Is Amazon FBA worth it?

Over the last couple of years starting an online retail business has become one of the hottest SME trends in the UK. 

In 2023 the number of ecommerce sites in the UK was counted at 1.24 million. With 67,000 new ecommerce businesses currently registered, according to Companies House data. 

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Amazon: A major player in Ecommerce

One of the biggest e-selling platforms and marketplaces is Amazon. The ecommerce giant has opened doors for countless entrepreneurs through its Fulfillment by Amazon (FBA) program. 

FBA allows sellers to leverage Amazon's massive infrastructure for storage, packaging, and shipping, freeing them up to focus on product sourcing, marketing, and growing their brand. 

And plenty of hopeful merchants (281,257 of them in the UK) have decided to try their luck at setting up and running an online store from the comfort of their home. 

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Ways to get your slice of the Ecommerce pie

No doubt you’ve seen/heard buzzwords like ‘’drop-shipping’’, ‘fulfillment’, ’cross-selling’, ‘affiliate-marketing’ and ’attribution model’ being bandied around the web left, right and center. 

And crowds of would be internet entrepreneurs scrambling to get exclusive distribution rights and original branding for all kinds of weird and wonderful products from suppliers on AliExpress. So they can get the jump on the thousands of other competitors trying to do the same thing. 

Given that the UK has the most lucrative ecommerce market in Europe at a volume of US$129.70bn, expected to hit US$188.80bn by 2029, the dream of FBA riches does sound alluring.

But with so many online business models out there, and the deluge of enthusiastic rat-race exiles trying to get in on the action, a key question arises - is Amazon FBA worth it? Or is it just perfect material for a modern-day series of Only Fools and Horses?

In this article we’ll examine the pros and cons of Amazon FBA, and try to ascertain if their virtual waterways are really flowing with digital gold. So intrepid FBA explorers don’t get stranded up an Amazonian creek, without a paddle.

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Forget the hype, what do the Amazon FBA stats say?

Before we compare the pros and cons of setting up an Amazon FBA business, to decide whether it’s worth it or not, we can get a very useful and informative snapshot from looking at the hard facts about FBA seller success.

According to a Jungle Scout Survey;

• The average Amazon seller makes $1000 per month, with ‘’super-sellers’’ making up to $100,000 per month. 
• 40% of sellers on Amazon make $1,000 - $25,000 per month, which could indicate $12,000 - $300,000 in annual sales.
• 57% of sellers have profit margins above 10%
• 28% of sellers have profit margins above 20%
• 13% report their business as not yet profitable
• 58% of sellers who responded said they achieved profitability within their first year.

These figures are taken from US sellers, but rough estimates will be similar for UK Amazon FBA members. 

Of course the people making the big bucks are almost always experienced and established on the platform, and the general consensus seems to be that most FBA sellers start off making just £100s of pounds per month.

However, these stats at least show it’s certainly possible to make a decent living from Amazon FBA.

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What do the sellers say?

Stats are great, but there’s nothing like real-life accounts of those who have been there and tested the waters. Let’s see what the people themselves, who have actually tried and/or succeeded at selling on Amazon, have to say.

These two comments were taken from various Quora discussion forums about the true viability of Amazon FBA. If you search through these you’ll find consistent themes in responses from existing and experienced FBA sellers. 

The mostly seem to say that, it’s competitive but still offers a wide number of opportunities provided you:

1. Have a good and unique product
2. Do proper product and market research
3. Put sufficient time in
4. Can generate enough traffic to your site
5. Don’t expect it to replace a full-time income straightaway.

Essentially most successful Amazon sellers agree that if you have a decent understanding of ecommerce marketing, you know how to use the platform, and can source quality, exclusive products, then you have a decent chance of making money from Amazon FBA.

Arguably the biggest hurdle with Amazon FBA, according to sellers, is ensuring your profits, on top of your regular business expenses and marketing costs, are above Amazon's FBA fees which include storage, fulfillment, and referral fees.

*If you want to know how to give your FBA business the best possible start, then Keep reading until the end, where we’ll share a couple of expert, insider tips.

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A breakdown of the pros and cons of Amazon FBA

Let’s take a glance at the overall benefits Amazon FBA has to offer, in comparison with its drawbacks.

Pros:

• Effortless Fulfillment - Skip managing storage and shipping. Amazon handles it all, freeing you to focus on growth. Plus, FBA easily scales with your business.
• Massive Reach & Trust - Tap into Amazon's vast customer base and leverage their trusted brand to boost sales.
• Fast, Prime-Eligible Delivery - Offer fast, free shipping to Prime members, a major sales driver. Amazon's network ensures nationwide reach.
• Cost Savings (High Volume) - High-volume sellers can potentially achieve lower fulfillment costs compared to managing it themselves.

Cons:

• Fees: FBA comes with storage, fulfillment, and potential additional charges. Factor these into your profit margins.
• High Competition: The Amazon marketplace is crowded. Strategic product selection and marketing are crucial for success.
• Limited Branding Control: Amazon's branding might overshadow your own. Consider how to build brand identity within the platform.
• Inventory Management: Careful inventory planning is key to avoid excess storage fees.

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Summing up the Amazon FBA adventure & tips for success

All things considered, it appears that Amazon FBA can be a financially worthwhile endeavor if you have the core ecommerce business knowledge and work ethic to commit to it. But it probably won’t make you a millionaire by this time next year, as it’s only the top 10% who make lifetime profits of $100,000 and over. 

Here are a few crucial tips that help lay the foundation for driving sales right-off-the-bat:

1. Learn how to do PPC and organic content marketing for online retail. Like any shop, digital or physical, a HUGE amount of the sales are dependent on getting the traffic in the first place.

2. Ask for advice from real life ecommerce experts. You can leap-frog up the ladder towards your goal by learning from those who have already done it. Every smart business person knows this.

3. Pursue word-of-mouth marketing. Consumer-generated content is the most powerful way of building trust with your customers. So encourage your customers to share their positive reviews on social media.

4. Use an ecommerce accountant. They are a wealth of knowledge and tax/cost saving tips that can give your business the edge. 

Most importantly, we would reiterate that thinking of Amazon FBA as a passive income stream is a recipe for disappointment. Success here requires a business mindset.  

By dedicating time and effort to product research, marketing, and strategy, you can unlock the true potential of Amazon FBA and become a thriving seller. If you do decide to enter the new world of commerce and traverse the trade routes of the Amazon, we wish you a safe and profitable voyage.

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Ready to begin  your Ecommerce adventure?

If you’re geared to get going, make sure you partner with the right people. Partnering with expert accountants can help you overcome the financial challenges and maximise your profits. 

Speak to our experts