As we approach the end of the year, many people are wondering if using Amazon FBA will still be a good idea in 2023. The answer is a resounding yes! Here’s why:
In 2021, Amazon’s revenue reached a staggering $469 billion, an increase from $386 billion the previous year. A significant portion of this revenue, 22%, is generated by third-party sellers. Among these sellers, a large majority (89%) use Fulfillment by Amazon (FBA) to manage their business on the platform.
Despite the increase in competition on Amazon and other e-commerce platforms, the demand for online shopping has also grown. In fact, 63% of consumers begin their product searches on Amazon.
In this article, we will explain why selling on Amazon FBA in 2023 is still a worthwhile endeavor.
How Much Do Amazon Sellers Make?
If you’re considering selling products on Amazon FBA, you might be wondering how much money you can make. Here are some statistics on the profits earned by current Amazon sellers:
- Approximately 65% of third-party sellers on Amazon report profit margins of over 10%, and 32% report profit margins of over 20%.
- 50% of Amazon sellers report monthly sales ranging from $1,000 to $25,000, while 13% report monthly sales of $25,000 to $250,000. On the other hand, 22% of sellers report monthly sales of under $500.
- In terms of profit margins, 9% of Amazon sellers report margins of 1-5%, 10% report margins of 6-10%, 15% report margins of 11-15%, 18% report margins of 16-20%, and 13% report margins of 21-25%. A small percentage of sellers, 3%, report profit margins of 51-100%.
- Approximately 14% of Amazon sellers have reported lifetime profits of over $100,000.
It’s worth noting that 8% of Amazon sellers report that they are not yet profitable, and another 8% are unsure of their profitability. If you’re not sure about your profits and losses, you can use a tool like Sales Analytics to track your performance and get a full financial picture of your business.
Pros and Cons of Selling on Amazon
Selling on Amazon has a number of benefits, as well as some drawbacks. Here are some pros and cons to consider:
- Access to a large customer base: Amazon.com receives nearly 3 billion visits per month and has over 300 million Prime customers worldwide. As a small business, you can list your products on a website that is visited by millions of people every day.
- Convenient fulfillment with FBA: If you use Amazon’s FBA program, you can send your inventory to Amazon’s fulfillment centers, where they will handle storage, order fulfillment, and customer service for you.
- Prime shipping: When you use FBA to fulfill orders, your products will be eligible for Prime shipping and will be accessible to Amazon’s large Prime customer base.
- Storage fees: If you use FBA, you will need to pay storage fees to keep your products in Amazon’s fulfillment centers. There are two types of storage fees: monthly and long-term. Proper inventory management can help you avoid costly storage fees.
- FBA fees: To store, pick, pack, and ship your orders, Amazon charges fees. These fees depend on the size and weight of your product. Between FBA fees and referral fees, you can expect to pay 30-40% of your product price.
- High return rates: Amazon has a generous return policy, which can lead to high return rates for some sellers. While this may be convenient for customers, it can be a hassle for sellers.
Is it Too Competitive to Sell on Amazon?
While competition on Amazon has increased in recent years, it is still possible for new sellers to be successful and make a profit. In fact, if you sell in the US marketplace, it is considered the least competitive of the Amazon marketplaces.
In any business, there will always be competition, and competition is actually a good thing because it indicates that there is demand for your products. This year, it is estimated that around 600,000 new sellers will have signed up to sell on Amazon. While this may seem like a large number of sellers, it’s important to remember that Amazon’s market share is consistently growing. This means that while there may be more competition, there is also a larger and growing customer base to share.
If you are a new seller on Amazon, it is important to do thorough product research before diving in and selling a particular product, even if it is currently popular. This will give you a better chance of being successful in e-commerce and on Amazon.
What Does it Take to Sell on Amazon?
Selling on Amazon requires both an upfront financial investment and a commitment of your time.
- Many sellers (69%) started their Amazon business with around $5,000, while 32% started with less than $1,000 and 16% started with under $500.
- If you plan to launch your own private label brand, you will likely need to start with more money. Retail arbitrage or wholesale can be good options for smaller budgets.
- 82% of sellers used personal savings or “bootstrapped” their business (meaning they started with a small amount of money and reinvested their profits) to start. 9% borrowed money from a family member, 18% used a credit card, and 14% received a business loan.
- It can take anywhere from a few months to a few years to turn a profit on Amazon, depending on your business model. 20% of sellers reported it took less than 3 months to turn a profit, 22% took 3-6 months, and 10% took 1-2 years.
- It’s possible to launch your first product within 3 months, like 55% of other Amazon sellers have done, or even within 6 weeks, like 29% of sellers. However, 14% of sellers took 6 months to a year to launch their Amazon business.
- Once your business is up and running, you will need to devote time to managing it. 43% of sellers spend less than 10 hours per week on their business, while 13% spend 21-30 hours and 19% work nearly 40 hours or more.
So, is Amazon FBA Worth It?
Starting an Amazon FBA business requires time, money, and effort. It is a competitive marketplace, and success is not guaranteed. However, in our opinion, the benefits of selling on Amazon outweigh the challenges.
Amazon is a massive platform with a large and growing customer base, and if you are willing to put in the work, learn from your mistakes, and continually improve, you have a good chance of being successful. Anyone can sell on Amazon – if you are willing to put in the effort, there is no reason why you can’t be successful too.