Amazon FBA Disadvantages: The Heartbreaking Truth of Online Selling

Today, we are bringing you the Amazon FBA Disadvantages. Naturally, internet marketers constantly rave about FBA, but it doesn’t take too much digging to see the largest influencers are sponsored to do so. It’s time for the truth.

If I had a nickel for every time someone asked me about my experience with Amazon FBA, I’d probably have enough money to cover the long-term storage fees for my unsold stock of neon llama-shaped sunglasses. Let’s just say, the journey has been…educational.

I dove headfirst into Amazon FBA, as starry-eyed as a kid in a candy store, visions of profit margins dancing in my head. Partly blinded by Twitter members flaunting unreal profit magins… as you’ll see below it’s not all rosey.

Amazon FBA Profit Targets

After all, who doesn’t want to leverage the world’s biggest e-commerce platform to sell goods? And who knew that llama-shaped sunglasses weren’t the next big trend?

Why I Believe Understanding the Pros and Cons of Amazon FBA is Crucial for Every Entrepreneur

Now, I can’t stress this enough – understanding the pros and cons of Amazon FBA is as crucial for an entrepreneur as knowing not to invest your life savings into neon llama-shaped sunglasses. We all have our learning curves, don’t we?

Getting into Amazon FBA is a bit like getting a puppy. It seems like a great idea, and it can be, but it also means dealing with the unexpected surprises that the puppy leaves on your favorite rug. And trust me, Amazon FBA has a lot of these “surprises.

So, buckle up, folks, because we’re about to delve into the bad and the ugly of selling with Amazon FBA. Anybody can speak highly about things, but you need to be aware they could be partnered with Amazon to do so. We have no ties with Amazon, other than our storefront of course.

By the end, you’ll hopefully be better prepared than I was – and fewer neon llamas will have to suffer the indignity of gathering dust in a warehouse.

How I got started with Amazon FBA and How it Works

It all started with a dream, a dream filled with the clinking sound of coins, and a weirdly specific image of neon llama-shaped sunglasses. Once I had the product (a decision I might have given a bit more thought, in hindsight), I turned to Amazon FBA.

Amazon FBA, or Fulfillment by Amazon, is essentially a service where Amazon takes care of storage, packaging, and shipping on behalf of sellers like me, who then sit back and dream of the tropical vacation we’ll take with our earnings.

To get started, I sent my products (yes, the infamous neon llama sunglasses) to Amazon’s fulfillment centers. From there, Amazon would store my inventory, and each time a sale was made, they’d package and ship the product. They even handled customer service and returns, leaving me free to imagine the yacht I’d buy.

The Benefits I Initially Perceived When Using Amazon FBA

At the outset, Amazon FBA seemed as magical as a unicorn sliding down a rainbow. I was drawn in by the promise of tapping into Amazon’s massive customer base.

No more sleepless nights trying to drive traffic to a new website – my llama sunglasses were now accessible to millions of Amazon customers.

Traffic Struggling On Own Site
My own store didn’t attract many visitors… and even less in sales.

Then there was the benefit of outsourced logistics. No more packing boxes till my hands were covered in paper cuts, or navigating the labyrinthine world of shipping providers. Amazon was going to do all the heavy lifting, leaving me with more time to design my future beach house.

Lastly, there was the allure of Amazon Prime. With FBA, my products would be eligible for Amazon Prime’s fast shipping, a fact that I was certain would have customers clamoring for neon llama sunglasses faster than you can say “unexpected fashion trend.

In summary, my initial journey with Amazon FBA was filled with high expectations, dreams of untold success, and a general lack of awareness about the roller coaster ride that lay ahead. Little did I know that my sunglasses would see more of Amazon’s warehouse than customers’ faces. But that’s a story for another day…

The Challenge I faced with Amazon FBA

So, there I was, dreaming of my neon llama-shaped sunglasses flying off the virtual shelves. But as the saying goes, “Life is what happens when you’re busy making other plans” – or in my case, when you’re busy envisioning your future as a neon-llama-sunglasses mogul. As it turns out, Amazon FBA wasn’t all rainbows and unicorns. Let’s dive into the first major challenge: the high costs.

A. Dealing with High Costs

  1. My Struggle with Understanding Amazon FBA’s Complex Fee Structure

The Amazon FBA fee structure is a bit like trying to understand the rules of Quidditch on your first read – it’s confusing, seems to have been devised by someone with a unique sense of logic, and there are more components than you’d expect.

From fulfillment fees to storage fees, referral fees to closing fees, it was like a never-ending maze of costs that left me feeling like I was deciphering an alien language.

  1. The Moment I Realized These Costs Were Eating Into My Profit Margins

The day I realized these costs were devouring my profit margins was a day I won’t easily forget. I was crunching the numbers, figuring out my profits when it dawned on me – after accounting for all the Amazon FBA fees, I was making less per sale than the guy selling hotdogs outside my local Walmart.

