# Is Amazon FBA really that great? Check this math

by nik0 Banned
15 replies
• |
Wow check this calculation

Sales price: \$148,00

Amazon referral fee: \$22,20
Pick & Pack: \$5,07
Weight handling: \$45,20 box only weights 23kg
30 day storage: \$5,13

Sub total fulffilment cost: \$77,60

Leaves you with: \$70,40

Import costs per product comes down to about \$45,-

So that leaves us with a tiny \$25 profit, as an affiliate instead of import we would make \$12,- (8%*\$150).

If I would import it myself for \$45,- and ship it for probably half of the costs I would be making 100% profit, or in other words about \$70,-. Amazon FBA doesn't seem worth it.
• In a lot of ways, the only way to guarantee you win the buy box on Amazon is to use FBA. And I agree with you their prices are sky high.

Personally, I would consider creating bundles and having a UPC label created for them and then shipping them yourself. You'll cut down on the competition and make a better profit.
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•  Originally Posted by nik0 Wow check this calculation Sales price: \$148,00 Amazon referral fee: \$22,20 Pick & Pack: \$5,07 Weight handling: \$45,20 box only weights 23kg 30 day storage: \$5,13 Sub total fulffilment cost: \$77,60 Leaves you with: \$70,40 Import costs per product comes down to about \$45,- So that leaves us with a tiny \$25 profit, as an affiliate instead of import we would make \$12,- (8%*\$150). If I would import it myself for \$45,- and ship it for probably half of the costs I would be making 100% profit, or in other words about \$70,-. Amazon FBA doesn't seem worth it.
Then do it yourself.

Do your own import. Have your own warehouse to store product. Risk your own back moving boxes. Get your own insurance. Pay your own employees to handle sales and shipping. Be responsible for associated taxes. Handle returns. Set up your own affiliate program and recruit millions of affiliates.

Do it all yourself and figure out how much time is worth.

Amazon doesn't claim it is the best solution for every business. For many, it is.

You can either have the \$25 profit while reading the Warrior Forum and Amazon handles everything, or you can make \$70 and do the work.

Or, you could create an affiliate website and battle Google instead of relying on Amazon's site, and try to make even tinier \$12 commissions.

Choices. Choices.

If the product has any sort of volume you may want to go with Amazon. You can then use your free time to find another product to sell and set it up so Amazon sends you more money.

\$25 profit on a \$150 sale. For perspective, there are a ton of businesses that would kill for that ROI. I suggest not opening a grocery store.

You could also have your own store and make \$70 per sale there, and sell on Amazon. They are not mutually exclusive.

You could also have an affiliate site driving traffic to your product on Amazon. Double dip by getting paid as an affiliate and a seller.

.
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• Banned
 Originally Posted by kindsvater Then do it yourself. Do your own import. Have your own warehouse to store product. Risk your own back moving boxes. Get your own insurance. Pay your own employees to handle sales and shipping. Be responsible for associated taxes. Handle returns. Set up your own affiliate program and recruit millions of affiliates. Do it all yourself and figure out how much time is worth. Amazon doesn't claim it is the best solution for every business. For many, it is. You can either have the \$25 profit while reading the Warrior Forum and Amazon handles everything, or you can make \$70 and do the work.
How are these few 100 affiliates IN MY NICHE going to chose my product above my few dozen competitors or perhaps even few 100 competitors with Amazon itself being the largest one. Just being listed at Amazon is no guarantee for success.

There are other facilitators to avoid 15% referral commission and that charge lower shipping/handling costs at the same time.

You sure like to take it to the extreme.

 Originally Posted by kindsvater Or, you could create an affiliate website and battle Google instead of relying on Amazon's site, and try to make even tinier \$12 commissions. Choices. Choices. If the product has any sort of volume you may want to go with Amazon. You can then use your free time to find another product to sell and set it up so Amazon sends you more money.
Volume is not guaranteed in any way.

To get volume we will have to battle with Google anyway as most of Amazon's traffic comes through Google first (now that's one HUGE advantage).

I would just as easily rank my Amazon listing page to the top as I would move my own site there.

 Originally Posted by kindsvater \$25 profit on a \$150 sale. For perspective, there are a ton of businesses that would kill for that ROI. I suggest not opening a grocery store.
Don't worry, no intentions too.

 Originally Posted by kindsvater You could also have an affiliate site driving traffic to your product on Amazon. Double dip by getting paid as an affiliate and a seller.
Talked about that with someone last night indeed, would bring me back at least half of my referral fee. Based on that it would probably be silly not to list my products on Amazon when the container comes in.

