Top 5 Reasons 90% of Amazon FBA Sellers Fail

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In a Fulfillment-By-Amazon (FBA) warehouse [above]

by CJ Black

It has been estimated that more than 90% of Amazon FBA (fulfillment by Amazon) Sellers have no long-term success (i.e., two years or more). That’s an astonishing number. In fact, that’s more than half of the people who sign up for a seller account and actually list a product, let alone the ones who were ever put on a listing! There are, of course, a number of factors that go into this statistic, and I’ll explain a little more about how this could possibly be the case.

While you may have heard the many success stories of Amazon sellers who made it big on the Monster e-tail platform, most of them fell along the way and are nowhere to be found. Nobody wants to admit they failed, especially after hours of training and hundreds of thousands of dollars in startup costs. This is definitely not an easy decision; to make your Amazon FBA dream come true. I can really empathize with those who take their bets off the table and fold. I know too well what that feels like; like I’ve been there too.

The US Amazon Marketplace Hundreds of millions of products are listed in 30 categories and over 200 million users visit Amazon’s websites every month. Almost every brand you’ve heard of is listed (or waiting to be replenished). Amazon Prime is a household name today and has reached epic proportions, particularly during the COVID-19 pandemic. Why are FBA sellers leaving the Amazon Sauce Train?

Is It Profitable To Sell On Amazon Now And In The Future? Yes absolutely! And is it easy to find profitable products with a bestseller rank that gives you an ROI of at least 10% or more? No, unfortunately this is an important factor that has made it particularly difficult for many new sellers and would-be sellers.

While it may sound easy to just ship your products to one Amazon FBA warehouseIf you’re doing everything else, approach Amazon with caution. ‘Why is that?’ you ask. Well, you need to understand that Amazon, like any competitive business, looks after its own interests. That interest will have a significant impact on how well you do in your FBA business. That is why there are tons of guidelines to follow – if you don’t follow them – watch out!

[1] You have chosen the wrong product

This is perhaps the NUMBER 1 reason people fail at FBA – both wholesale and private label. A new seller can go through the first part of the product research and select the first product that bills OK and is immediately available. Then when they list the product, they find that the product is not that great after all. You will find out soon enough that there is either too much competition for the Buy Box or hardly any demand. Or even worse: You have not checked whether the product itself was “sold and shipped” by Amazon!

Product selection is by far the toughest task in the FBA business and depends a lot on who is getting the best wholesale prices. As a newbie, you never want to be included on a product list that dominates Amazon. Amazon sells a wide variety of branded products as well as its own brand so they dominate tons of offers.

SOLUTION: Spend at least 4 weeks doing product research as there are a number of criteria to consider when choosing the right product to sell on Amazon. Do not rush this process. Invest in product research tools. One of the most popular is Keepa. If you choose private label brands, you should check out AmazeOwl.

[2] You have selected the wrong supplier (s)

When you outsource inventory, you not only see the current price, but also the price history over the last 12 months with Keepa. Then you know how low a product can be sold on Amazon and how high it can possibly be. This will help you decide what wholesale price range to look for in order to get at least a 10% return on investment after subtracting Amazon fees. This, in turn, can cross a bunch of suppliers off your list as you are limited to competitive pricing and inventory availability that you seek.

When it comes to reviewing wholesale suppliers, not only will you want to ask for their most current inventory, but you also want to find out what experiences, if any, they have had with Amazon FBA sellers. This gives you a full insight into how well they are serving this market. Most suppliers have a minimum order quantity (MOQ) before accepting new customer orders, including Amazon sellers. Some smaller suppliers no longer work with FBA sellers due to poor experience.

You won’t really know how good a supplier’s service is until you work with them and develop a relationship with their key salespeople. If you are a serious buyer and take action, they will likely answer your future calls and give you better deals later. Just don’t expect good wholesale deals as a new account unless you’re spending at least $ 1,000 or more on inventory (or your competition will get their hands on these better deals).

