15 Reasons Selling On Amazon FBA Is Hard | Why You Should Still Consider It

December 15, 2023

Some reasons selling on Amazon FBA is hard are:

  • The Amazon marketplace is extremely competitive
  • Amazon FBA fees are increasing
  • Product research is an extensive process
  • Amazon advertising is expensive
  • Amazon has strict FBA packing and prep requirements

It's hard to make money with Amazon FBA. In fact, 24% of new Amazon sellers never even become profitable, according to Ecommerce tool SellerApp. With negative factors like high competition and fees, many sellers look to alternative Ecommerce marketplaces to sell their goods and even other online business models. However, for those that stick out the first few years of learning pains, an Amazon FBA business is a proven method for making money online. Data from Jungle Scout shows that over 39% of Amazon sellers earn at least 6 figures per year in revenue from their Amazon business. With the right product opportunity, you can too. However, you'll first need to overcome the many challenges of Amazon FBA, like earning sales over the millions of other Amazon sellers. 

1. The Amazon marketplace is extremely competitive

As one of the most popular online business opportunities, Amazon is flooded with sellers. Amazon has allowed third-party business owners and manufacturers to sell products on the Amazon marketplace since the year 2000. As of 2023, there are approximately 1.9 million active sellers on the platform. Although many of the third-party sellers on Amazon are small businesses, you'll also be competing with major national brands like The Disney Store and Lands’ End. 

Perhaps even worse, Amazon is overrun with Chinese sellers. The majority 63% of Amazon sellers are from either China or Hong Kong, according to EcomCrew. Many of these sellers are manufacturers with deep pockets and tight connections throughout the Chinese manufacturing system, enabling them to sell products on Amazon for much better margins than the typical small-scale third-party seller. In fact, China makes up 59.3% of the top sellers on Amazon while the United States only makes up 34.8%. 

However, it’s not just third-party sellers you need to compete with. You also need to compete with Amazon directly for sales! Approximately 40% of Amazon’s sales come from their own products. Amazon has over 118 of its own private label brands, like Amazon Basics and Amazon Essentials, that it sells alongside the products of third-party sellers on its marketplace, according to CNBC. Amazon’s extensive financial resources allow the company to sell its products for thin margins, making it nearly impossible for most small third-party sellers to compete for those product types.

2. Amazon FBA fees are increasing

Although FBA services enable a third-party seller a more simplified Ecommerce selling experience, those benefits don’t come cheap. According to Entrepreneur Magazine, Amazon takes a 50% cut from each seller on average. Considering that not all Amazon sellers use FBA services, that means those that do outsource fulfillment to Amazon can expect an even greater portion of their revenue to end up in Amazon’s own pockets instead of their own. Furthermore, these FBA fee charges, like inventory storage fees and shipping fees, only seem to rise over time, and these rises aren't always as subtle as you might expect. Between 2020 and 2022, the Amazon fulfillment fee rose a whopping 30%, making it that much harder for FBA sellers to be profitable selling on Amazon. 

3. Product research is an extensive process

The hardest part of selling on Amazon is finding a winning product. In order to even find a potential product opportunity, you need to employ the help of an expensive product and keyword research tool like JungleScout and spend many hours digging through Amazon product data. Even if you following the most comprehensive Amazon FBA product research tutorial to a tee, it will likely take you multiple product launch attempts before you find yourself with a profitable product. There are just so many variables at play that are hard to predict, like the amount of money you’ll need to spend on Amazon advertising to sell your product. 

4. Amazon advertising is expensive

Besides the cost of product inventory, an Amazon FBA seller trying to establish a new private label or wholesale product on Amazon needs to promote that product listing using Amazon’s paid advertising platform if they want to generate any product sales. However, the high competition on Amazon has pushed up Amazon PPC prices to an average of $1.20 per click, according to Sellozo, with some sellers paying up to $10 per click! Furthermore, the average conversion rate on Amazon is just 9.58%, according to Ad Badger. Therefore, you can expect to spend around $12 just to generate one sale from Amazon advertising.

This makes it very difficult to be profitable. In fact, it’s not uncommon for Amazon sellers with new products to actually carry a negative profit margin for the first year or longer while they try to use Amazon advertising to generate sales in order to move up in organic search on the Amazon Marketplace for the product’s keyword. 

