Is Amazon FBA Saturated? (4 Hard Truths)

Amazon FBA is a fantastic business opportunity, allowing you to open up a Business without having many upfront costs.

However, you may be concerned about whether the market is already saturated with too many sellers, making it difficult for newcomers to find success. In this article, we will explore the current state of the Amazon FBA landscape and analyse if it is still a viable option for online entrepreneurs.

While it is true that Amazon FBA has grown considerably in popularity, this does not necessarily mean that the market is entirely saturated. It is essential to recognise that new sellers with the right ambitions and strategies can still thrive in this competitive environment.

The key to success lies in choosing the proper approach, understanding the market, and staying up-to-date with trends to identify untapped opportunities.

That being said, it’s crucial to acknowledge that selling through Amazon FBA is no longer as effortless as it once may have been. The competition is fiercer, and it requires a more strategic approach, but this should not deter you from pursuing your entrepreneurial goals. As long as you’re willing to put in the effort, Amazon FBA continues to offer endless possibilities for business growth and success.

I’m going to be doing this article a little different to usual, getting straight into the key questions that you may have.

Is Amazon FBA over saturated for Sellers?

Over the last 5 years, the count of Amazon FBA sellers has undoubtedly increased. It’s a highly profitable business avenue which more and more people are finding out about. However, lots of sellers doesn’t mean less profit for sellers. There are millions of products available on Amazon, so millions of items that sellers can list. At times, you may find a seller that keeps undercutting to the lowest price, but you can wait for them to sell out and then make your profit.

Are All Amazon Sellers Successful?

Not all sellers are successful. Not all businesses, regardless of their sector are successful. This can be down to buying stock that doesn’t sell well, buying at the wrong price and losing money etc.

We highly recommend reading our free guide which will help Amazon Sellers to understand all aspects of FBA.

How Many Sales on Amazon are From FBA?

It’s been reported that 49% of Sales on Amazon are fulfilled by Amazon FBA sellers, which we think is quite an interesting statistic. When most people buy from Amazon, they think they are buying ‘from’ Amazon, not that there is another individual involved in the sale! This shows the importance of Amazon FBA.

Understanding Amazon FBA

What Is Amazon FBA?

Amazon FBA, or Fulfilment by Amazon, is a service provided by Amazon that allows sellers to take advantage of Amazon’s vast logistics network and customer base. By using the FBA programme, you can store your products in Amazon’s fulfilment centres, and they will take care of all aspects of storage, packaging, shipping, and even customer service for your products. This automation allows you to focus on other aspects of your business while Amazon handles the logistics.

How Does Amazon FBA Work?

When you enrol in the Amazon FBA programme, you’ll be required to send your products to one of Amazon’s fulfilment centres. Upon arrival, Amazon will store your items and handle all the order fulfilment processes. Here’s a brief rundown of how it works:

  1. Sending your products to Amazon: You’ll need to create a shipment plan for your products and send them to an Amazon fulfilment centre. This will involve creating product labels and packing your items properly.
  2. Storage at Amazon fulfilment centres: Once your products arrive, Amazon will store them in their fulfilment centre and take care of all the inventory management tasks. You will be charged a storage fee, which depends on the size and weight of your items.
  3. Order fulfilment: When a customer orders one of your products, Amazon will automatically pick, pack, and ship the item to the customer. This automation ensures that you don’t have to worry about the logistics of getting the product to your customers.
  4. Customer service and returns: Amazon FBA also takes care of any customer service inquiries and handles the return process if a customer is not satisfied with their purchase. This includes refunding the customer and restocking returned items.

By utilising Amazon FBA, you can streamline your business operations, save time and resources, and ultimately focus on scaling your business. Furthermore, FBA products are eligible for Amazon Prime, which can significantly boost your sales by attracting more customers to your products.

Marketplace Competition

Analysing the Marketplace

When considering selling on Amazon, it’s essential to understand the competition in the marketplace. With millions of sellers and thousands of brands on the platform, Amazon FBA can feel saturated. However, there is still room for growth and opportunity, as evidenced by the over 200 million Prime subscribers and constant innovations in ecommerce.

It is true that many entrepreneurs are turning to Amazon FBA, leading to more competition. Perhaps the most significant force in the market is the growing number of Chinese sellers, who make up about 63% of all third-party sellers on Amazon. Additionally, 38% of top-selling brands are based in China, further influencing the market dynamics.

