Amazon is an ecommerce giant with over two million third-party sellers, dozens of warehouses, and a massive logistics operation.
Fulfillment by Amazon (FBA) is a program that allows sellers to outsource certain tasks to Amazon.
With the Amazon FBA program, Amazon takes care of everything from storage, shipping, delivery, and customer service. You get the opportunity to sell across various marketplaces while you focus on other aspects of business that generate revenue.
But even with multiple benefits, the Amazon FBA service comes with major pitfalls that can affect you as an Amazon seller.
Read on as we look at some of the biggest pitfalls of the FBA service and how you can overcome them in 2023.
Amazon FBA takes care of storing and shipping your products. However, sellers have complained of delayed or lost inventory.
Sometimes, Amazon could take weeks to fill your inventory into their system.
As an Amazon FBA seller, this could cause a delay in customer shipments and even cause you to miss out on future orders.
Also, your inventory may get lost in the Amazon supply chain. If this happens, you will need to file a claim to get reimbursement from Amazon.
But guess what? Amazon may reimburse much less than the value of your product.
Some sellers have also complained of having extra inventory after shipping their products to Amazon fulfillment centers. These inventory problems could affect ratings on your Amazon Seller account and may cause you to lose out on sales.
Firstly, you need to keep in mind that Amazon runs numerous fulfillment centers and can sometimes get disorganized. You want to prepare yourself for this by checking shipments on your Amazon Seller Central account regularly to ensure Amazon has received your shipment.
If your inventory is lost, you can then submit a request for an investigation right away. This could take a day or even more than a week.
Alternatively, you may want to employ the services of third-party logistics, especially during peak seasons.
As a business owner, you want to have control over all aspects of your business. However, if you are selling with Amazon FBA, you need to relinquish control.
When Amazon ships your products to customers, they come in Amazon shipping boxes with Amazon logos. You can't send any personalized notes to customers which prevents you from building solid relationships with your customers. In other words, it is difficult to establish a strong brand with Amazon FBA.
Unfortunately, if you want to have complete control over your branding and build more personal relationships with your customers, you will need to switch to Fulfillment by Merchant (FBM) where you can fulfill orders on your own or use a 3PL.
If you are selling on Amazon FBA, all products are automatically eligible for Amazon Prime shipping.
As an Amazon seller, this means you can attract millions of Prime members who are willing to pay more for faster shipping. However, the shipping cost is something you will have to deal with.
You won't be able to decide which products get free shipping and which don't. As long as you are using the FBA service, your product is automatically eligible for free shipping. This could even turn into a loss especially if you are selling low-margin products or orders with high shipping costs.
Before you sign up for Amazon FBA, ensure you consider the extra costs of free shipping.
You may want to use Amazon FBM for items with low margins and high-shipping costs to avoid incurring losses.
One of the major pitfalls of the Amazon FBA service is the high costs. Many sellers find it difficult to get a decent profit as a result of numerous FBA fees. Amazon charges monthly storage fees, long-term storage fees, fulfillment fees, referral fees, and other fees which can eat into your profit.
Amazon FBA can be very useful and may even be cheaper than other fulfillment options. As an Amazon seller, it is important to analyze your expenses using an FBA calculator to know if Amazon FBA is the best option for you. If your expenses outweigh your income, FBM may be a better alternative for you.
Many Amazon sellers have laid complaints about the Amazon customer service. Some sellers have reported spending many hours exchanging emails and phone calls without getting any resolution. Also, it could take weeks to resolve a problem.
However, on the flip side, Amazon works to attend to any complaints from buyers, so this takes the burden of attending to customers off your shoulders.
Unfortunately, it may be difficult to avoid the glitches. You will have to wait for a response from the Amazon customer service team. However, to get a faster response from them, keep your messaging direct and avoid sending multiple messages.
Keep in mind that if you want to share contacts and send more personalized messaging to your customers, Amazon FBA may not be the best option for you.
If you have a physical store in the United States, you may need to pay sales taxes. So if a customer orders products from your company, you will need to add sales tax and remit it to the state.
Also, if your products are stored in an Amazon fulfillment center in another state, you may have to pay sales tax in that state. What's more, it may be difficult to keep track of inventory locations as Amazon may move your inventory from one warehouse to another. Unfortunately, Amazon won't tell you where your inventory is stored.
This makes it difficult to collect sales taxes.
Thankfully, there are various Amazon FBA toolkits for keeping track of your sales tax. These software makes it easy to automate the process. All you need to do is sync your Amazon seller account with these Amazon sales tax software. Some of the best Amazon FBA tools for sales tax include Avalara, SimplyVAT, Taxify, and so on.
There's no doubt that the Amazon FBA service is an excellent business model for your business. You stand a higher chance of winning the Buy Box and can sell to millions of Amazon Prime members. You can also focus on other aspects of your business while Amazon takes care of order fulfillment.
However, just like any model, Amazon FBA comes with its pros and cons. As an Amazon seller, it is important to weigh the pros and cons to decide if Amazon FBA is the best option for you.