5. Amazon has strict FBA packaging and prep requirements

When you have a product to send to the Amazon fulfillment center, you need to prepare it according to Amazon’s FBA packaging and prep requirements if you want to avoid unexpected fees or outright product refusal. Amazon is very strict about:

  • What type of barcode you should use - Amazon only accepts the Manufacturer barcode (UPC) or Amazon barcode (FNSKU).
  • How you should package different kinds of products - For example, one of the rules for using poly bags is that the poly bag or shrink wrap must not protrude more than 3 inches past the dimensions of the product.
  • What kind of box you should use - For example, the box must have six sides and not collapse when medium pressure is applied. 
  • How large and heavy the shipment is - Most Amazon shipments cannot exceed box dimensions of 25 inches on each side and 50 pounds. 
  • What packing materials you’re allowed use - The only packaging materials you're allowed to use are bubble wrap, full sheets of paper, inflatable air pillows, and polyethylene foam sheeting. 
  • How you should label your shipment - For example, if you're sending a pallet into Amazon, you need to attach four pallet labels, one on the center of each side. 

6. Inventory management requires careful planning

Inventory management is certainly one of the most challenging aspects of running an Amazon FBA business. It’s a balancing act between ensuring you have enough inventory at the Amazon warehouse to never miss out on sales and not overstocking to avoid getting hit with higher inventory storage costs. The main four inventory storage problems selling on Amazon can present you with are:

  1. 1
    Demand forecasting - Analyzing historical product data and current trends to estimate upcoming demand. 
  2. 2
    Avoiding stockouts - Sending Amazon enough products so you don't run out of inventory. 
  3. 3
    Managing multiple SKUs - Keeping track of inventory for multiple products, which often requires an inventory management software. 
  4. 4
    Seasonal sales planning - Amazon has busy sales seasons, like around Black Friday and Christmas, and slow sales seasons, like February. 

7. International shipping and logistics can be complicated

Although 25% of Amazon sellers use retail arbitrage to purchase products at a discount from local stores like Walmart to sell on Amazon, the majority 54% of sellers employ the private label business model where they brand their own product, according to the 2023 State of the Amazon Seller report by Jungle Scout. In order to access the best manufacturers and realize cheaper production costs, many private label Amazon sellers source products from overseas manufacturing hubs like China, Vietnam, or India. However, coordinating the delivery of product inventory from a manufacturer in Asia to an Amazon warehouse in the United States or Europe can be a challenge. You need to consider things like:

  • Cost of different freight options
  • Delivery speed of different freight options
  • Customs declaration documentation and paying customs fees
  • Getting international shipping insurance
  • What service will courier your products from domestic shipping port to the Amazon warehouse

8. Many products are restricted and require ungating before you can sell them

Amazon has restricted categories, products, and brands. You must go through an approval process to get ungated in order to sell these products, if you even qualify to sell them at all. The specific requirements to get ungated vary depending on the category, product, or brand you want to get ungated for. If you accidentally try to sell a product that requires approval, you can end up losing the money you invested into product inventory if you can't get approved. 

  • Examples of gated categories include: Jewelry, Watches, and Fine Art
  • Examples of gated products include: Alcohol, Dietary Supplements, and Cosmetic & Skin
  • Examples of gated brands include: Adidas, Nike, and Pokemon

9. Amazon sellers need many positive reviews to excel on the platform

Positive product reviews are one of the most important factors for driving sales on Amazon. An article by USA today that interviewed the owners of successful Ecommerce brands selling on Amazon, like Alice Kim of Elizabeth Mott, found that: 

  • Positive reviews can increase sales by 20% on average
  • One-third of consumers avoid buying products without any reviews
  • Items with just one review are 65% more likely to get purchased than items without any reviews

Positive customer reviews help attract more customers to purchase an Amazon product as well as improving the product’s ranking in the Amazon algorithm. If your Amazon product doesn’t have enough reviews or has too many negative reviews, getting any sales, let alone organic sales, is nearly impossible. 

10. The winner of the Buy Box gets the majority of the sales

Unless you're selling a private label product, chances are high you will be sharing an Amazon listing with other sellers of the same product. To avoid cluttering its extensive catalog, Amazon only allows one product identification number, or ASIN, for each product in its marketplace. That means sellers of the same product need to share product a product listing.