Despite these statistics, there are still opportunities for businesses to thrive in the Amazon FBA marketplace. To excel, you’ll need to research your niche, target audience, and competition thoroughly to create a strong product offering, with unique value propositions.

Amazon FBA vs Other Business Models

There are various ecommerce business models to choose from, each having its own set of advantages and challenges. When comparing Amazon FBA to other models like dropshipping and retail arbitrage, it’s essential to understand the differences in terms of competition, market share, and potential for success.

  • Amazon FBA: As a seller within the FBA program, you can benefit from Amazon’s vast customer base and streamlined logistics capabilities. However, the competition within the marketplace is steep. To succeed, you’ll need to find innovative ways to stand out from the crowd, such as optimizing your product listings, providing excellent customer service, and focusing on niche markets.
  • Dropshipping: This model may be less competitive than FBA because it doesn’t rely on a single platform like Amazon. However, dropshipping also tends to have lower profit margins due to the additional fees from suppliers. Additionally, managing inventory and logistics can be more challenging than with FBA, where Amazon handles most of those tasks for you.
  • Retail Arbitrage: This practice involves purchasing discounted products from retail stores and reselling them on platforms like Amazon for a higher price. This model has its own set of challenges, including finding profitable deals, managing inventory, and maintaining enough stock.

As an entrepreneur considering an online business, it’s crucial to weigh the pros and cons of each model. By understanding the landscape of marketplace competition, you can make an informed decision on which business model aligns best with your goals and resources. Remember, success in any ecommerce venture requires dedication, research, and continuous efforts to adapt and grow in a dynamic market.

Seller Analysis

The Success Rate of Amazon FBA Sellers

When considering whether the Amazon FBA marketplace is saturated, it’s essential to evaluate the success rate of existing sellers. It’s true that competition has increased over the years as more businesses enter the space, but that doesn’t mean the opportunity for success has diminished. In fact, Amazon continues to grow each year, and new sellers continue to enter the market with profitable products and strategies.

To succeed in the FBA business, keep in mind the importance of niche selection, product differentiation, and a proactive marketing approach. By doing so, you’ll set yourself apart from your competition and increase your likelihood of success in the crowded marketplace.

Newcomers in the FBA Business

For newcomers to the FBA business, it’s essential to understand that while competition exists, there’s still immense opportunity for savvy entrepreneurs willing to put in the work. Amazon’s ever-growing customer base and expanding product categories mean new opportunities arise daily.

An estimated 200 million subscribers use Amazon Prime, which highlights the potential audience for your business. As a new seller, you can capitalise on this by conducting thorough research, identifying gaps in the market, and utilising effective marketing strategies to target specific customer groups.

In conclusion, don’t be discouraged by the competitive nature of the Amazon FBA marketplace. With a clear plan, carefully selected products, and a willingness to adapt to new trends, you can find success as a seller, regardless of the current level of saturation.

Costs of Running an Amazon FBA Business

FBA vs FBM Fees

When considering the costs of running an Amazon FBA business, it’s important to compare FBA (Fulfilment by Amazon) fees with FBM (Fulfilled by Merchant) fees. Choosing FBA means you will use Amazon’s fulfilment services, whereas FBM means you handle the storage and shipping of your products.

In general, FBA fees tend to be higher than FBM fees. However, the time, resources, and convenience provided by Amazon’s extensive logistics network, as well as access to Amazon Prime customers, could make it worthwhile for your business.

Breakdown of FBA Fees

FBA fees consist of multiple components, which can be broken down into the following categories:

  1. Fulfilment fees: These fees are charged for every unit sold and are based on the weight and dimensions of your product. Fulfilment fees include the cost of picking, packing, and shipping your products, as well as handling any returns.
  2. Storage fees: Amazon charges storage fees for the space your products take up in their warehouses. These fees are calculated by the cubic foot, and rates vary depending on the season. Between January and September, the fees are typically lower, and they increase during the busy season from October to December.
  3. Long-term storage fees: If your products remain unsold for an extended period of time (more than 365 days), Amazon charges long-term storage fees. It’s essential to be aware of these fees, as they can significantly impact your profit margins.
  4. Referral fees: Amazon referral fees are charged on each product sold through their platform. This fee is a percentage of the seller’s product price, typically between 6% and 45%, with the average being around 15%. These fees are applicable regardless of whether you use FBA or FBM.

