Selling on Amazon FBA is not still worth it in 2024 for many sellers because:
Amazon FBA seller earnings are generally low, with the majority 70% of sellers earning just $0 to $5,000 in Amazon sales per month, according to the 2024 State of the Amazon Seller report by Jungle Scout. Considering that the majority 71% of Amazon FBA sellers realize a profit margin between 1% to 25%, most Amazon sellers can expect just $0 to $1,250/month in actual profit from their Ecommerce business.
Amazon has gradually raised its FBA fees over the last few years, with Amazon fees surpassing 50% of seller revenue on average in 2023. Amazon sellers have been able to avoid accruing excessive inventory storage fees when storing products at an Amazon fulfillment center by carefully calculating the maximum amount of inventory they should store at a given time. However, starting in 2024, Amazon has now added an additional FBA storage fee, the low-inventory-level fee. This fee has angered many Amazon sellers because now they need to worry both about sending in both too much inventory and too little inventory.
Selling on Amazon is extremely competitive, requiring that sellers invest a major portion of their revenue into Amazon PPC advertising just to be seen. Even if you can find a great opportunity and market your product effectively enough to push it to the top of Amazon’s search rankings, there is no guarantee of long-term success. As one former successful Amazon seller learned the hard way, other Amazon sellers can use product research tools to find your successful product, replicate it for themself, and price you out of the market over time if they have enough resources.
Amazon FBA sellers typically experience above average product return rates, with many FBA sellers reporting illegitimate returns. For example, one Amazon seller claims they lost hundreds in profits because their customers were able to claim damaged products without actually providing Amazon with concrete proof. As a result, the Amazon seller had to essentially provide an additional set of their product to the customer for free.
When issues like this happen, Amazon FBA sellers are left with little to no support from Amazon, as many Amazon sellers reporting horrendous support from Amazon Seller Support.
An alternative online business model many prefer to Amazon FBA is local lead generation. Local lead generation entails setting up websites that capture customers for local service businesses and selling those leads to real local service businesses for $500 to $3,000/month. Setting up these websites is relatively affordable, so local lead generation businesses can command profit margins of up to 90%.
In the following article, we discuss further whether Amazon FBA is still worth it by looking closer at seller profitability. We also discuss reasons why selling on Amazon still might be worth it for some people.
1. Amazon Has Massive Customer Base
Amazon’s massive customer base refers to the large number of active users who regularly shop on the platform. It makes it a prime reason why the FBA program is so valuable. Similarweb reveals that there are over 310 million active users globally, and 161.7 million Prime members in the U.S. alone. Amazon provides sellers with access to a vast and highly engaged audience. Prime members, who benefit from perks like fast, free shipping, are frequent and loyal shoppers. It makes it easier for sellers to reach and convert customers.
Unlike Shopify, where building a customer base requires significant investment in advertising, Amazon offers sellers immediate exposure to millions of potential buyers. The trust that customers place in Amazon’s fast delivery, easy returns, and secure payment processes makes them more likely to buy from new or unknown brands on the platform. This built-in trust and traffic reduce the upfront marketing costs for FBA sellers and allow them to generate quick sales, making Amazon FBA an attractive option for e-commerce businesses looking to scale efficiently.
2. Amazon Provides Fast and Reliable Fulfillment
Amazon’s FBA program offers fast and reliable fulfillment by handling warehousing, shipping, returns, and customer service. This allows sellers to focus on growing their business without dealing with the logistics. With Amazon’s large network of fulfillment centers, products are shipped quickly, especially to Prime members who enjoy one- or two-day delivery. This fast service helps sellers stay competitive and keeps customers happy.
While Amazon typically processes FBA shipments in 3–7 business days, certain factors can slow things down. Larger shipments with many different items take more time to scan. Peak seasons like Black Friday and Cyber Monday can cause delays due to the high volume of orders. Proper labeling is important too—if labels are missing or incorrect, it can cause extra delays. Staffing shortages at fulfillment centers can also affect processing times. By planning for these issues, sellers can keep their fulfillment running smoothly.
