“In 2021, can I make money on Amazon FBA?” This is a question widely asked in the FBA startup community. Open Reddit or any other related forum, enter the keyword “Amazon”, and a bunch of similar questions will come up.
Such questions are obviously brought up by new players who have little knowledge about Amazon FBA. This also reflects the situation that many novices are ready to come in while Amazon FBA businesses are becoming more competitive.
A huge influx of Chinese sellers come into the market. Because of language barriers and information asymmetry, there were many people who didn’t know about cross-border e-commerce in China in the past. Since 2019, Amazon saw the great potential of bringing in Chinese E-commerce operators who are either very successful doing business on Taobao, JD and Pingduoduo or have great manufacturer resources in China. 90% of the newcomers who are ready to enter the Amazon FBA space have learned some information about it from the institutional advertisements on Douyin, Kuaishou, and Toutiao.
North American sellers has also increased significantly. Also you can see the Amazon Fulfillment centers have expended quickly, here are all the locations. A lot of people started selling online while they spend a lot more time at home. Thanks to COVID.
The “beautiful pictures of self-made millionaire” in those advertisements strengthened the prowler’s swaying mind. At the same time, it is a big leap for anyone to start investing (a lot of) time and money in “the real deal”. And people are scared of being deceived.
So, it is 2021, can Amazon FBA still make money?
Yes, Amazon FBA has been and will always be making money!
However, the novice sellers ask the wrong question. The point is not whether Amazon FBA can make money, but is whether YOU can make money on Amazon FBA.
Just to compare horizontally with Chinese market. Everyone knows Taobao / Tmall is way more competitive than Amazon. But I know a seller who only started to enter Taobao in 2019 and made 7 figure profit in 2020.
Therefore, if you want to enter Amazon FBA space, you must make sure you have the clear answer to these question I have for you.
By the way, we are not talking about those who are going to work in e-commerce companies, because they have basically fixed salaries. Today we only talk about people who plan to start a business on Amazon.
First of all, do you have money?
This is a very practical problem. For sellers with insufficient budgets, it is difficult to even start an Amazon FBA business, let alone succeed.
The average success rate of product selection 20% based on our survey. This result is for operator with a lot of experience. With the help of product selection tool, this rate will not change much. As more and more people use tool like JungleScout, the product being suggest becomes the honey pot. It will soon become very competitive.
When a novice sellers stumble into the market and choose 10 products, it is very lucky if 2 survive.
What are the reasons for the failure? Too many.
It may be that the competition of the selected product is fierce, and there is no traffic after the product goes online. It may also be that the product is inadvertently infringed some patent, the listing is directly taken down by Amazon. It may also be that underestimate seasonality of a product, which was brought online at a wrong time, and so on.
These failed products are sunk investment until you hit one successful product. Then when the sales ramp up, you run into negative cashflow. You have to purchase more stocks before you can sell them and collect the money. This can be a lot. The quicker sales ramp up, the more money you need to invest in. At this point, you are already seeing the end of the tunnel. 🙂
There are also some service items that Amazon must have, and the current prices are also astonishingly high.
Amazon service for certain category is also a money-eat machine. A “best deal campaign” cost more than $1,000. A “lightening deal” cost $500.
These things to kick off the initial sales need money to support.
Of course, some unpopular products for sub-categories may not require a lot of money to operate. $5,000 to $7,000 may be able to pull off one product. But such products are not easy to find, and as more and more people come in, such product categories are gradually becoming crowded and unprofitable.
I’m not trying to scare away novice sellers. I want to show you some facts. There is risk doing any business. Amazon FBA has relatively low risk. At worst, you can sell off your inventory at a clearance rate. You should be able to recoup a lot of your inventory cost.
If you want to borrow money to come in play, I advise you to stop. Doing business are too risky, you must be cautious no matter how high the returns are.
Secondly, are you self-discipline or not?
Working for yourself and working for other are completely different things.
Working in a company, especially a big company, every employee has his/her scope. A short period of laziness may not affect the overall performance of the whole company or stability of your job.
But when you start up a business? The slightest sloppy is not tolerable.
You don’t want to deal with the buyer message? Well, after 24 hours, it will be counted as negative points in your shop performance.
Do you respond quick when the bad review came? Well, the conversion rate of the product may drop to freezing point in the next second.
Starting a business Amazon has too many things that you need to consider, deal with, and make decisions.
Starting 5am pacific time in the morning, it is the best time to practice your new operation and study your competitors. 9pm is not beer time either because you can’t wait to see how many orders your store made last day.
So, if you are an undisciplined person, if you can’t let yourself be 100% invested in the Amazon entrepreneurship , then the entrepreneurial path might not be suitable for you.
Finally, do you love to learn?
I have always believed that learning is a lifelong career, and there is no end to this career.
For someone who start an Amazon FBA business, learning is even more important.
Many novice sellers who have just entered Amazon are addicted to some Amazon Facebook groups and cannot extricate themselves. In fact, those fragmented records cannot bring you a substantial improvement in operation skills.
Many novices ask questions or questions: How to edit a listing? How to upload a new shipment? How to print the product label?
In fact, these things can be solved by reading a few good articles. Instead of asking for a quick answer, one should systematically learn the whole operation from product sourcing, listing optimization to PPC optimization.
In fact, every novice seller should make his/her own operation notes. Ask questions every day, solve your own problems every day, and make progress.
After a while you will find yourself knows a lot about it and able to synthesize the pattern that works for yourself.
Hope the above content can bring you some inspiration. If you are still not being discouraged by me, I will share my most important tips about how to mitigating some of the risks.