However, only one seller can get highlighted on the product listing as Amazon’s recommended seller to buy the product from. Amazon’s recommended seller is automatically placed in the Buy Box on the product listing page and receives the credit for the sale when the customer adds the item to their cart without exploring the additional sellers of the product. According to Ecommerce platform BigCommerce, the majority 82% of all sales on Amazon are through the Buy Box. While that is great news for the seller that wins the Amazon Buy Box, it means that the majority of other sellers on the listing don’t get many sales. 

11. Amazon cares more about its customers than its third-party sellers

According to Amazon’s About page, “Amazon strives to be Earth’s most customer-centric company.” Although the Amazon FBA seller army certainly contributes to company’s bottom line by paying Amazon fees, it’s the hundreds of millions of Amazon customers that make the company the success it is. Therefore, Amazon will always give preference to keeping those customers happy, especially Amazon Prime customers, over third-party sellers. To highlight this, just look at Amazon’s customer friendly refund policy. 

Most product categories on Amazon can be returned within a 30 to 90-day window. According to SellerApp, approximately 12% of the product bought on Amazon are returned. Amazon itself does not take the hit on the costs incurred from the return, the seller does. If a seller returns an item and it is still in sellable condition, Amazon returns the product to your inventory but does not reimburse you for any FBA fees the order cost.

12. Amazon Seller Support service is often considered poor

A reason why Amazon sellers fail is that they don’t get the support they need from Amazon. While Amazon provides excellent customer service to Amazon shoppers, third-party sellers don't get the same level of treatment. Amazon sellers looking for assistance can contact Amazon Seller Support through Amazon Seller Central. However, the only way to get assistance on Amazon is by following a series of prompts to open a support ticket. Seller Central does list a phone number, email, or provide a live chat option for sellers to reach an Amazon Support agent quickly. 

Many sellers find their experience with Amazon Seller Support in Amazon Seller Central an unsatisfactory experience. In fact, review site SiteJabber rates Amazon Seller Central with 1.09 out of 5 stars from 392 reviews, while Trustpilot shows 1.3 out of 5 stars from 130 reviews. 

13. Your Amazon seller account can get suspended

Amazon seller account suspension is fairly common. Amazon is a strict company and if you break any of its rules, you’re likely to lose your selling privileges. Some of the most common reasons a third party Amazon seller could get their account suspended are by:

  • Operating multiple Amazon seller accounts at once
  • Selling restricted products
  • Committing copyright infringement by using images and text that belong to another business in a product listing
  • Failing to address intellectual property complaints
  • Getting hacked and raising Amazon’s flags for suspicious activity
  • Falling out of compliance with Amazon's performance metrics, such as having an order defect rate above 1%

Sellers with account suspensions can only reinstate their selling privileges by completing a "Plan of Action" outlining how they will fix the issue and submitting it to Amazon for approval. 

14. There is no one holding you accountable to do the work

As a third party seller on Amazon, there is no one driving you and providing you support in achieving your goals, unless you pay an online coach to push you. You need to have the discipline to complete the work yourself if you want to make money. Success with Amazon takes time and many sellers give up before they are profitable because putting many hours into work that doesn’t result in direct payment like traditional employment can be a mental hurdle. That’s why Amazon FBA is bad for those who don’t have patience or the ability to delay gratification.

15. You need to learn a considerable amount of information and skills

Although many Amazon seller gurus would lead you to believe selling on Amazon is as easy as posting a product online and making sales, it’s much more than that. You need to develop an extensive understanding of the Ecommerce landscape and equip yourself with the necessary skills and tools to be successful. You need to be able to perform tasks like product sourcing and building long-term relationships with suppliers, profitability running Amazon paid advertising campaigns, understanding the Amazon algorithm, leveraging SEO to move up in Amazon’s organic rankings, and much more.  

Furthermore, Ecommerce is dynamic industry so you need to be able to pivot and update your business accordingly if you want to stay competitive. New trends emerge, Amazon policies change, and innovative technologies disrupt the market. 

How hard is it to sell on Amazon FBA?

It’s fairly hard to sell on Amazon FBA. On a scale of difficulty, I would rate it an 8 out of 10, 10 being the most difficult. The competition over the years has just become so intense and with 350 million products to browse through on Amazon, it’s hard to attract customers' attention to your specific product and get sales, especially for a new seller. Furthermore, Amazon sales just aren’t as profitable as they used to be. Competition has driven down product prices while increasing Amazon fees have driven down profit margins for all sellers. You really need to sell a lot of products if you want to make money on Amazon FBA.