3. Amazon Allows Low Initial Investment for Marketing
Amazon allows low initial investment for marketing by giving sellers access to its vast customer base, which helps them make sales without needing to spend much on platforms like Google Ads or Facebook Ads. Unlike Shopify or WooCommerce, where sellers must invest in ads to drive traffic to their stores, Amazon FBA provides built-in visibility through its marketplace. Sellers can list products and leverage Amazon’s existing traffic, which includes millions of daily visitors, to generate initial sales without heavy ad spending.
With Amazon FBA, sellers can focus on optimizing their product listings with tools like Amazon Seller Central and Amazon Advertising, rather than relying on expensive paid campaigns from external platforms. Since customers are already on Amazon with the intent to shop, sellers can start making sales more easily and at a lower cost. This reduced marketing expense, along with Amazon’s trusted reputation, makes FBA an attractive option for new and growing businesses.
A Quora post explains that starting an Amazon business with no money is not possible because of some necessary costs. You need to invest in product sourcing to buy items to sell, and there are fees for an Amazon seller account—$0.99 per sale for the "Individual" plan or $39.99 per month for the "Professional" plan. If you don’t use Fulfillment by Amazon (FBA), you’ll also need to cover shipping costs, including packaging, storage, and delivery.
The post also highlights the need for marketing and advertising to succeed, which requires spending on Amazon PPC campaigns or social media promotions. On top of that, there are legal fees like trademark registration and product liability issues that you can’t avoid. While some costs can be reduced, starting an Amazon business without any money is not realistic due to these unavoidable expenses.
4. Amazon Offers Scaling Opportunities
Amazon offers scaling opportunities by allowing sellers to reinvest their profits into expanding their business. Once sellers generate cash flow through Amazon FBA, they can use that money to add more products to their catalog, improve their branding, or even grow their business by selling on other platforms like Shopify or TikTok Shop. This gives sellers the flexibility to scale their business at their own pace and expand their reach.
With tools like Amazon Seller Central, sellers can monitor sales performance and identify new opportunities for growth. By using profits from their existing products, sellers can invest in new inventory, marketing strategies, or entering new markets, all without needing a huge initial investment. This ability to scale efficiently makes Amazon FBA a valuable platform for long-term business growth.
5. Amazon Offers Diverse Product Range
Amazon offers a diverse product range, meaning sellers can list and sell almost any type of product on the platform. Amazon’s product categories include books, electronics, apparel, beauty products, groceries, toys, tools, and much more. With over 350 million products available, this wide variety allows sellers to find the right niche and offer items that fit their target market.
Using tools like Amazon Seller Central, sellers can manage different products across various categories and track their performance. This flexibility makes Amazon FBA ideal for sellers who want to explore multiple product lines or test different items to see what works best. The ability to sell such a wide range of products makes Amazon FBA a great option for those looking to grow their business across different markets.
6. Brand Development and Visibility
There are still problems to solve out there and ways to improve upon the current products already available solving many of them. If you go the private label route and create your own unique branded product that meets the requirements to join the Amazon Brand Registry, you can set yourself apart from other sellers. As an FBA seller with access to the Amazon Brand Registry, Amazon provides you enhanced features to showcase your products, like involving high-quality images in your product description instead of just the dull plain text version most sellers use.
With Amazon advertising, you can force your product to be seen on the first page and generate sales regardless of where your product is actually ranked. Even though Amazon marketing on platform is a great way to generate sales, in 2024 you don’t need to limit yourself to the Amazon platform alone. You can extend the visibility of your product by taking advantage of affiliate marketing and have others market your products for you on their blogs and social media pages. Plus, with your own branded product, you can do your own brand awareness outside of Amazon through social media as well.
How Many Current Amazon Sellers are Profitable?
Most Amazon sellers are profitable, with many earning at least $1,000 per month in sales. Around 40% of sellers make between $1,000 and $25,000 per month, which means they generate $12,000 to $300,000 annually. Some high-level sellers, often referred to as super-sellers, make more than $100,000 per month.
