Is Selling On Amazon FBA Worth It In 2024? Here's The UGLY Truth...

Is Selling on Amazon Worth It This Year?

In this section, Steve Chu discusses the changes in Amazon's fees and the challenges faced by sellers in 2021.

Changes in Amazon Fees

• Amazon introduced a new fee structure, including placement or receiving fees ranging from 21 cents to 68 cents per item for standard size items and $2.16 to $6 for oversized goods.

• Despite lowering FBA fees on most items by an average of 19 cents, sellers will end up paying more overall due to additional charges like the low inventory search fee.

Impact of New Fees

• The low inventory search charge penalizes sellers for maintaining low stock levels, adding to the complexity of managing inventory on Amazon.

• These new fees are challenging to calculate and dispute, making it harder for sellers to predict costs accurately.

Rising Advertising Costs

• Amazon advertising costs have been increasing, with PPC fees rising significantly since 2020, impacting sellers' profitability.

• The lack of transparency in Amazon advertising's auction system raises concerns about inflated costs per click and challenges in budgeting ad expenses.

Challenges Posed by Competitors like Teu and Shein

Steve Chu highlights how platforms like Teu and Shein are affecting sales on Amazon and emphasizes the importance of branding for success.

Competition from Teu and Shein

• Platforms like Teu offer products directly from Chinese factories at significantly lower prices than those on Amazon, impacting sales on the platform.

• Customers can benefit from cheaper prices and faster shipping times through alternatives like Teu, posing a challenge to traditional e-commerce models.

Importance of Branding

• To succeed amidst growing competition, sellers must focus on building a brand around their products rather than relying solely on price competitiveness.

Selling on Amazon: Hidden Costs and Considerations

In this section, the speaker discusses the importance of having a branded website, collecting customer information, and the hidden costs associated with selling on Amazon.

Importance of Branded Website and Customer Information

• Having your own branded website is crucial for success.

• "In order to succeed you also need to have your own branded website."

• Collecting customer information is essential for selling more to existing customers.

• "Collect your customers' information so that you can sell more to your existing customers."

Hidden Costs of Selling on Amazon

This part focuses on the significant hidden costs involved in selling on Amazon, particularly related to refunds and inflated revenue numbers.

Refunds as a Major Hidden Cost

• Refunds pose a substantial challenge when selling on Amazon.

• "The biggest hidden cost selling on Amazon is refunds."

• Average return rates vary across product categories.

• "Average return rate is 12% for electronics, 15-20% for high fashion apparel."

Inflated Revenue Numbers and Return Costs

• Revenue numbers shared online are often inflated due to how returns are handled by Amazon.

• "Those numbers are always inflated big time."

• Calculating actual costs of returns accurately is challenging.

• "Actual cost of a refund to your bottom line is nearly impossible to calculate correctly."

Challenges with Returns and Inventory Management

This segment delves into the complexities sellers face with returns, unsellable products, inventory management issues, and challenges with Amazon's fulfillment processes.

Impact of Returns on Sellers

• High return rates are common when selling on Amazon.

• "You will experience a much higher return rate selling on Amazon."

• Unsold returned products can lead to financial losses for sellers.

• "Product will come back as unsellable."

Issues with Inventory Management

• Maintaining precise inventory levels is crucial but challenging due to various factors like returns.

• "You have to maintain your inventory at precise levels."

Amazon FBA Challenges: Shipment Losses and Malicious Activity

This part highlights challenges related to shipment losses, malicious activities by competitors, and the necessity of vigilance when using Amazon FBA services.

Shipment Losses and Reimbursement Delays

• Instances where Amazon loses or damages shipments can result in financial setbacks for sellers.

• "Amazon mysteriously loses your shipment sometimes."

Vigilance Against Malicious Activities

• Sellers need to be vigilant against hijacking attempts by competitors.

• "Malicious activity hasn't gone down much either despite Amazon's best efforts."