazon seller account resulting in a negative balance until my first sales started coming in, so really… I started selling on Amazon with -$38.00.
That was about two months ago and my total sales to date are almost $900. It may be a slow start, but sales are continuing to grow and I am able to source a little bit more, and purchase supplies needed with every payout that comes in.
This business really can be started with nothing as long as you’re willing to put in a little more work and effort and figure out how to get it done.
Natalie-
Your comment is super helpful to me. I don’t have the phone (just a cheap little cell, but willing to buy one).
I have an individual seller account right now and want to change it over to FBA.
Am I reading this right that there is no pro merchant fee to pay when you switch over?
Thank you for your comment. It has eased some anxiety about switching over.
Laura
Hi.
I just found your website and I am in the process of doing my very first shipment.
I am wondering if there has been problems with using “USED” boxes when you shipped your first box? Is it OK that retail boxes have words on the side…as long as the box is relatively clean and sturdy?
Thanks!
I assume that this article is just for reselling books and stuff through FBA. I make my own product, so there’s none of this scanning or bar codes or smart phones or unlimited data, etc etc.
Hello,
I am closing down my small online gift shop. I need to get rid of about 200 products, some multiples of same item (baby, home, etc).
Wondering if you could provide the best Amazon option. I really just want to get rid of the inventory. I am new to Amazon so any information anyone could provide would be extremely helpful.
Thanks in advance!
Gina
Amazon Autopilot is my guide to setting up an FBA business.
I want to go the FBA route but very concerned about the Sales Tax Nexus in 15 states. Almost impossible for a small $ seller to keep track. Any ideas? Thanks!!
Be very careful about taking sales tax advice from someone trying to sell you books or services related to helping solve the problem they’ve exacerbated. Make sense?
I will start my FBA business with no money and that includes no mobile phone for scanning.
I will do it because I don’t have any other choice.
I have found a way to source books easy and will try all of this with nothing but my Computer and free seller account.
I do not even have a car to haul a box. I will start off like a homeless person selling flowers and see if I get a smile from anyone around me.
Since I barely can feed myself I felt the need to start off with nothing and look to see what I own that could help.
This will not put me in debt. I just need to remain positive.
Good luck to you! Thinking of starting one ourselves but the above statements have me concerned. Please update how you do and I hope you prosper and then can offer tips to other who are starting with little to no start up expenses.
I don’t know if can’t see the whole article, but your reasons are not enough for that agreement because you will encounter some cost every time you start a business. As a matter of fact, you will be running your business at net lost for awhile before you can see some profits..
Hi all! My question is about Merchant fulfilling. I know that FBA has restricted categories that that you need permission to sell and send in. Is there a list of restricted categories for fulfilling orders yourself? I just signed up for the free sellers account until i get my feet wet. I don’t want to accidentally buy products that i’m not allowed to resell. Thank you.
Can anybody give me any advice? I am looking to sell cleaning products-32 ounce, and 16 ounce on the website. But the products sell for $7, and $5.50, respectively. How the heck can I make this affordable selling with Amazon? I’ve talked to several people on Amazon and wasted it a couple hours of my life learning basically nothing. Nobody really seems to be able to offer me any support as far as making this affordable for me. Any ideas?!