Disadvantages of FBA
What are the disadvantages of using FBA services?
High costs: distribution and storage costs (including long-term storage costs) may increase rapidly, especially for slow-moving or oversized products. The seller also needs to pay the removal fee for the defective, damaged and unsalable products, as well as the disposal fee charged for getting rid of the unsalable inventory.
Amazon's product handling problem: sometimes inventory may be lost or damaged during fulfillment. Often, the fault lies with Amazon, not the seller. In these cases, Amazon will take the initiative to refund the seller. However, some situations may be ignored, during which the inventory is damaged and the seller's money will be lost. Seller shall keep shipping records in case Amazon receives insufficient inventory.
Precise product guidelines: Amazon has specific requirements for certain products (i.e. plastic bags and bubble packaging) to ensure that they arrive at Amazon operations center in the best condition. Sellers can also choose to have Amazon pay for each item.
Mixing without stickers: Amazon's default inventory setting is to mix the same products of the manufacturer. This means that if the seller sells exactly the same products as other retailers or sellers, their inventory will be mixed together. Sellers should be wary of mixing, as the low-quality products of sellers with poor reputation may be mixed with their own products, which may lead to fraud and account suspension.
More returns: since Amazon handles returns through FBA, once customers understand how easy it is to return goods on Amazon, sellers may encounter higher return rates.
Amazon logistics expenses
Amazon charges various fees to FBA members
Standard seller fee: Amazon charges about 15-18% of the product price as the seller fee when the goods are sold. How much will vary by product. Amazon said it charged 15% of the fee, but there were some hidden costs, such as refunds that were not fully refunded, which increased the overall cost of the seller.
Shipping expenses: these expenses are calculated in units, depending on whether the product is standard or oversized, including picking and packaging, transportation and handling, customer service and product return.
Inventory storage fee: Monthly storage fee per cubic foot of inventory shall be charged to the seller according to the calendar month and daily average quantity. These costs also vary depending on the product size class. Long term storage fee is applicable to goods stored in Amazon operation center for more than 365 days, and does not include any monthly inventory storage fee.
International transportation: Amazon now offers global exports, allowing sellers to send their inventory around the world.
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