In addition to these fees, you should also account for costs such as shipping to Amazon’s warehouses, taxes, research tools, and more.

Remember, while using FBA might have higher fees depending on your products and sales volume, it can save you time, effort, and resources in managing the fulfilment process, which could help you scale and grow your business more efficiently. Carefully assess the costs and benefits of using FBA vs FBM to make the best decision for your business’s unique needs.

Profitability Myths and Realities

Is Amazon FBA Still Profitable?

Amazon FBA continues to be a viable opportunity for generating income and establishing a profitable business. Despite claims that it’s saturated, many third-party sellers still manage to turn a profit. While increased competition makes it more challenging, dedicated sellers who invest time, effort, and research can achieve success in this arena.

To maintain profitability, focus on differentiating your products, understanding your target audience, and optimising listings for better visibility. Effective product research and niche selection also play a crucial role in identifying the potential for revenue growth.

About Low Risk Earnings

Starting an Amazon FBA business is often seen as a low-risk venture due to the convenience and relatively low initial investment. With as little as £500, aspiring sellers can begin exploring the Amazon marketplace. However, it’s recommended that you have at least £1,000-£1,500 to cover initial expenses and adequately invest in inventory.

While low entry costs can be enticing, it’s essential to remember that no business venture comes without risk. Profit margins and earnings can vary due to factors such as market trends, competition, product quality, and customer demand.

To increase the likelihood of low-risk earnings, consider the following:

  • Researching profitable niches: Identify products and categories with high demand, low competition, and decent profit margins.
  • Optimising listings: Use effective keywords, product descriptions, and appealing images to attract customers and rank higher on search results.
  • Competitive pricing: Monitor competitors’ prices and adjust your pricing strategy accordingly to remain attractive to potential buyers.
  • Inventory management: Maintain a healthy inventory level to avoid stockouts and manage storage costs efficiently.

Although starting an Amazon FBA business might appear low-risk, it’s vital to approach this opportunity with diligence and commitment. By making informed decisions and embracing a continuous learning mindset, you can increase your chances of turning a profit and achieving long-term success in the Amazon marketplace.

Tools for Amazon FBA

Value of Accurate Research

In the competitive landscape of Amazon FBA, conducting accurate research is crucial for your success. Proper research helps you identify profitable product niches, analyse competitor strategies, and estimate potential revenue. By dedicating time to thorough research, you can make informed decisions and minimise risks associated with your Amazon FBA venture.

Top Tools for Amazon Sellers

To increase your chances of success, it’s important to leverage the power of specialised tools designed for Amazon sellers. Here, we’ll discuss some of the top options to help streamline your research process:

  • JungleScout: A popular tool among FBA sellers, JungleScout offers features such as product research, keyword analysis, sales analytics, and more. Utilising JungleScout enables you to identify profitable products and gain insights into market trends, assisting you in making data-driven decisions for your business.
  • Helium 10: Similar to JungleScout, Helium 10 provides an extensive suite of resources for Amazon sellers. This platform offers features like keyword tracking, product research, and listing optimisation. Helium 10’s breadth of functionality empowers you to comprehensively analyse your potential product niches and finetune your Amazon listings.

While there are other tools available, JungleScout and Helium 10 are widely used and trusted in the Amazon FBA community, offering invaluable insights to help you succeed in this dynamic market. By making use of these tools, you arm yourself with the necessary information navigating the Amazon FBA landscape effectively.

Customer Perspective

The Role of Amazon Prime

As a buyer, you might be familiar with Amazon Prime, which significantly influences the customer experience on Amazon FBA. Your Prime membership provides you with numerous benefits, such as free express shipping, access to exclusive deals, and streaming services. The presence of Prime sellers in the FBA marketplace ensures that you receive top-notch service and quick delivery of products, enhancing your overall satisfaction as a customer.

Not only does Prime shipping appeal to buyers, but it also acts as a driving force for sellers to join the FBA programme. It allows them to leverage the benefits of Prime membership to reach more customers and provide competitive shipping options, keeping the Amazon FBA marketplace from becoming too saturated.