What are the alternative marketplaces to Amazon for selling products online?

  • eBay
  • Etsy
  • Walmart Marketplace
  • Ruby Lane
  • Newegg
  • Wayfair

7 Reasons to sell on Amazon FBA

  1. 1
    Automated fulfillment and customer service - Amazon FBA simplifies the selling process by handling a large portion of the typical Ecommerce tasks requirement for you. 
  2. 2
    Large amount of traffic - Amazon gets over 2 billion website visits per month, according to Statista. No other Ecommerce platform or online store can offer that level of traffic. 
  3. 3
    Brand recognition - Amazon is one of the most widely recognized and trusted brands on the planet. 
  4. 4
    Some liability protection - Amazon helps third-party sellers avoid getting sued for product liability by offering customers up to $1,000 if the product of a third-party seller causes injury. 
  5. 5
    Collect sales tax for you - As a Marketplace Facilitator, Amazon collects and remits sales tax so their third-party sellers don't have to worry about it. 
  6. 6
    Fraud protection - Amazon handles payment collection from customers so Amazon sellers don't need to be concerned with getting scammed. 
  7. 7
    Highly scalable - Amazon's systems can easily support scaling efforts by providing the space for more product inventory.  

Is Amazon FBA worth it as a side hustle?

Amazon FBA can be worth it as a side hustle. In fact, the majority 53% of Amazon sellers spend just 10 hours or less on their business, according to Jungle Scout. An Amazon FBA side hustle can enable you to establish a passive income stream online to give you more financial security beyond your day job. 

How much does one really need to start a successful Amazon FBA business?

You need between $10,000 and $20,000+ to start a successful Amazon FBA business. This is the amount you would need to get started with Amazon wholesale or private label, the two Amazon FBA business models with the highest profit margins and scalability potential. However, you could also start an Amazon FBA business for around $500 or less by using online arbitrage.

How long until Amazon FBA is profitable?

Amazon FBA is usually profitable within a year. According to Jungle Scout, 68% of Amazon sellers get profitable by the end of their first year of selling. 15% of Amazon sellers even get profitable within 3 months. 

Related Articles on Amazon FBA

  • Is Selling on Amazon FBA Worth It? - Find out how many Amazon FBA sellers are successful, some of the biggest challenges they face, and why FBA is still worth it in 2024.
  • Top Ways To Lose Money With Amazon FBA - Learn the most common ways sellers lose money with Amazon FBA, like quitting too soon or sending too much inventory into the fulfillment center at one time, so you can avoid it!
  • Can You Do Amazon FBA Part-Time? - Learn how to leverage your time to earn a full-time income with part-time hours on Amazon FBA.
  • Is Amazon FBA Safe? - Did you know about these 9 risks to avoid when selling on Amazon, such as the range of scams that could target you?

Why I stopped selling on Amazon FBA

You no longer need to ask yourself, “Is Amazon FBA hard?” The answer is a definitive yes. However, that doesn’t mean it’s not worth it for those people who are willing to invest the time and effort into creating a successful Amazon store. With the right strategy and a little luck, Amazon FBA can be incredibly lucrative. You can be a millionaire from Amazon FBA. In fact, Jungle Scout’s 2023 State of the Amazon Seller Report found that 19% of current Amazon sellers have made between $1 million and $50 million in lifetime sales. These results aren’t typical, but they are possible.  

Although I’ve had success with Amazon FBA in the past, I eventually turned my focus to an online business opportunity with a higher profit margin that doesn't rely on a third-party giving me permission to run my business. That business is local lead generation. Local lead generation entails ranking websites on Google to find customers for local businesses. Each of these local lead generation websites makes me anywhere from $500 to $3,000/month in passive income. Unlike Amazon FBA, where you’ll be lucky to keep 20% as profit, a local lead generation website has low overhead costs so you keep the majority of the money you make. You also don’t have to worry about losing your income stream like an Amazon FBA seller who gets suspended does because you own your websites completely. 

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Ippei Kanehara

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Ippei.com is for digital hustlers, industry leaders and online business owners.

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