Amazon FBA vs Self-Fulfillment

[AnAverageJoe]

Hey guys, pulling this question from my Progress Thread. Wanted to try to get more eyes on it so I can hear some opinions before moving forward.

I'm almost ready to put in my large order for my product and make it all real! Well, maybe.

My product is based on something I found on Etsy that isn't on Amazon. There are similar items, but nothing exactly like it. On Etsy, they are selling for around $50. That's what I'm basing my price off of.

My landed cost will be $22.10 per item. $17.88 for production, $4.22 for freight. I don't want to sell at a loss and not be able to re-order (assuming I get to that point). So to make back my money on the order, I'd have to sell at $60.

I'm worried that price is too high and they won't sell. Am I underestimating the power of Prime? Will people buy for the convenience? Will they buy because there's no real competition on Amazon for this product yet? I've had a lot of interest in the product, but I had it listed at a much lower price before I ran all the numbers. I've already had some pre-orders.

Or I was thinking about skipping FBA and just listing it on Amazon and selling it on my own website to avoid the extra FBA and storage fees. Or just sending a small chunk of the order to FBA at first to see how they sell.

How many people sell on Amazon as well as their own website? How do the sales compare? Am I over thinking this? I finally have the money to order and I don't want to throw it all away.

Thanks for your time everyone.

 

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[Vigilante]

Hey guys, pulling this question from my Progress Thread. Wanted to try to get more eyes on it so I can hear some opinions before moving forward.

I'm almost ready to put in my large order for my product and make it all real! Well, maybe.

My product is based on something I found on Etsy that isn't on Amazon. There are similar items, but nothing exactly like it. On Etsy, they are selling for around $50. That's what I'm basing my price off of.

My landed cost will be $22.10 per item. $17.88 for production, $4.22 for freight. I don't want to sell at a loss and not be able to re-order (assuming I get to that point). So to make back my money on the order, I'd have to sell at $60.

I'm worried that price is too high and they won't sell. Am I underestimating the power of Prime? Will people buy for the convenience? Will they buy because there's no real competition on Amazon for this product yet? I've had a lot of interest in the product, but I had it listed at a much lower price before I ran all the numbers. I've already had some pre-orders.

Or I was thinking about skipping FBA and just listing it on Amazon and selling it on my own website to avoid the extra FBA and storage fees. Or just sending a small chunk of the order to FBA at first to see how they sell.

How many people sell on Amazon as well as their own website? How do the sales compare? Am I over thinking this? I finally have the money to order and I don't want to throw it all away.

Thanks for your time everyone.

Margin is not great. On a $50 item, I'd like to own it at $10. I have had $119-$99 retail items before we owned for $20. You don't have much margin for error from that cost.

People will buy if the market price/value is right. They won't buy for Prime just because it's Prime. Research the concept (basic) of price elasticity. The venue and delivery method doesn't matter nearly as much as price/value exchange.

If they don't sell for $49.99, what happens at $39.99... you'll break even or take a marginal loss after fees and shipping? Worth playing around with but I wouldn't be the farm on an item with those tight of margins.

FBA is a tie breaker, not a deal maker.

 

[Scot]

As someone who sells at a loss on FBA, watch your margins.

Everyone forgets about the Amazon referral fee. Amazon will take 15-18% on top of FBA fees as a referral fee.

But, 44% of the world ecommerce transactions happen on amazon.

What about ordering a large sample order first and putting those up on amazon to test your pricing and demand first?

Pay for a sample order with an amount of money you’re willing to use, toss up 20 or so units on Prime and play with pricing and see what you do. If the experiment shows you can be profitable, then pull the trigger.

But if you’re only profiting $5 off the unit, you need to think about long term. Can you get 10-20 more skus to make your brand profitable? Just one sku alone will not make your business.

 

[BNeumann]

As someone who sells at a loss on FBA, watch your margins.

Everyone forgets about the Amazon referral fee. Amazon will take 15-18% on top of FBA fees as a referral fee.

But, 44% of the world ecommerce transactions happen on amazon.

What about ordering a large sample order first and putting those up on amazon to test your pricing and demand first?

Pay for a sample order with an amount of money you’re willing to use, toss up 20 or so units on Prime and play with pricing and see what you do. If the experiment shows you can be profitable, then pull the trigger.

But if you’re only profiting $5 off the unit, you need to think about long term. Can you get 10-20 more skus to make your brand profitable? Just one sku alone will not make your business.

I would add that if you want to sell on Amazon FBA you have to consider monthly fees, storage fees (which fluctuate) and lastly you will not sell unless you use their advertising PPC. All of this eats at your margins, which is why it is all the more important to have them as high as possible.

 

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[AnAverageJoe]

Thanks for taking the time to respond guys.

I think the margins are too tight. With all the fees, shipping everything to Amazon and the PPC costs I don't think I'll be able to make my money back. To me, this is a large amount of money. I'm stuck in traffic in the slow lane right now so I'm trying to be careful with how it's used. I understand there will always be risk involved, but I want to be sure it's calculated risk.

I might do a larger sample order to test and see how that goes. I think the best thing to do though is to start with a few smaller and cheaper items within my niche (but well researched) to get my feet wet and establish the brand. If everything works out there, I will come back to this product when the time is right.

When I have the funds to order more pieces, production and freight costs will go down, obviously making for better margins. This order is only for 300 pieces.

Thanks again guys.