Is Amazon FBA worth it? Experiences with Amazon FBA and how to build a profitable business with the fulfillment service even as a new merchant

When the online giant Amazon presents its annual figures to the stock exchange, new sales and profit records have become almost the norm. Indeed, the US company has been celebrating double-digit growth rates almost without exception for more than a decade. The end of the line seems further away than ever. Only recently, founder and CEO Jeff Bezos announced that the company had broken the 200 million Prime customer barrier – just three years after winning over its one hundred millionth paying Premium customer.

Of course, this breathtaking development did not go unnoticed by the general public. More and more retailers have tapped into the online marketplace as an additional sales channel in recent years; for many of them, it has become indispensable. Moreover, additional services such as Amazon FBA (Amazon’s in-house fulfillment solution) have made ecommerce accessible to those who previously had no experience in the industry. Meanwhile, the marketplace is literally teeming with sellers, most of whom source their products from the Far East and compete for local customers.

For this reason, many people are justifiably asking themselves whether joining Amazon FBA is still worth it these days. The competition in large parts of the online marketplace seems too great at this point in time. Caution, spoiler: The answer is basically “yes” – under certain conditions, of course. In this article, we show what these conditions are and why trading via FBA can still be highly profitable today. To do this, we first take another look at the features of the Amazon marketplace, which form the foundation for the following chapters. We then take a detailed look at the individual steps in the value chain and provide valuable tips for a profitable start with Amazon FBA. Have fun reading!

By the way: If you are already running your own online store this is no disadvantage on the way to your own Amazon business. In fact, quite the opposite is true: Together with our (multiple) award-winning listing tool magnalister, you will find optimal conditions for an easy and smooth start. In conjunction with the multi-channel fulfillment program (MCF), you can even ship those products that are sold through your own webshop via your Amazon store. Conversely, the proactive, simultaneous development of your own online store can make a significant contribution to minimizing risk. You will also learn more about this over the course of this article.

Find out more about the core features of the magnalister marketplace interface and the possibility to test the plugin in a 30 day free trial with full functionality here:

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Table of Contents

In a Nutshell: Here’s what makes Amazon’s FBA program different for online sellers

Is Amazon FBA still worth it at all? Challenges and opportunities of marketplace selling

From product sourcing to first customer review: The stages of the value chain and key levers of the FBA merchant

Bonus tip: With magnalister, you can link well-known online marketplaces such as Amazon and eBay directly to your own online store – and in addition to increased sales, also ensure more independence

Conclusion: If Amazon FBA is worth it depends first and foremost on yourself – experience shows that with challenges also opportunities grow

In a Nutshell: Here’s what makes Amazon’s FBA program different for online sellers

The basic principle of the Amazon marketplace probably no longer needs much explanation: Sellers from all over the world can offer their products on the huge platform in exchange for corresponding sales fees – and thus gain access to millions of ready-to-buy and returning customers. Over the past few years, however, the online giant has steadily expanded its own service portfolio. One of the most important service additions is found in Amazon FBA. FBA stands for “Fulfillment by Amazon”.

On closer inspection, the term actually falls far short of the mark. Because beyond fulfillment, the service also includes the storage of products in Amazon’s worldwide logistics centers as well as returns management and, to a large extent, even customer service. In other words, almost all goods handling is outsourced to the company as part of the program. In return, FBA sellers give an additional portion of their profits to Amazon that exceeds the actual sales fees.

This quickly reveals the type of seller the service is primarily designed for: Namely, ecommerce beginners who are excellent at marketing products, but do not have the necessary resources that internal logistics would require. As true ever so often, exceptions prove the rule. In many cases, building up your own infrastructure does not make sense, even for sellers with a strong financial backbone, because the effort and investment quickly exceed the benefits.

So let’s keep it simple: The main tasks for FBA sellers lie in the selection of suitable products and manufacturers (“product sourcing”) and subsequent marketing via the online marketplace. None of these tasks should be neglected. An unsuitable product is difficult to sell, even with the best marketing skills. On the contrary, an excellent product will not sell itself on Amazon without further ado. And the manufacturer? – is, so to speak, the oil that keeps the entire engine running reliably.