  1. A Particular Instance Where These Costs Had a Significant Impact on My Business

One particular instance that stands out was during the holiday season. I had stocked up on inventory, expecting a surge in sales. What I hadn’t anticipated were the increased storage fees for the unsold stock of neon llama sunglasses.

The costs skyrocketed and the sales… well, let’s just say the llamas weren’t flying off the shelves as expected. I ended up with a bill that you would expect at a high-end restaurant.

The high costs associated with Amazon FBA can hit you harder than the realization that neon llama-shaped sunglasses might not be the best business venture.

Llama Sunglasses

But as they say, you live, and you learn… and then you find another quirky product to sell. This was a valuable lesson to learn. I was used to flipping items on eBay for 75% minimum return on investment.

I soon learnt that Amazon marketplace is a different type of online store, and I’d have to re-think my ecommerce business completely.

My Intentory Nightmares

The fun didn’t stop there. I soon learnt what it meant to be an Amazon seller. It’s not all about viewing green bars in your Amazon Seller Account. Far from it.

  1. The Difficulty I Faced in Managing and Controlling Inventory

When I embarked on my Amazon FBA journey, I imagined inventory management to be a smooth process, one that involved me lounging on a beach while Amazon handled the details. Afterall, this is the self-taught prophecy that you’ll be sipping cocktails whilst the profit rolls in.

The reality, though, was more like trying to perform a synchronized swimming routine in a sea of neon llamas. Aggressive ones, that are actively trying to de-capitate you!

Predicting how much stock to send, keeping track of what was where, and dealing with Amazon’s occasionally cryptic inventory updates, was like herding said llamas – a true test of patience and fortitude.

  1. That Time When My Inventory Was Lost and the Impact it Had

And then came the day when Amazon lost a portion of my inventory. Yes, you heard that right. One day, a few hundred pairs of my treasured llama sunglasses just… vanished.

It was like a magic trick, but the magician had forgotten the part where they’re supposed to bring the item back. I spent weeks in back-and-forth communication with Amazon, while the lost sunglasses, presumably, were off having an adventure of their own.

The impact on my business was significant, leading to missed sales, frustrated customers, and one very stressed entrepreneur (yours truly).

  1. My Struggle with Long-term Storage Fees and How it Added Up

Remember those high costs I mentioned earlier? Well, the fun didn’t stop there. As it turns out, Amazon isn’t a big fan of storing items that aren’t selling – go figure!

Long-term storage fees began to pile up like a mountain of unsold llama sunglasses. I found myself not only struggling to sell my products but also battling to reduce the cost of storing them. It was like being in a game of tug of war, but I was the only one pulling my side.

In short, managing inventory with Amazon FBA presented more twists and turns than an episode of Game of Thrones, and just when I thought I had it figured out, another curveball would come my way. But hey, at least it kept things interesting!

The Branding Battle

And now, my friends, let me lead you into the battlefield of branding in the realm of Amazon FBA. If you thought that carving out a unique brand identity was as simple as slapping a logo on a product and calling it a day, prepare for a revelation.

Because when it comes to Amazon FBA, branding can feel like trying to perform a solo at a rock concert where everyone else is also trying to perform a solo.

How Amazon’s Packaging Hindered My Brand’s Visibility

When you’re selling neon llama-shaped sunglasses, you want your packaging to be as vibrant and eye-catching as the product itself. But with Amazon FBA, my sunglasses were shipped in standard Amazon-branded packaging.

Sure, it was reliable, but it was as plain. You need vibrancy with certain products like this and let’s face it, when your product is as flamboyant as mine, you want the unboxing experience to match.

But alas, Amazon’s packaging left my brand camouflaged in a sea of brown boxes.

  1. The Moment I Realized My Products Lacked the Personal Touch

There was a day when I received a package from a small business I’d ordered from. Inside, along with the product, was a hand-written thank you note. It was a small gesture, but it made me feel valued, and I immediately felt a connection with their brand.

This was when I had my “Eureka” moment – my sunglasses lacked this personal touch! With Amazon handling packaging and shipping, my opportunities for personalization were as scarce as hen’s teeth.

  1. How This Limitation Affected My Brand Recognition and Customer Loyalty

This lack of personal touch and branding started to show in my brand recognition and customer loyalty – or rather, the lack thereof. Customers remembered the Amazon packaging, not the quirky brand selling neon llama sunglasses.

Repeat customers were as rare as a peaceful day on social media, and I began to feel like I was running on a hamster wheel, constantly needing to attract new customers because the old ones didn’t remember me.

So there you have it, my friends – the tale of the branding battle. A tale of missed opportunities, faceless brown boxes, and the realization that sometimes, you need to be able to add that personal touch, especially when you’re selling something as, well, unique as neon llama-shaped sunglasses.