SOLUTION: Ask a few questions of each prospect and see how well they know about the Amazon FBA system. You will be amazed how much more you can learn from just their experience. Just be careful not to deal with suppliers who also sell on Amazon as they will not give you the best wholesale deals. Invest in the World Wide Brands Directory if you are looking for 100% certified wholesalers for any type of brand or product in North America.

[3] They have little to no diversification

I’m sure you’ve heard the “don’t put all your eggs in one basket” cliché. There’s a logic behind this saying that made it very popular. FBA sellers who stop expanding on Amazon don’t stay long. So when you find a successful product for sale, expand it ASAP and have 5 more successful products running! That way, you still have 5 profitable products to rely on when one of them refuels at the buy box. The more products the better.

In fact, Amazon encourages sellers to list at least 40 different products from their store, and that’s a ton of startup costs to consider. Not only that, but you need to overlook all of the deals that Amazon is dominating the buy box on and that’s a ton of deals! You definitely need to think outside the box in your product research as many salespeople gave up when it became increasingly difficult to find profitable products with few competitors.

SOLUTION: Ideally, you want to distribute your sales of products across different categories. All experienced salespeople do this. However, this is not an easy task as many new sellers get stuck in the mud here. If you want to grow your business over the long term, you will need to source a wide variety of products, including products that are considered “oversized” (such as golf clubs). These decisions largely depend on your budget. The heavier or larger the product, the higher the shipping and storage costs.

[4] Your account has been blocked

When you sell on Amazon, make sure you know the rules – what you can and can’t do. If you violate certain terms of use and do not adhere to the established standard, Amazon can and will close your account. This currently appears to be a common practice. The struggle to get out of an account suspended is another reason salespeople lose their business and eventually fail. Going through the appeal process is a real problem and can take weeks. Meanwhile, your listings are stranded in the Amazon matrix and are no longer selling.

Here are the main reasons Amazon suspends an account:

  • Selling inauthentic or restricted products
  • Violations of sales guidelines (e.g. dropshipping products)
  • Operation of more than one seller account
  • Account hacked or security breach
  • Be flagged for complaints from customers

SOLUTION: First and foremost, prevention is always better than cure. You need to know and follow Amazon’s rules and guidelines. As you learn from others whose accounts have been banned, stay tuned. Always respond to policy alerts and / or notifications from Amazon as quickly as possible. Be ready to hire help if you don’t know how to create a plan of action to recover your account.

[5] They thought Amazon FBA was easy

Many people think FBA is a great way to get extremely rich overnight when they see all of the potential products that they could sell in such a huge market. Of course, this is not the reality. Amazon FBA is a company that requires a lot of hard work and dedication. They say it takes a long-term perspective. Too many people sign up for an Amazon seller account thinking this is an easy way to make money – at least that’s what Amazon gurus sound like – and then quickly find out that it just doesn’t, and eventually quit .

Amazon has a huge learning curve. You need to educate yourself about the many different categories, their fees, shipping your goods, calculating your margins and forecasting your profitability, and many other aspects of doing business. In addition, you need to constantly contact new and current suppliers who do not work in the evenings or on weekends.

SOLUTION: The cost of doing business with Amazon can be extremely high. So invest in a reputable training program that will teach you the ropes. Join a community of other students learning how to do Amazon FBA and can help you along the way.

FINAL THOUGHTS

Amazon is a rapidly evolving market with lots of FBA sellers coming and going. Decide early on whether Amazon is really the online business for you or whether you have considered all of your options. Choose the best option that fits your vision, goals, and budget.

The current Amazon FBA success rate may not be in your favor, but on the other hand there are risks with any new business venture, online or offline. Personally, I prefer to run a business that I have full control over, rather than playing in someone else’s sandbox. There are other options that are very lucrative and far less competitive

CJ Black is the proud author of the Digital-X Product Formula: “I just created this brand new guide that is a proven breakthrough formula for building a hugely successful internet business with no inventory, no overhead, and no ecommerce store! ”Find out more here: https://www.digitalxpayday.com

[updated Feb 10, 2021]

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