 Originally Posted by kindsvater Plus, you have Amazon creating your customer / mailing list for you for free. Mail them offers for related products. Sell your list like other physical businesses..
I believe I read in the terms that it's explicitely forbidden to contact the customers that came through Amazon, recipe to get your account banned fast so totally inapplicable.

Conclusion: I am going to inquire about other warehouse/shipping facilitators as I see no benefit from competing with 100's of competitors at Amazon, and as said being listed is no guarantee for success when you're listed at page 5. All the effort I would have to put into it, to get on the top of the lists could just as well be spend on my own website and ranking in Google. By having my own site I can charge my own prices.

Heck I could even sell below Amazon's prices and still make a better margin.

You couldn't convince me so far, maybe others can or maybe I come back from my words in case it turns out harder then expected to find another warehous/shipping facilitator.

You know what's funny? All those success stories of ASM, people who are doing \$20,000/month revenue and bragging about it LOL, good for them if they also get 16%, means they end up with \$3200,- and after taxes not more then an average salary, and that was only the top 50, although that went down to \$5000/month revenue, so probably only the top 25 is making at least a minimum wage salary How many members they have, a few 1000? Wooohoeeeee
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•  Originally Posted by nik0 Wow check this calculation Sales price: \$148,00 Amazon referral fee: \$22,20 Pick & Pack: \$5,07 Weight handling: \$45,20 box only weights 23kg 30 day storage: \$5,13 Sub total fulffilment cost: \$77,60 Leaves you with: \$70,40 Import costs per product comes down to about \$45,- So that leaves us with a tiny \$25 profit, as an affiliate instead of import we would make \$12,- (8%*\$150). If I would import it myself for \$45,- and ship it for probably half of the costs I would be making 100% profit, or in other words about \$70,-. Amazon FBA doesn't seem worth it.

nik0,

You're saying you did purchase for \$45.00 ("Import costs per product comes down to about \$45,-")

and you made \$25.00 profit ("So that leaves us with a tiny \$25 profit.") Right?

Let me see. Please, correct me if otherwise.

\$25.00 profit into \$45.00 cost is = 80% profit.

At this point, there's no need to make any further comment.

Just do what "Kindsvater" already mentioned to you.

Meharis
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• Banned
 Originally Posted by Meharis nik0, Maybe, you're forgetting about percentage... You're saying you did purchase for \$45.00 ("Import costs per product comes down to about \$45,-") and you made \$25.00 profit ("So that leaves us with a tiny \$25 profit.") Right? Let me see. Please, correct me if otherwise. \$25.00 profit into \$45.00 cost is = 80% profit. At this point, there's no need to make any further comment. Just do what "Kindsvater" already mentioned to you. Meharis
Wow your math couldn't be way off more then this.

How is \$25,-/\$45 80% profit? Would love to see that calculation, according to my calculator that would come down to 55%

And only 16% of our revenue = profit. (\$25/\$150), which is terrible low, compare that to an affiliate and take 8% of revenue without all the hassle/investments and limitations in growth due to not having unlimited finances

What we also forget are the advertising costs to get people to our Amazon listings as otherwise we'll never climb to the top of the results.

I'll have to do that with my \$25/left? Very sober deal.

Guess I'm focusing on the wrong niches.
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• I know some people in my facebook groups who are making a killing and a living doing FBA.
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• Banned
 Originally Posted by DavidLuvLB I know some people in my facebook groups who are making a killing and a living doing FBA.
Never said it's impossible, just disappointed by the margins.

I think I can do better without Amazon.
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• I have to disagree with most of Amazon's traffic coming through Google. Most people go straight to Amazon and bypass Google. Recently Amazon has come to the fore as a search engine in and of itself...
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• Banned
 Originally Posted by DoubleOhDave I have to disagree with most of Amazon's traffic coming through Google. Most people go straight to Amazon and bypass Google. Recently Amazon has come to the fore as a search engine in and of itself...
Too bad neither of us has any data to back it up so be free to disagree.

Amazon ranks for virtually any phsyical product in the top 3 in Google.

Another huge percentage of their traffic comes from their affiliates.

Where does the traffic from these affiliates come from? Google!

So it's either Google one way or the other.

I would be surprised if 1/3rd of their traffic would be direct traffic. (edited after looking at statistics I guestimated it at 25%), for what it's worth:

Which sites did people visit immediately before this site?

Site Percent of Unique Visits
3. ebay.com 2.2%
4. yahoo.com 2.0%
7. live.com 0.7%
9. amazon.co.uk 0.6%
10. wikipedia.org 0.6%

That's already 33% of Amazon's traffic!

Add in all those affiliates, probably good for an equal percentage all combined.

That leaves another 33% direct traffic to Amazon, more then the 18.7% that Google directly drives, but probably pretty much of a headsup race when adding the indirect traffic from for example affiliates.
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• Banned
Now let's look at conversions.