Judging by our experience, the Amazon FBA merchants who are most profitable in the long term are those who can best satisfy customer needs without losing sight of the bigger picture. What this all means in detail, you will learn over the course of this article.

Is Amazon FBA still worth it at all? Challenges and opportunities of marketplace selling

Uninterrupted growth meets comprehensive services: The benefits of FBA

We have already touched on some of the key factors up to this point. The supposedly biggest of all is that newcomers can access the company’s unparalleled presence and infrastructure on an ad hoc basis. This is because once your own product offering (“listing”) is created, customers from all over the world can theoretically find it via the search feature. This contrasts, for example, with setting up your own online store. Although such a shop is quite easy to set up these days, it must first be fed with a sufficient stream of visitors through advertising campaigns before the first sales can fill the till.

By the way, you will learn later in the article why having your own online store simultaneous to Amazon is still an excellent idea and what role our listing tool magnalister plays in this.

But not only the mere presence of your own products is guaranteed within the framework of FBA. By outsourcing fulfillment, they also automatically qualify for the so-called Prime status. This signals particularly good customer service and fast delivery times to Prime customers, who pay monthly fees for the premium service. It also further increases visibility in search results, while purchase rates and sales figures usually rise significantly. No wonder: Retailers have to meet strict requirements and successfully complete a seven-day trial period to obtain Prime status. With Amazon’s FBA services, you hand over fulfillment to those who do it best and benefit directly from an unparalleled infrastructure.

As an FBA merchant, you don’t have to deal with your own logistics warehouse and shipping process, which means you can fully focus on the real core competency of Amazon commerce: Sourcing and marketing your products. Once you have gained a foothold in your home marketplace (e.g. amazon.de), FBA also makes it comparatively easy to expand across national borders. Given the steady growth of the platform, the potential for dedicated and diligent merchants is almost limitless.

To sum it up, here are all the benefits of Amazon FBA at a glance:

• Instant access to millions of ready-to-buy and returning customers
• Outsourcing of the entire goods handling
• Automatic qualification for the coveted Amazon Prime status
• Easy internationalization
• Continuous growth of the platform and thus of the potential clientele

The flip side of the coin: Increasing competitive pressure and rising customer demands

The entire online retail industry has evolved at a rapid pace within the last few years. Globalization and digitization are advancing relentlessly and ensure that new standards are created regularly in terms of shopping experience, customer service and delivery times. The benefits are clear from a customer’s point of view and you most likely know them from your own experience. But as the saying goes? One man’s joy is another man’s sorrow. For sellers, this often means that those who can’t or don’t want to follow suit will have a hard time in the long run.

This effect is reinforced by the fact that more and more people want their share of the growing ecommerce pie. One of the simplest and most direct methods to make you money online is certainly Amazon FBA. Admittedly: Not all of your competitors approach the issue with discipline and sufficient preparation. Nevertheless, the negative effects of increasing seller numbers cannot be ignored. In fact, in the past, you could see real price wars in some areas of the marketplace, as merchants tried to multiply their own sales at the expense of margins.

So, according to experience, finding a profitable niche within the framework of Amazon FBA and placing it in the top positions of the search results is no longer quite as easy as it was a few years ago. The prerequisite is a thorough market and product analysis, for which many resort to paid analysis tools. Once you have established yourself as a successful seller, you should be aware of the enormous dependence on Amazon and take appropriate precautions to minimize risks. But more about that later.

In summary, here are the disadvantages and challenges of Amazon FBA at a glance:

• Constantly increasing demands of customers
• Constantly growing competition in the form of new (FBA) sellers, which may lead to price wars
• Great dependence on the Amazon marketplace

From product sourcing to first customer review: The stages of the value chain and key levers of the FBA merchant

So far, we’ve established that rising customer expectations and increasing competitive pressure are demanding more from FBA merchants than they did a few years ago. On the other hand, the profit opportunities are increasing for those who really understand their craft – and know about the importance of thorough planning. In the following section, we want to take a closer look at the individual stages of the value chain and show where the levers lie for you as a future FBA merchant. To do this, we have broken the process down into a few key steps.