While profitability can vary, Amazon FBA remains a viable business model for those looking to achieve profitability relatively quickly, as it typically takes less time compared to traditional businesses, which can take two to three years to become profitable.
How Much Money are Amazon Sellers Making Right Now?
According to data from JungleScout, about 50% of Amazon sellers make between $1,000 and $25,000 per month in sales. Even more impressively, 12% of sellers report earning between $25,000 and $100,000 per month. However, it's important to note that high sales don't always translate into high profits.
According to Investopedia, a healthy profit margin for a small business is between 7 - 10%. Referencing the same data from JungleScout, only 9% of Amazon sellers make below 6% profit margin. Furthermore, 25% make between 6 - 15% and 47% realize 16 - 50% profit margin. Those numbers make for some outstanding profit potential!
However, those favorable figures are not likely to last. Due to a variety of factors, it's becoming extremely challenging to be successful with Amazon FBA.
5 Reasons Sellers Say Selling on Amazon FBA Is Not Worth It
1. You re Competing With Major Players
Anybody can sell on Amazon. While that seems like great news for those getting started in online business, there is a major drawback. It means that while you’ll certainly be competing with other small businesses, you will also compete with MAJOR players. Big name brands, distributors and even Chinese suppliers are among your direct competition on the platform and can profitably run on substantially thinner margins than a typical small business just getting started.
According to EcomCrew, 63% of third-party sellers on Amazon are Chinese. While all of those certainly aren’t manufacturers, a large portion likely are. As many US-based Amazon sellers source their products from manufacturers in China, it’s not difficult to understand how this anti-competitive circumstance could present issues for small sellers. Additionally, even small sellers in China are going to be able to negotiate better contracts with manufacturers in their own country due to their understanding of business culture and better communication.
2.You are Competing Directly With Amazon
Not only do sellers face stiff competition from other third party sellers, you will also be competing against Amazon itself. The private label business model is one of the most popular models for third party sellers. However, no one does private label better than Amazon with their Amazon Basics product line. Since the end of 2017, Amazon Basics has been the best private label product line on the platform.
3. Global Economic Circumstances
Between China factory shutdowns as a result of Covid 19 and spiking oil prices from the conflict in Europe, your timeframe to receive your products from abroad, especially China, currently has extremely volatile pricing and delivery time. In May 2022, the rate to ship from Asia to the west coast of North America was 35% higher than the previous year, according to Freightos. Even more incredible? The rates actually fell 30% during the month and were still that much higher than the year prior. Furthermore, it’s also more challenging to plan the restocking of inventory. Just look at the dramatic increase in average shipping time from China to the US in the last few years.
4. Many Amazon FBA Niches Already Established
Amazon’s algorithm is extremely important for ranking on the platform and driving organic sales. Products that rank on the first few pages of Amazon where people actually scroll and see them have obtained enough positive reviews to establish consumer acceptance. To remain in that position, they also need to generate more average monthly sales than the competition and have a satisfactory conversion rate that signals to Amazon consumers are likely to buy that product over other products if they see it.
Once a product reaches a high ranking for a keyword, it’s difficult to replace that product. As long as the product quality remains satisfactory, it should continue to attract more reviews as more people see and purchase the product. A new product just coming to market needs an excellent Amazon PPC strategy and capital to be able to advertise and generate enough monthly sales to move up the rankings. "Uphill battle" is an understatement when you’re trying to compete with an Amazon Basics product that already has 60,000+ overwhelmingly positive product reviews.
5. Amazon Requires High FBA Fees
While outsourcing operations like order fulfillment and customer service as an Amazon FBA seller is convenient, it isn’t free. Amazon seller fees include costs like an FBA fee for Amazon fulfillment of your product and a storage fee for keeping your products in the Amazon warehouse. Amazon updates their FBA fees from time to time, and those updates are usually to inform sellers that fees are increasing. Selling through the Amazon FBA program can eat more into your profit margin than many sellers might expect.