The Fear of Account Suspension

Although I have never received an account warning, or suspension, it doesn’t mean I haven’t been fearful. I have a close friend of mine who once received an account suspension with just over £15,000 worth of stock in the FBA warehouse.

Due to a succession of customer satisfaction issues, Amazon decided they would close his account… and charge him to remove all of his items.

Amazon suspended

The Amazon fulfillment centers delivered the customer service, so they basically closed him down because of their own failures… which is a failure in itself. He’s now selling products again after a successful appeal, but they wouldn’t reimburse the fees for the stock that they automatically returned to him.

  1. The Pressure of Constantly Adhering to Amazon’s Strict Policies

Amazon has set strict policies for sellers to ensure the integrity of its marketplace. From listing policies to rules for customer interactions, these guidelines are comprehensive and detailed.

As a seller, the onus was on me to adhere to these rules, which sometimes felt like navigating through a complex labyrinth. The constant vigilance required to ensure compliance added another layer of complexity to my entrepreneurial journey.

  1. My Experience of Living in Fear of Potential Account Suspension

The possibility of account suspension created a constant sense of unease. Every notification from Amazon felt like a potential threat to my business’s existence. This fear was not unfounded. Amazon takes its rules seriously and doesn’t hesitate to suspend accounts if they believe the rules have been broken. This constant worry added to the overall stress of managing my business.

  1. A Story of a Fellow Entrepreneur Who Faced Account Suspension and its Aftermath

A fellow entrepreneur, a seller of novelty socks, experienced this worst-case scenario. His account was suspended due to a mistake in adhering to one of Amazon’s policies.

Sales stopped abruptly, his inventory was stuck in limbo, and it took weeks of effort to get his account reinstated. This incident had a considerable negative impact on his business and highlighted the precarious nature of relying solely on Amazon FBA. He had no other market to sell on, didn’t use his own website and had no social presence (Which is why so many third party sellers choose an Amazon FBA business).

In summary, the fear of account suspension is a significant disadvantage of Amazon FBA. It underscores the importance of diversification and not relying solely on one sales channel for your business’s survival.

It’s a sobering reminder of the risks that come with the potential rewards of selling on a large platform like Amazon.

The Competition Crunch

One of the most daunting aspects of using Amazon FBA is the sheer volume of competition. Amazon is a global marketplace with millions of sellers, each vying for the attention of consumers. This competition can be both a blessing and a curse, as I came to learn.

  1. The Day I Realized the Massive Number of Sellers on Amazon

I’ll never forget the day when the scale of competition on Amazon truly sank in. I was casually browsing through the platform, as one does, and I began to notice the vast number of sellers, each offering a plethora of products. It was a humbling moment, realizing that my neon llama-shaped sunglasses were just a tiny speck in this vast ocean of offerings.

  1. My Struggle to Differentiate My Products in a Sea of Options

Differentiating my products amidst this sea of options proved to be a significant challenge. While my sunglasses were unique, there were thousands of other unique products on the platform. Getting potential customers to notice my product was like trying to get noticed in a crowd, all while everyone else is also desperately trying to stand out. This struggle forced me to invest more time and resources into marketing, which was both challenging and rewarding.

  1. The Price War That Hit My Profit Margins and How I Coped

The level of competition on Amazon often leads to a price war among sellers. I found myself caught in one such war, with other sellers offering similar novelty items at lower prices. This downward pressure on prices took a toll on my profit margins. I had to balance the need for competitive pricing with the necessity of maintaining profitability.

To cope, I focused on strengthening the perceived value of my product. I improved my product listings, enhanced my customer service, and worked on building a brand that customers could connect with.

This strategy helped me to differentiate my offering and allowed me to maintain a higher price point than some competitors.

In essence, the competition on Amazon FBA is fierce. While this vast marketplace provides access to a large customer base, it also requires you to continually work on differentiating your product and brand.

It’s a constant dance of adaptation and improvement, but one that can lead to significant growth and learning. Remmeber, this is your own online business, and if you stand still you will fall behind.

Whether you do Retail Arbitrage, Online Arbitrage or Private Label Products… we all need to adapt to maintain a successful business.

Exploring Alternatives to the Amazon FBA program

As my journey with Amazon FBA continued, I found myself wondering if there were other e-commerce platforms and fulfillment alternatives that might better suit my needs.

This curiosity led me down a path of exploration, experimentation, and new discoveries. There were some major websites I could try such as Etsy, Shopify, eBay. How would they work out?

My Journey of Discovering Other E-commerce Platforms

My search for alternatives began with an exploration of other e-commerce platforms. I was looking for a platform that offered a balance between a large customer base, reasonable fees, and control over my brand and customer interactions.