Amazon’s Customer Service Influence

Amazon FBA is known for its exceptional customer service, which plays a pivotal role in gaining the trust and loyalty of buyers. As a customer, you can expect responsive and efficient assistance from the Amazon support team. This exceptional level of customer support keeps buyers coming back for more and entices new buyers to try Amazon FBA, ensuring a constant demand for a diverse range of products and services.

From a seller’s perspective, Amazon’s emphasis on customer service helps maintain a balance between supply and demand. By encouraging sellers to uphold high-quality customer support standards, Amazon fosters healthy competition within the FBA marketplace without it becoming overly saturated.

In summary, the customer perspective on the Amazon FBA marketplace is largely shaped by the benefits of Prime membership and the emphasis on high-quality customer service. These factors contribute to a satisfying shopping experience and help maintain a balance between supply and demand, preventing the FBA marketplace from becoming too saturated.

Impact of Product Selection

Choosing Your Niche

Selecting the right products to sell is crucial to your success with Amazon FBA. A key aspect of this decision is finding a niche that is not oversaturated, yet still offers plenty of demand from customers.

Your first step should be to conduct thorough market research, which involves:

  • Identifying potential niches by exploring different product categories on Amazon
  • Analysing these niches to determine demand, competition, and profitability
  • Selecting the niche with the best potential for success

Remember, it’s important to choose a niche that matches your interests and expertise, as this will allow you to make more informed decisions when selecting products and engaging with your target customers.

Wholesale vs Private Label

When deciding whether to sell wholesale products or develop a private label brand, consider the following factors:

Wholesale:

  • Speed to market: With wholesale products, you can start selling on Amazon relatively quickly, as you don’t need to create new products or invest in manufacturing.
  • Lower investment: This option generally requires less capital upfront, as you purchase existing products at a discount from suppliers or manufacturers and resell them at a higher price on Amazon.
  • Brand demand: Whenever there is demand for a known brand, operating through wholesale may allow you to benefit from that recognition.

However, selling wholesale products also means tighter profit margins, and you’ll be competing with other sellers who supply identical products.

Private Label:

  • Higher profit margins: Creating a private label brand allows you to have full control over pricing and profit margins.
  • Brand development: By establishing a unique brand, you can create a stronger connection with your customers, which may lead to increased loyalty and higher lifetime value.
  • Customisation and product improvements: As the product owner, you can make changes to the design and manufacturing to differentiate your products from competitors and meet customer needs better.

Private labeling requires more upfront investment in product development and manufacturing, as well as the need to provide customer support and manage product quality.

In conclusion, both wholesale and private label selling have their advantages and drawbacks. But by selecting a suitable niche and making informed decisions about your product strategy, you can still find success in the Amazon FBA marketplace.

How to beat Amazon FBA Saturation

As you venture into the Amazon FBA world, it’s essential to stay updated on market trends and competition. While the platform may be saturated, you can still find success by focusing on growing your sales and strategically positioning your business.

Firstly, identify a niche product or target market that has a demand but isn’t oversaturated. This will help you stand out from the crowd and attract customers to your ecommerce business. Conduct thorough market research to ensure your chosen product has a promising future.

Invest time and resources into optimising your product listings on Amazon Seller Central. High-quality images, compelling descriptions, and a clear value proposition will make your listings more appealing to potential customers. Regularly review your listings and update them as needed to stay relevant and competitive.

Foster strong relationships with your suppliers to ensure a consistent, reliable flow of products. Having a trustworthy supply chain will enable you to meet customer demands and maintain a positive brand image. Make sure to keep your inventory levels adequate, so you never miss out on potential sales.

Stay on top of your order fulfilment and delivery processes as this plays a key role in securing the coveted Buy Box on Amazon. Timely and professional deliveries will significantly impact customer satisfaction, leading to positive reviews and better visibility on the platform.

Lastly, utilise various marketing strategies to promote your products and increase your brand presence. From Amazon PPC campaigns to leveraging social media, there are numerous ways to attract potential customers and drive traffic to your listings. By doing so, you’re creating more opportunities for your ecommerce business to generate passive income.

By pivoting your approach and focusing on these key elements, you can overcome the saturation challenge in Amazon FBA and grow your third-party selling business. Remember to stay adaptable and proactive in this competitive environment while maintaining a confident, clear, and knowledgeable mindset.

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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