Say Amazon ranks at #1 for "folding bike"

And I'll rank at #2 when my container arrives, or perhaps I'll beat them off nr.1 when I go a little hardcore on it.

They visit my site and see the best selling bikes as I have experience in that niche and know what the people want, however I get 50% traffic less from Google.

However I don't have to share the pie of traffic with 99 other competitors that rank inside Amazon.

I don't see how I can lose by doing it myself, even without the 33% direct traffic.

Heck, I can even setup a script that redirects them to Amazon through a different landing page in case they want to click the back button, so that I don't lose a cent of value to Amazon.

I'm getting more and more excited now that I think it through
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• The best way to decide if FBA is for you is to research everything that is required FIRST.

Then you ask yourself, is this something I can see myself doing in the future or is it a Bright Shiny Object?

Then you ask yourself, okay, if it IS feasible, how do I:

2.) Build up a *real* business around it (and not simply think it will run itself)

3.) Determine what the real outlay would be

4.) Decide if its in my best interests or not.

Official Amazon FBA resources (videos, tutorials, etc.)

Amazon.com Help: FBA Resources

Amazon.com Help: FBA Guidelines and Frequently Asked Questions

And:

A Seller Tool has tools specifically FOR FBA.

As with everything, this is YOUR business - do the research to the best of your abilities.

Hope this helps!
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• Banned
Helps

For me the most important part is, how much effort/money does it require to get top listings on Amazon oppposed to the costs for getting top listings (eg outranking Amazon) myself in Google.

Obvious I have a huge advantage opposed to most as my main business is SEO, so I can accomplish it with relative small investments, as the network is there already, it's just the price of content to post, which is nihil.

The way I see Amazon is like a classified ads site, where you not pay for your ads but per product.

Look at the WF, I bump my threads here for \$20,-, it allowed me to build a list, despite that I get few orders lately, I still have a TON of repeat business that keeps on coming back over and over, even people who bought something from me 2 years ago pop up again. If I had to pay \$20 per package/monthly payment, I would do myself short hugely.

And that's why I build up something against Amazon, you're not allowed to communicate with clients besides shipping details, they cant come back to you but always go back to Amazon, customers often have a short life span in many niches so you can't keep them warm. I only see the disavantages at this point. Unless it turns out dead easy to get TOP rankings inside Amazon then it might warm me up again. But I know that's very unrealistic to expect as there are 100's of competitors fighting for those TOP listings. Yes in Google too, but Google is no problem at all.

Plus you're fighting against huge brands like Schwinn, they sell top quality folding bikes for a bargain these days. Everyone knows them and they are crazy competitive priced. I really think I'm looking in the wrong niches here to profit from Amazon, can't be any other reason.

Low-end niches is probably where the money is, keywords that aren;t even worth it to rank for and where people don't care whether the product has a brand name, like those racks to dry your clothes or even less like cloth hangers and that kind of stuff that's completely off focus for me as there's no money to make in such niches as an affiliate.
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• Banned
After quickly going through all the sites at the 1st page of Google that rank for "How to get top Amazon listings" I came up with this list:

1: Optimized product title

2: Sales volume (drive traffic from other sources)

3: Ratings

4: Offer the cheapest total price (product + shipping)

5: Sell break-even or even at a loss at the start to push up sales volume

6: Use FBA

7: Optimizing with additional 5 search terms (tags)

8: Filtered navigation (color / sizes pages)

9: Listing as complete as possible
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• First I'll admit that math gives me a headache. Aside from the math details some things to think about - Amazon gets more buyer traffic than any other site anywhere, how can you beat that? Think about the overhead you have with FBA (virtually zero) versus the overhead of a brick and mortor store or an online store expense if it that requires paid traffic and advertising.
The ROI you mention in your example is actually pretty darn good. Some of my FBA sales have had very high profit margins and ROI but the volume is low, usually single item sales. If you can regularly stock you inventory with a product that moves and you are getting a decent ROI - that sounds great to me!
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• There really is a lot more to this. One thing that is barely mentioned is that you have to have an internationally chargeable cc in order to sign up as a seller, per the sign up page on Amazon.

But, then on another page, it is stated that they will also accept US debit card if it is tied to a major cc company, so they are sort of confusing in the original sign up process as a seller.

You must be a seller, before you can sign up with FBA.

There are other considerations. I read one horror story where one person was selling dvds and cds (all legally) and one persons sad misfortune. You read it here.

Poor guy really got the shaft from Amazon and it shed some light on problems with the program, itself.

Again, this is one extreme case, but he lost his business over what apparently involved "co-mingling" of products and he was sued for a product that was not even his (according to him).

It is an interesting article and it shows another side to the business.
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