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Is Amazon FBA Worth It in 2022?

“Is starting an Amazon FBA business even worth it, especially now?”

Anyone who is thinking about selling on Amazon eventually has this question cross their mind:

In our post-COVID world, this question is more relevant than ever.

The Internet has spoken loudly about how costs have risen everywhere, most notably sea freight shipping being 8-9X the cost compared to the pre-pandemic days.

That’s no small amount. A full container load from China used to be $3,000 – $4,000 to ship to the USA, now it can range anywhere from $16,000 to $24,000+.

This naturally leads to skepticism about the viability (and even possibility) of investing in Amazon FBA and starting your own business on the platform in 2022.

So, what’s the answer?

In my opinion, now is a great time to get started in the Amazon world.

This claim does come with caveats, of course.

Even though the potential amount of money to make on Amazon is the highest it’s ever been, the difficulty in getting started (and operating) is also higher than ever.

Let’s go over some Pros and Cons of starting an Amazon business in 2022, and with that information you can decide if it’s the right decision for your time and capital.

Even though I’m a half glass full kind of person, we’ll start with the Cons…

Cons of Starting an Amazon Business in 2022

Let’s go to go over cons first, because if you don’t get scared off by these potential negatives, then it bodes well for your potential success on Amazon.

Con #1 – Upfront investment costs for starting an Amazon business are higher than ever.

As I mentioned earlier, sea freight shipping (and everything else) is getting more expensive.

Chart comparing sea freight shipping rates of 2021 vs 2020
Shipping Container Trends 2021 vs 2020. Source: Freightos Freight Rate Index

Production costs are up, labor costs are up, sea freight costs are up, new tariffs exist, Amazon FBA fees are up, the requirement of using a 3PL (third party logistics) or Amazon Prep Service raises your costs, PPC costs are up.

Everything just costs more.

And since everything is more expensive, it raises the required initial investment to start selling on Amazon in earnest.

If you don’t have the capital to start, then you basically can’t start. You’ll either have to save more, or start smaller.

The Silver Lining

Everything costing more is generally bad, you must keep in mind that this is a difficulty everybody is sharing collectively.

Most sellers have chosen to raise prices, making up for the increased cost of operations. As long as your profit margins work, you can still be successful.

Also, there are ways to start smaller and lower your initial investment and risk.

Things like:

  • Negotiate a smaller MOQ (minimum order quantity) from your manufacturer
  • Test very small batches (10-50) of domestically made products before acquiring massive quantities
  • Start on Amazon with a lower investment strategy like Retail Arbitrage

Being creative and thinking outside the box will really help you be more competitive, so always keep that in mind.

Con #2 – Running an Amazon business is more complicated and time consuming than ever

Also a side effect of the pandemic, previous benefits people had running an Amazon business have disappeared.

Shipping and logistics is more complex

Sending products directly from your manufacturer to an Amazon Warehouse, something sellers used to enjoy, is no longer sustainable.

Amazon’s item limit restrictions and increased shipping prices have made this option essentially impossible.

The standard way to manage your inventory on Amazon these days is to have it sent to a 3PL or Amazon Prep Service. They then send the products off to Amazon Warehouses in small batches.

No More “Passive income”

With costs high across the board, you will be fighting for every % of margin.

There is no more “set it and forget it” approach to Amazon. It requires a lot of attention and number crunching.

With PPC being more expensive, you will have to really optimize your campaigns and even find other sources of traffic to drive to your listings.

With more active sellers, you will have to work hard on branding and messaging, and have the absolute best listings to stand out.

No More Easy Private Label Selling 

Buying 1,000 insulated stainless steel cups on alibaba.com and slapping your logo on them is no longer viable.

In today’s Amazon world, you need to innovate to break into product categories.

That requires research, understanding your niche, finding a manufacturer that can implement your product ideas, and strong branding.

The Silver Lining

In all honesty, almost everything to fight this Con are things you should already be doing.

It shouldn’t be a deterrent if you were already planning to sell an innovative product within your category.