Good planning forms the foundation of your success

Even before you can start thinking about your first product, you need to consider a few important steps. These include, of course, the establishment of the company (if it does not already exist), the opening of the company’s business account and the application for various numbers and certificates (e.g. tax number, VAT ID, EORI number). The necessity of possible insurances should also be checked with the help of an expert.

Secondly – and this point is often forgotten – you should evaluate yourself and your plans in a very first step: Am I at all suitable for independent trading? How much time do I intend to invest in my project and what are my short-, medium- and long-term goals? Are these goals realistic and compatible with my other commitments? Of course, these questions are not aimed at inhibiting your own motivation. Rather, they are intended to give you the necessary assurance that your time is well invested and set you up for the tasks ahead. This will pay off at the latest when the first challenges arise.

In our experience, many Amazon FBA merchants don’t review their plans thoroughly and make their future lives unnecessarily difficult already at this point. Either because you want to start selling as quickly as possible and therefore do the necessary preparations half-heartedly or not at all. Or because you start the Amazon adventure with completely false expectations based on reports and stories – which in turn means you lose motivation at the first setback. True to the motto “good things come to those who wait”, we therefore strongly advise against a hasty start. Detailed instructions on the individual steps of preparation can be found in our big Amazon guide for beginners and our separate article “Preparations for Amazon FBA“.

At this point, we would like to recommend a video by the US YouTuber “Travis Marziani”, who interviews an experienced Amazon FBA merchant, who delivers an authentical, self-critical and honest review of his experiences with his own product(s). On the one hand, it shows how easy mistakes can creep in for supposed beginners while giving a realistic insight into the first steps of many newcomers. On the other hand, it shows the great potential that still lies within trading with Amazon, given good planning.

The Centerpiece: Patience and foresight are the top priorities in product research

After you’ve set up your seller account (again, our linked articles help here), it’s on to one of the most important steps of all – finding the right product. “Right” in this case is, of course, a relatively elastic term. In fact, in addition to factors such as the price structure or sales figures, individual aspects also play a role. With Amazon FBA, this also includes previous experience as well as your own skills and expertise. If, for example, you have above-average knowledge in the field of strength training, a product in the “Sports and Leisure” category is naturally particularly suitable. In reality, however, it is often the case that you have to choose your own product completely independently of your own preferences and interests.

But first things first. In our article “A guide to Amazon product research“, we have compiled in detail for you what you need to pay attention to when researching products.

In the following section, we would like to go through the most important factors step-by-step, as they are essential for a long-term profitable Amazon business.

1. Selection of a suitable product category: Not only does the nature of the products differ depending on the categories, but also the cost structure under certain circumstances. In fact, there are sometimes serious differences in sales fees, which can have a significant impact on margins. Some product categories, on the other hand, are characterized by particularly high return rates, necessary certifications (e.g. TÜV) or seasonal effects. Our tip is therefore to choose a category with comparatively low potential entry barriers at the beginning of your Amazon FBA business setup – even if other categories may seem more attractive.

2. Finding the right niche market: Less is sometimes more. In many cases, this also applies to the market you choose with your (first) product. Instead of being one of countless competitors in crowded market segments, it can pay off to dominate an attractive niche. The goal should always be to become one of the absolute top sellers in your segment, because that’s the only way you have a real chance of winning sales boosters such as the coveted “Amazon’s Choice” badge or the so-called buy box.

Promising niches can be characterized, for example, by the fact that they have a moderate to high search volume, which can only be served inadequately by existing providers. Data and analysis tools such as Helium 10 or Jungle Scout can help here.

3. A unique selling proposition is the be-all and end-all: Being successful on Amazon means being able to meet the needs of customers better than the majority of other sellers. To really internalize this statement, you just have to put yourself in the customer’s shoes. At the end of the day, the purchase decision is nothing more than a simple weighing of costs and benefits: What do I get at which delivery conditions from which retailer – and what is the price for this? Your goal: to stand out from the mass of suppliers.

