3 Reasons Not to Sell On Amazon FBA
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this new series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
CapForge Founder and Owner Matt Remuzzi goes over what it takes to get into the Amazon FBA industry.
Video Transcript:
Business Advice Video:
Three reasons you shouldn’t do Amazon FBA. No. 1 if you wanna have a warehouse and employees and be physically working every day to ship your products because with FBA you don’t do any of that. We manage it all from our laptop. No.2 if you don’t wanna pay more in taxes because you’ll probably end up making much more selling on Amazon, of course with hard work, than you do in your current job so, of course, you’ll have to pay your fair share to Uncle Sam. No. 3 if you’re looking for a get-rich-quick scheme. There’s a lot of those going around. Amazon is definitely not one. This business takes time and effort, months of hard work to build a real legit business on Amazon. Then you can sit back and relax while the sales come in
Matt’s Review:
Okay well, with you know over 1,000 ECOM clients here I have a pretty good idea of what it takes to run an Amazon business cause we see clients doing it. And FBA does help make it easier. You don’t have to handle the inventory but with the rules they recently put in place on inventory levels that you have to maintain a lot of our clients are switching to also having a 3PL, third-party logistics system, that helps manage that inventory flow. And it’s not nearly as easy as it was of just sitting back ordering a bunch of product from China, having it shipped straight to Amazon, and not worrying about it. You can still do that but Amazon is definitely gonna charge you even more if you send too little or too much or doesn’t sell quickly enough or whatever. So you really have to get into this planning on how you’re gonna manage your inventory. It’s not quite as easy as just saying let Amazon do everything for us, at least not if you wanna maximize your profit.
Which is another point, these businesses can have pretty low margins if you’re not careful and you don’t create, you know, unique brand with differentiation that you can have premium pricing for. Otherwise, if you’re just selling a commodity product, you’re gonna have very low margins and you’re gonna have to do a ton of volume to make any money. So you know, using it as a tax avoidance scheme or being able to run expenses through the business, yes there is some of that but that’s definitely not why I would start an Amazon business. That’s only something to worry about after you’ve got it up and running and you’re making good money.
And then the part about “sit back relax and let the sales roll in” not really. This is not a passive income business. Yes once you have established products you can reorder and spend a little less time on those products, but there’s always competition, there’s always new sellers coming in, there’s always more to worry about in terms of launching new products and growing the brand and expanding to other channels. So this is not a business to get into where you’re expecting to put in a couple of months of hard work and then just be able to sit around and cash checks. That’s just not how it happens. This is a real business, like any other real business, that requires ongoing effort and maintenance and work and time and energy and investment. So if you’re prepared for all that and you have a plan, great, but even if you’re looking for a get-rich-slow program this is probably not that. It’s not get-rich-quick but it’s not even get-rich-slow unless you’re planning to put the work in.
