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February 18, 2022

Is FBA worth it? Should I Start An FBA Private Label Business?

“Should I start an FBA business?”

Question

If you have/had an Amazon business, I really need your HONEST opinion. I’ve been sitting on the side lines for 2 years researching what I can about the FBA business. I feel I understand the process now and am seriously considering jumping in and beginning the product research stage.

My dilemma is that I feel I may have waited too long to start. More and more posts are complaining of the increase in fees, rules, and competition. My worry is that I will find the next potato peeler or bike pump or whatever using the same software everyone else is using, thus only delaying the evitable competition.

Now I totally get there will always be new competition, but it seems the increase in the FBA business model is at an all-time high. And there’s more frustrated posts with how to even be visible in searches you have to run constant PPC now (not just during the initial launch anymore), thus leading to a lot more time and money to barely break even.

I can’t be the only one who hasn’t started because of similar thoughts, or worse, currently going through the struggles mentioned.

The poster’s Questions

If you had never started FBA (but with the knowledge you currently have from doing FBA), would you start it today?
What knowledge do you wish you had when you first started?
What are the biggest pain points of FBA?
Finally, are you planning to continue with FBA for the foreseeable years, or are you planning on shifting your business model?
If you are planning on staying, what are the keys to success in your opinion?

Thanks in advance!

My answers

*If you had never started FBA (but with the knowledge you currently have from doing FBA), would you start it today? *

Yes…BUT I would do so in a more mindful way.

First and foremost – I would only do it if I could find a customer type I really cared about; a problem I was obsessed with solving; and a product type that I was equally in love with. Half-hearted or half-arsed is a total waste of time in crowded, competitive markets. And rightly so, btw. Consumers don’t owe you a living and Amazon doesn’t owe you organic rankings. You need to be good or go home.

Yes, it will take time to home in on your perfect customer, to deep dive into their issues; and to perfect a product for them. But if you aren’t really committed to all three, I would just not bother starting. Probably true for any business model ever in fact in any competitive space (read – MOST!) not just Amazon or PL.

Get enough capital

Secondly, I would only do so if I could capitalise it properly. In theory, you could start with a
few $1000. And I certainly don’t advise you to spend all your money in one go. But if I couldn’t at least set aside/budget at least $10,000+ PER PRODUCT LINE, preferably a lot more, I personally wouldn’t bother.
People will be frothing at the mouth at this so I want to clarify 1 or 2 key phrases/words:

NOTA BENE:
1. “I personally” – lots of people would do differently.
Fine. Go ahead and good luck. I’m answering Russell’s question.

2. “budget/set aside” – I
didn’t say “spend all at once”.
you should work your way into spending
more money on some product line once it’s got at the very least traction, at best lots of profits.

However I truly think it’s tragic when I see sellers find a product that can really take off profitably but they can’t fund the expansion. Yes organic expansion is a thing – but let’s say you grow sales organically 200% a year …from
$20K a year…it’s going to take YEARS to reach critical mass. Meanwhile your competition is funding it properly…do the math, as you say in the States.

*What knowledge do you wish you had when you first started?*

How long have you got? The above points most importantly.
Also –
proper training in importing from China
– a partner who cared about product dev
– a peer group of people who knew what they were talking about
– a coach who had walked the path but was affordable
(sounds self serving but it happens to be true anyway)
– above all, the stones to follow what I cared about not a narrow business model

*What are the biggest pain points of FBA?*

FBA includes about 20 business models.
Assuming you’re talking very specifically about private label (and since
that’s in the title of this group, I assume you are)…
there are many but in summary
– Amazon account and listing suspensions
– Amazon seller support and in general Amazon’s relationship to sellers (we are ultra disposable – get over that or don’t go in)
– the deep capital requirement (if PL) to start a product line (not true for RA/OA)
– the amount of cash (working capital) tied up for months esp if importing (again if PL)
– the amount of time (months) it takes to develop a customised product – even experienced/competent people. This is usually VERY underplayed in the marketing.
– the increasing of Amazon ads as a % of revenue.

I’m afraid I see the drivers only pushing this gradually up over time. Plan accordingly. If you ask what that means, you could write a book but broadly, you’ll need fatter profit margins with all that implies.

– the increasing levels of competition.

Competition heating up is far from unique to Amazon – in fact, it’s usually true for any successful market by definition – high profit levels, resulting from low competition, attract competitors. The land grab is over. It’s time for committed and well-capitalised companies and entrepreneurs, I’m afraid.

*Finally, are you planning to continue with FBA for the foreseeable years, or are you planning on shifting your business model?*

Yes and no. Yes in that I plan to keep being part of partnerships that sell custom products on amazon. No I
the sense of doing it all myself. I love marketing and deep diving in understanding consumers. But I find product dev painful. I’m partnering with
passionate and very expert people in the latter these days. If you’re just starting out, there’s no reason such people will approach you sadly. Depends on who you are and who you know. I’ve personally
had to earn such people’s trust over years in the space (coming up on 8 years)

* If you are planning on staying, what are the keys to success in your opinion?*

See above. My first answers plus expert partnerships.

In summary – this stuff IS worthwhile and CAN be very big wins. But if you’re under-committed, under-capitalised just walk away.
The most likely successes are the opposite;
– highly committed,
– well capitalised (hint – look at the size of the market you’re going into. If you can’t afford to outsell the current #1 seller, you’re probably not adequately capitalised. Again, I could write a book on this so it’s hard to summarise in a sentence)
– well connected if possible
This is not obligatory but very helpful. Having an industry expert up your sleeve can be the key advantage needed.

Summary

Sorry if this is all tougher than you wanted to hear. I know many many people personally who have become legit millionaires from this (as in worth over $1M NET worth not just their home etc etc). But IF you’re talking PL/custom products (as distinct from RA/OA), it’s a real business these days, not a little side hustle.

Go in with deep commitment, deep pockets and knowing some helpful people or stay home is my honest best summary advice.

If you’re hesitating to start FBA at all, honestly, the best thing is to start with low risk and do Retail arb or online arb. Standing on the sidelines for 2 years isn’t going to serve you at all.

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Michael Veazey


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