Is Amazon FBA Dead?
Amazon FBA is not dead, but it has become much more difficult for new sellers to succeed. The platform has seen significant changes, with rising competition, increasing fees, and stricter policies. It makes it tough to start and scale an FBA business. New sellers now face major hurdles such as high fulfillment costs, the risk of account suspensions, and the challenge of dealing with counterfeit products and fake customer reviews. These factors make it difficult for beginners to build a sustainable business on Amazon.
A Reddit user with nearly a decade of experience selling through retail arbitrage on Amazon stated that profit margins have decreased drastically, and for many sellers, the effort is no longer worth it. The user noted that Amazon FBA is only worthwhile for those generating over $500,000 in revenue annually. However, according to Jungle Scout's 2024 State of the Amazon Seller report, only about 7% of sellers hit this revenue milestone, meaning the majority struggle to reach profitability in today’s market.
A Reddit post shared the experience of an Amazon FBA seller who once made six figures but decided to quit due to high fees, especially FBA storage fees. The seller explained that while they earned a lot, the storage fees were a "silent killer" that could quickly eat away at profits if not carefully watched.
Is Amazon FBA Saturated?
Yes, Amazon FBA is becoming saturated with an estimated 9.7 million third-party sellers offering over 600 million products, according to AMZScout. Amazon also promotes its own brands, like Amazon Basics, which makes it harder for independent sellers to stand out. Additionally, Amazon hosts summits in China to help sellers bypass middlemen, increasing competition even further.
To succeed in this saturated market, sellers must differentiate their products and use Amazon PPC advertising to improve product visibility. A six-figure seller, Kevin Pak, lost $10,000 in his first year because his products were not unique. For example, his private-label animal repeller didn’t stand out from other similar products, which allowed other sellers to easily replicate and flood the market. This highlights the importance of offering something different to stay competitive.
What Is the Future of Amazon FBA?
The future of Amazon FBA looks challenging, but the program isn’t going anywhere anytime soon. Third-party sellers play a big role in Amazon’s success, contributing to the majority of units sold. In fact, Amazon made $80.5 billion in third-party seller fees in 2020, according to eDesk. This shows that Amazon benefits greatly from keeping the FBA program running.
If you’re considering starting with Amazon FBA, it’s best to act sooner rather than later. While the program is open to almost anyone right now, Amazon may make it harder to get approved in the future. So far, the company has relied on competition to ensure that only quality products succeed, while weaker ones fail. This trend may continue, making it tougher for new sellers to break in.
Conclusion: Why Local Lead Generation Is Far Better Than Amazon FBA?
Local lead generation is far better than Amazon FBA because you only compete with other local businesses for visibility on Google. In contrast, Amazon FBA sellers face tough competition from millions of other third-party sellers, including Amazon itself, which sells its own products like Amazon Basics. Many Amazon sellers are based in China and have direct access to manufacturers, making it difficult to compete on pricing and product availability.
The work involved in Amazon FBA is also more complex. To run an Amazon FBA business, you need to research profitable products, source them (often from overseas), coordinate shipping, optimize your product listings, and manage paid advertising campaigns. On top of that, you have to constantly monitor inventory and communicate with suppliers. In contrast, local lead generation is much simpler. You set up a website, optimize it for local SEO, and then rent it out to local businesses for a flat monthly fee, making it a more straightforward process.
Local lead generation is also far more passive and profitable. Once your website is ranking well and generating leads, it can provide steady income with minimal effort. With profit margins as high as 90%, local lead generation offers a higher return on investment than Amazon FBA, where profit margins typically range from 15-20%. Plus, local lead gen doesn’t rely on a third-party platform like Amazon, which means you avoid high fees, strict rules, and the risk of account suspensions.
If you're looking for a low-competition, high-profit business model that provides passive income, local lead generation is the way to go. Start building your digital real estate today and secure long-term success!