4. The final margin hovers over everything: You will quickly notice that a whole lot of costs add up over the entire process – from purchasing goods to sales and shipping to returns. It is therefore extremely important not to lose sight of the final margin in all your considerations. After all, it is profitability that ultimately determines whether your business can be successful in the long term. Our advice for new Amazon FBA sellers: Document all decisions and considerations in writing right from the start. A simple Excel spreadsheet, for example, is ideal for carrying out the most important calculations, weighing up options and, above all, maintaining an overview.

The following video by FBA expert Tatiana James for example, provides excellent guidance on various calculations:

Typical beginner’s mistake: When searching for a manufacturer, cost conditions and pricing should not be your only consideration!

To start with: You will also find a detailed guide to the manufacturer search among the links mentioned at the beginning of this article. In this section, we would therefore like to steer the focus away from these individual steps a bit. It is more important at this point to understand why the right manufacturer is decisive for the success of one’s own business and why the financial aspects do not play the sole main role.

Now, we have just emphasized the importance of the profit margin, which is fast becoming the downfall of Amazon FBA especially for sellers without any experience in ecommerce. With the manufacturer search whatsoever the resulting costs are naturally also of central importance. However, what is unfortunately neglected by the majority of retailers: Product costs are only half the battle. Indeed, the second important factor for long-term success lies in the “personal fit” with one’s own supplier. But why is the right chemistry with a wholesaler, usually located thousands of miles away in the Far East, so important?

Well, the answer is actually found in the question itself. As an FBA retailer, you are particularly dependent on your supplier. Delivery delays or sudden quality defects draw particularly long rat tails in the Amazon business. In addition to lost sales, bad customer reviews quickly lead to a devaluation of the products by Amazon’s in-house ranking algorithm, which in turn results in lower visibility of your items in the search results. At the same time, you can only influence what happens on site to a very limited extent.

It is therefore of great importance that you scrutinize your partner regarding reliability, but sometimes also the values and working conditions of the company before you enter into a cooperation. This is especially important if you purchase your goods through portals like Alibaba. In any case, we advise you to make personal phone calls to your contact or account manager in the company. Once you have established a satisfactory business relationship, you can certainly expect improved conditions in the long run, which will strengthen your position enormously in the fast-moving online market environment.

The product listing is your chance to stand out from the competition at first glance

Once the product and manufacturer research are complete, the product listing is next on the agenda. This term, which is sometimes confusing for beginners, means nothing more than the entry of your product on the Amazon marketplace. Once your item is listed, it can be found by thousands and thousands of visitors every day via the Amazon search feature. The product page contains all the important information about the product itself and, ideally, high-quality images that give potential customers the best possible impression.

What makes a successful product listing, we discuss in our great Amazon beginner’s guide, which you should definitely take a look at for more detailed information. This much should already be said: When creating your listing, always keep in mind that it should not only ensure a great first impression, but also replace the in-store appraisal. Looking at, touching or trying out is simply not possible in the online environment. If you take this to heart, you can set yourself apart from the competition right from the start and persuade prospective buyers to make a purchase decision.

Last but not least – Don’t rest on your laurels!

After the first successful weeks and months, it can be tempting to rest on your laurels earned in the (sometimes laborious) initial phase. As soon as the first product has achieved a certain consistency in terms of sales and revenue figures, people often start looking for the next product. In principle, this is not wrong – as long as you don’t leave the old one unregarded.

But what does this mean in concrete terms? As we have already pointed out several times, online retailing is very dynamic and fast-moving these days. On the one hand, this refers to products and trends, but on the other hand, it also applies to the seller side. So selling a functioning product package today has little predictive value for the prospects of success in the future. It is therefore of great importance to regularly and thoroughly sound out the market you operate in, in order to be able to determine the need for adjustments to price or product.

Among others, you should regularly ask yourself the following questions:

• How have my sales figures developed in the short, medium and long term? Can a certain trend be identified?
• Does such a trend make a price adjustment necessary or can I possibly increase my sales through this?
• Are there new competitors in my market niche? How is my product developing relative to my competitors (visibility, rating, sales figures, etc.)?
• Also, outside of Amazon: Is my product being offered with new modifications that noticeably increase its utility? Can I effectively differentiate myself from the competition by adding such modifications (potentially even my own) to my product?

In short, if you stay alert and keep your eyes open, you will regularly discover opportunities to improve your results and strengthen your competitive position. Another effective way to achieve this is using our listing tool magnalister.