I explored options like eBay, Shopify, and Etsy, each with their own unique selling propositions. This journey was an eye-opener, revealing the diverse range of e-commerce platforms available and the different opportunities each one presented.

Ultimately, I moved my goods over to eBay due to being able to keep the most profit with this platform.

B. The Fulfillment Alternatives I Experimented With

Beyond different platforms, I also looked into various fulfillment alternatives. I explored options like self-fulfillment, where I would handle the storage, packing, and shipping of products myself.

I also looked into third-party logistics providers who could take over the fulfillment process for me, much like Amazon FBA, but potentially with more flexibility and control.

Experimenting with these options gave me a greater understanding of the logistics involved in e-commerce and helped me appreciate the conveniences and challenges that different methods offered.

C. The Advantages and Disadvantages I Found with These Alternatives

Each platform and fulfillment method came with its own set of advantages and disadvantages. For example, with self-fulfillment, I had complete control over the process and could add the personal touches that were missing with Amazon FBA.

However, it also meant taking on all the responsibilities and challenges of logistics, from storage to shipping.

Similarly, other e-commerce platforms like Shopify allowed me to build a stronger brand identity and have direct communication with my customers.

On the downside, I had to drive traffic to my store myself, unlike on Amazon, where millions of customers are already browsing. I failed to do this, and I think it’s due to my store having such a wide range of items. There’s not many people who want to buy nappies, sunglasses and hangbags from the same site…

In summary, exploring alternatives to Amazon FBA was a learning journey in itself. It broadened my understanding of the e-commerce landscape and gave me valuable insights into the different ways to run an online business.

While Amazon FBA has its challenges, it’s just one of many options available to entrepreneurs in the digital age.

Conclusion

My journey with Amazon FBA has been a rollercoaster ride, marked by both highs and lows. As I navigated through the labyrinth of e-commerce, I encountered a multitude of challenges that tested my resilience and adaptability.

It has helped me to understand so much more about the platform, but ultimately, I’m taking a hands-off approach due to the difficulties with the Amazon marketplace.

During 2023, I will cease selling on amazon. However, I have a team of Virtual Assistants lined up to start selling product on my behalf. So I a sense, I will still be selling online… but I’ll be able to sleep without worrying if I’ve got the buy box, or what excess monthly storage costs I’ll have this month.

I will be focusing on building my own brand, so I can sell products which I fully own. This will give me more freedom and it means that I’m able to compete in a niche I specialise in, rather than battling against wholesale business sellers.

I can then focus on things that I can control, such as brand loyalty, repeat purchases and healthy profit margins. I’m trying to work out how I can document this in a blog, without giving my readers my business!

A Recap of the Challenges I Faced with Amazon FBA

From grappling with Amazon’s complex fee structure to the struggle of maintaining a unique brand identity in a sea of brown Amazon boxes, the path was often challenging.

The constant fear of account suspension kept me on my toes, while the fierce competition forced me to continually innovate and adapt. In addition, managing inventory proved to be a tricky aspect, and the price wars often squeezed my profit margins.

Why I Believe Every Entrepreneur Should Consider These Disadvantages in Relation to Their Unique Needs and Goals

However, it’s essential to remember that every entrepreneur’s journey is unique, and what may be a disadvantage for one may not necessarily be a disadvantage for another. It’s crucial to weigh these challenges against your unique needs, goals, and capabilities.

For example, a small business with limited storage space may find Amazon’s warehousing an advantage, while a brand-focused business might find Amazon’s packaging limitations a deal-breaker.

My Final Thoughts on the Role of Strategic Planning in Making E-commerce Business Decisions

Strategic planning is key in making e-commerce business decisions. It involves understanding the trade-offs of different platforms and fulfillment methods, and carefully aligning these with your business goals.

My journey taught me that while Amazon FBA has its disadvantages, it also offers immense opportunities. The key lies in leveraging its strengths while mitigating its challenges through strategic planning and execution.

In conclusion, while the road with Amazon FBA was bumpy at times, it offered invaluable lessons that honed my entrepreneurial skills.

It’s a journey I would recommend to anyone stepping into the world of e-commerce, with the caveat to tread wisely, armed with the knowledge of potential pitfalls and a robust strategy to navigate them.

Despite all of these negatives, I really enjoy selling on Amazon and haven’t written this article to deter third party sellers. Instead, you can use these issues I had, to improve your amazon selling experience.

I purchased an absurd amount of novelty glasses, without considering if they were selling on amazon frequently. I wasn’t on the buy box and excessive fulfillment fees crippled any margins. It was a bad buy.

These helped me though. Helped me to learn how to manage returns and refunds!

Author
Tom P
Hi, I'm Tom Paddock! An Amazon & eBay seller, who has helped over 10,000 people start their own online business. I provide cutting-edge techniques to help sellers with Online Arbitrage, Retail Arbitrage & Wholesale on Amazon.

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