Create something better than the competition is producing, and you’ll see success.

Con #3 – Competition from International Sellers is Higher than Ever

With how easy it is to sell on Amazon, a lot of manufacturers have started selling directly on the platform.

In fact, EcomCrew estimates there may be as many as one million active Chinese sellers on Amazon right now.

These companies have a lot of advantages compared to US sellers. Things like tax advantages, tariff advantages, lower labor costs, and no middlemen getting a cut of margins.

The Silver Lining

It may seem daunting that you have to compete with companies that directly sell on Amazon.

These companies have a lot of cash to work with and also have fewer restrictions running their business than you would.

As bleak as that sounds, it’s not a hopeless situation.

The main weakness of these sellers is branding. They don’t understand their product niche as much as a seller would who really gets it. They can’t innovate as easily, and they can’t offer the language and cadence that matches your audience.

You can create more unique and innovative products than these manufacturers-turned-sellers

Sellers who are also manufacturers tend to focus on more commoditized products.

The secret sauce to selling on Amazon today is branding, innovation, and ultra-targeting your niche.

If you can figure that out, you’re on your way to a successful business.

Con #4 – The Aggregators are Here

Aggregators aren’t really a problem for individual sellers… yet.

Of the cons on this list, this one isn’t really a threat at this moment, but in the future it may be.

If the aggregators are successful in what they are attempting, the end result will essentially be a world where there’s another barrier to entry for smaller sellers to get started, as it will be hard to compete with an aggregator’s scale.

The Silver Lining

Luckily, that future isn’t here yet, and it may never be.

So, if you’ve managed to make it past the cons, and you aren’t deterred, let’s move on to the Pros.

Pros of Starting an Amazon Business in 2022

Pro #1 – The Aggregators are Here

Wait, wasn’t this a Con?

It’s true, while it’s possible the Aggregators will create a more competitive eCommerce space, making it harder for small companies to enter the market, there is a benefit to them right now.

Their current strategy is to buy Amazon accounts from sellers just like you!

Amazon sellers now have a new exit strategy for their companies, if they choose to go that route.

On top of that, the rates at which these Aggregators will pay for your account is much higher than any deal you could have gotten before these aggregators existed.

Seriously, you can get a 4-5x offer of your previous 12 month’s worth of profits.

If you’re an Amazon seller today or planning on starting soon, the payout for a successful exit is higher than it’s ever been.

So where some people see future negatives, the present positives are quite lucrative.

🚀

Pro #2 – Online Demand is Higher Than Ever

The pandemic brought about a lot of damage and hardship, there are a lot of people who lost a lot.

Conversely, there are always big winners in these situations as well.

The biggest winners of the pandemic are online businesses.

Demand for eCommerce is absolutely the highest it’s ever been, and it’s only just starting.

eCommerce spending is estimated to be $1 trillion in 2022.

While stock issues have the supply chain to blame, this is also due to absolutely insane levels of demand.

There’s never been a time to grow an online business faster, and if you have a future exit in mind, you can achieve an extremely profitable sale of your entire business.

Pro #3 – Selling Online is Extremely Optimized Right Now

It’s still just as simple as always to create a seller account on Amazon and start selling.

There are more options for freight and infrastructure, and it is much more tailored to smaller sellers who want to ship a partial container (LCL or less-than-container load) or a single container (FCL or full-container load), as well as logistics and FBA prep services that will hold on to your products and fulfill them for a relatively low price.

There’s a ton of software, guides, videos, courses, funding options, contractors, agencies, and resources to help you get started selling online.

Every aspect of your business can be outsourced and automated, to the point where you never have to touch your product or hire a single employee.

Truly, if you wanted to get into eCommerce now, there’s never been more support, guidance, and infrastructure to help you on the path to success.

Putting it All Together

With all that now in mind, is Amazon FBA worth it in 2022?

To answer the initial question in more detail:

Yes, Amazon FBA is absolutely worth it in 2022. While the cost to play has increased, the potential profit and big payoffs is much higher.

So get out there and start selling!