Bonus tip: With magnalister, you can link well-known online marketplaces such as Amazon and eBay directly to your own online store – and in addition to increased sales, also ensure more independence

As already mentioned at the beginning of this article, a (simultaneous) development of an independent online store via well-known systems such as Shopware, WooCommerce or Shopify brings several advantages. In addition to higher margins on your product sales, you primarily reduce your dependency on Amazon, which results from being tied to the company’s own marketplace. In addition, you proactively prevent the market entry of financially strong and skilled competitors, first and foremost Amazon itself. In short, you combine the best of both worlds while reducing your risk.

This is exactly where our listing tool magnalister comes into play, which can secure decisive competitive advantages for you as a retailer. Regardless of whether you already run your own online store or are planning to do so in the future: as a webshop plugin, it offers everything you need for effective management between online store and marketplace – making it much easier for you to get started and for ongoing product and order management. Once you have set up your webshop and configured magnalister, you can connect numerous other marketplaces besides Amazon in no time at all, thereby exploiting the full potential of your products. Thanks to the MCF program, the sometimes time-consuming fulfillment can still be handed over to Amazon, who after all do it best.

How the whole thing looks in practice is shown in a short documentary by Welt der Wunder, who visited us in our Berlin office:

With magnalister you benefit from the following features for efficient multi-channel distribution:

• Central product upload: Time-saving and efficient upload of products to all connected marketplaces
• Price synchronization: Prices are matched fully automatically or individually (per marketplace)
• Inventory synchronization: Current stock levels are synchronized and thus unwanted cancellations are avoided
• Automatic order import: Import and manage marketplace orders
• Attribute matching: Match product variations and features with marketplace attributes*
• Order status matching: Automatically match order status (e.g. “shipped” or “cancelled”) with marketplaces
• Invoice upload: Send invoices automatically from the webshop
• Interface customization: Customize the plugin via so-called hook points as you desire**

* Not supported by all marketplaces

** Requires programming knowledge. Not available for cloud (SaaS) systems, as no intervention is allowed by the manufacturer.

The magnalister plugin is available for many of the well-known webshops and can be tested in a 30 day free trial with full functionality.

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Conclusion: If Amazon FBA is worth it depends first and foremost on yourself – experience shows that with challenges also opportunities grow

The requirements for Amazon sellers have risen in recent years, no question about it. On the one hand, this is simply due to more sellers on the online marketplace competing for paying customers. Price wars are not uncommon in highly competitive market segments. On the other hand, however, this is also due to constantly rising customer demands, which Amazon itself is fueling with the rapid expansion of its own service network.

Fortunately, as an FBA merchant, you can make direct use of this network. The challenge, then, lies more in building a profitable business, which depends on factors such as picking the right product and manufacturer, but equally on skillful marketing. Something that is underestimated by many, but immensely important, is also ongoing market observation. Resting on your laurels rarely works in Amazon’s dynamic market environment. In this article, we have looked in detail at how you can systematically take all these factors into account and what concrete approaches are available to you for implementation. Please also take a look at our further articles on the various topics:

• Amazon sales fees: General info on costs and fees on Amazon
• How-to guide for Amazon product research: How to find suitable products
• International sales with Amazon: Step-by-step guide to international expansion
• Preparations for Amazon FBA: How to start with Amazon FBA successfully

In the end, the reviews of merchants with Amazon FBA show again and again: Building a sustainably profitable online business depends first and foremost on oneself. The importance of reasonable preparation has certainly increased; a “head over heels approach” as in earlier days is no longer possible. On the other hand, the ever-growing customer base offers a huge opportunity for traders: Those who know about the characteristics of the marketplace and act accordingly can reach more people than ever before. This shows that as the challenges grow, so do the opportunities.

In order to exploit additional potential and reduce your own dependence on Amazon in the long term, it may also make sense to maintain your own online store. In this context, we would also like to refer to our plugin magnalister: As an interface between your web store and many well-known online marketplaces including Amazon, our tool effectively supports you in the area of product listing and order management, so that you can fully concentrate on selling your products and the expansion of your ecommerce business.

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