I have some experience with FBA, so let me share with you what I learned.
If you know your item will sell through well and have a plan to build up your reviews, then FBA can work. If you have a product that might sit around for a while, then be aware that Amazon will charge you monthly for warehouse fees. Your real cost isn't just the FBA seller fees. For example, 95% of the time, Amazon will side with their customers on returns. And when they accept returns and give refunds, Amazon does not take the hit, you do. Including shipping. And the merchandise that just sits there. All of these things affect your profit margins.
To give you an example, we put these name brand toys with decent sell-through on Amazon FBA in November before the Christmas rush. Our cost was approx $5 per unit. Shipping and materials to Amazon's warehouse came out to another $5 per unit. Our cost was $10 to get it to FBA and the retail price was around $25 per unit. $15 profit per unit, right? No.
When we entered the game, we had to offer slightly better pricing to get some action. So we put it at $24. We got a couple sales, then the other competing sellers lowered their prices, too. Everybody wanted those holiday sales. A bidding war ensued over the next month and the final price got down to about $16.
At $16, we were losing money because of all the fees associated with using Amazon's platform. We did it anyways because it's better than merchandise sitting after Christmas. Turns out it was a good move because the remaining inventory after Christmas didn't sell for months. We were given the choice to receive it back (pay return shipping), have Amazon throw it away (costs money, but much less than shipping), or keep it in FBA and hope it sells (pay monthly warehousing fee). We decided to have Amazon throw it away because it was a temporarily popular toy and kids will probably not even want it anymore.
In the end, a $5 product selling for $25 didn't perform to our expectations. We thought we were going to cash in when we found this supplier. I mean, who wouldn't think that? Buying a name brand product for 20% retail is cheaper than wholesale...closer to liquidation...but due to the nature of toys, the size of the product, and competitors with the same mindset during the busy holidays, I understand why things happened the way they did. Good experience.
Everything is worth trying and there are plenty of people who are doing well with FBA. You just have to figure out what works for you.
One friend found a supplier for used books. He did FBA with them, then started selling wholesale lots of books to other people who wanted to do FBA. Turned one good supplier into 3 income sources - His personal FBA business, an FBA coaching business, and distribution business to his coaching clients.
Another friend sold power cables, like cell phone, laptop, etc. He'd only make $0.50 per $10 or $20 sale, but Amazon sold millions of them for him. He made a lot of money until Amazon decided to source their own cables and cut him out of the equation. Sucks for my friend, smart for Amazon.
