Why Amazon FBA is Bad for Small Business. Amazon FBA Business PROs and CONs.

Ever wondered is Amazon FBA good or bad? And why Amazon FBA is bad for small business, some say? Let me tell you the TRUTH about Amazon FBA program… It’s risky, very complex, the profit margins are super tiny and it’s nearly impossible to build your own brand. I will explain all of that in more detail in this blog post, and will tell you why Amazon FBA is bad for small business. Actually, in my humble opinion, it’s one of the worst businesses you can start at the moment. No surprise, many entrepreneurs facing these issues begin to ask: “Is Amazon killing small business on purpose?”. But let’s try to be objective 🧐
I will list Amazon FBA business PROs and CONs. Let’s go.

It became very trendy to sell on Amazon. Amazon FBA (Fulfilment by Amazon) program is when you allow Amazon to pick, store and ship your products directly to customers. You pay fees to Amazon and Amazon is handling everything from payment to delivery. There are a lot of YouTube videos with all kinds of success stories, encouraging you to start a business with Amazon FBA and start making a lot of money. This makes you feel like if you don’t sell on Amazon yet, you are faaaar behind. But they don’t tell you everything.

Amazon FBA business PROs and CONs.

Yes, Amazon has some obvious PROs, Let’s list them:

1. Amazon has a huge customer base which you can access and sell to.
2. Amazon handles payment, order processing, storing, packing and shipping – very convenient, right?
3. Amazon allows to sell globally – in any country or region.

But in reality, it’s not as easy as it may seem. This blog post is more about CONs. Let me show you why Amazon FBA is bad for small business. I will list 5 reasons why selling with Amazon FBA is one of the worst businesses you can possibly start.

Reason #1 why Amazon FBA is bad for small business: Crazy Competition

You are competing with millions of sellers from around the world. For many of them (like Chinese guys) making US$400 per month is a great income, they can feed the entire family. Sorry for honesty, no offense 🙂 They can put such a low price that it makes no sense for you to even sell. They also compete with each other, so they put even lower price.

These guys don’t care about intellectual property, they can steal your idea and make it a lot cheaper. If you want to compete with them, you need to invest a lot of money in Amazon advertisement to make yourself visible. But guess what? These brilliant Asian sellers will always be able to invest more. Because you need to make at least 5K to feed your family. And if these guys make US$5,000, they will invest 4K in advertisement and beat you. Which takes us to the next point…

Reason #2: Very Low Profit Margins.

This crazy price competition and high advertisement costs can eat your entire profit margin. Did I mention that you also compete with Amazon itself? No wonder, many entrepreneurs express their frustration on how Amazon is killing small business. Amazon analyzes the entire data from their platform, and when they see that your niche or a product is doing very well, they might create their own version of the product and sell it cheaper. You will have to adjust. How will this impact your income? Now it becomes clearer, why Amazon FBA is bad for small business, doesn’t it?

I am not saying that it’s impossible to make money with Amazon FBA, but it’s very hard to stay profitable. You cannot put higher price on Amazon, because Amazon has specific parameters for pricing. And if you want to compensate this by selling at a higher price on your own web-site, it’s a big no no. Amazon has an army of bots checking the prices on other web-sites. If they find your goods at the higher price elsewhere, they can “shadow ban” your account, which basically means your sales will suddenly drop and you will not even understand why. And it takes us to the third reason.

Reason #3 why Amazon FBA is bad for small business: High Risks.

With Amazon FBA you rely heavily on Amazon’s platform and policies. Any changes in Amazon’s rules or algorithms can affect your business, and there’s limited control over your brand and customer relationships. You don’t even have the emails of your customers, because Amazon handles everything.

And there is a high risk of account suspension. Amazon has strict policies, and sellers risk having their accounts suspended for various reasons, including alleged policy violations or negative customer feedback. We already discussed “fair” competition. Does it happen that your friendly competitors (aka alligators) leave fake negative reviews to shut down your account? Yes, it does. Recovering a suspended account can be a lengthy and uncertain process. By the time your account gets unblocked (if it gets unblocked), you may be already out of business.

Reason #4 why Amazon FBA is bad for small business: Complexity.

You may have an impression that Amazon FBA is very easy, because Amazon is handling everything – payment, storage, packaging, delivery. And it’s indeed very helpful. However, Inventory Management can be tricky and complex. You and no one else need to make decisions about the stock. Overstocking can result in high storage fees, while understocking can lead to missed sales opportunities. Balancing inventory levels requires careful monitoring and forecasting.

Another difficult thing is Quality Control. And it’s one of the most unexpected but important reasons why Amazon FBA is bad for small business. Ensuring product quality and customer satisfaction is crucial. Because negative reviews and returns can harm your seller reputation, and even lead to account suspension, as we mentioned. However, it may be very difficult to maintain consistent quality when dealing with suppliers, especially those overseas. And you don’t even have access to your items at Amazon warehouse, so you can’t check the quality yourself!

The reason #5: Impossible to Build Your Brand

If you want to build a recognizable brand, it can be very hard to do on Amazon. On Amazon people don’t look at the brand names, they look at the product attributes, price and reviews. If it’s cheaper and has good rating, people will buy, even if it’s called Mayoyuju. This makes it hard to establish a lasting identity in the marketplace, especially with such a high competition, including competition with Amazon brand itself.

If you are considering starting your own business with Amazon FBA, you should take all these things into account to minimize your risks. Don’t just look at the success stories. Stay informed, share this post with your friends, and see you soon.

Looking for good business ideas? These articles may help:

7 Businesses That Never Fail. Businesses With The Highest Success Rate
Which Business Should You Start and Why? How to Find Your Niche in Business?
How To Start a Business With No Money.