Why you should be skeptical of bold claims made by FBA sellers entrepreneur how earn by blogging blog

Hey guys!

FBA has seemingly become the new hot topic on /r/entrepreneur, and for good reason. With Jeff Bezos being the richest man in the world, and Amazon saturating our lives more than ever, one might think they're missing out by not jumping on the bandwagon.

And the topics on this subreddit have certainly come to reflect that. I can't even count on two hands how many times I've seen "Making $20,000 per day doing FBA AMA" here, and I can't count past two hands because I never learned to read.

So I taught myself to read and picked up the Amazon financial statements to get to the bottom of this. Surely there must be some information out there to give us insight into this world -- is Amazon FBA a way to make millions for the average Joe, or is it starting to become a get-rich-quick-scheme-too-good-to-be-true sort of thing?

So here are the statistics I unearthed.

First, the amount of goods sold via Amazon FBA, in the calendar year ended in 2017, was $31.88 billion. So far so good, that's a lot of money!

But... Amazon has also reported that there is over 2 million active FBA sellers, so the pie begins to shrink. If we divide $31.88 billion by 2 million active users, we get to the more modest sum of $15,940 of revenue per user. Hmm.

But you may be saying, "John, who's average here? I'm destined to make $1 million bucks a year, because that is how cool I am, friend."

Amazon also revealed how many users are making $1 million in revenue or year or more. The answer? 0.6%. That means that there are 12,000 FBA sellers out of 2 million making those revenue figures

Once we remove these super-affiliate/FBA sellers, it leaves $19.88 billion at the most (remember those sellers are $1m or MORE) / 1,988,000 at the least FBA sellers (Amazon has said there are at least 2 million sellers, they haven't revealed the exact number), which lowers the average revenue per FBA seller remaining to $10,000 per year at the very most, but this figure is probably less.

Oh, but we're not done...

Remember, again, this is revenue. Amazon FBA takes substantial portion of these proceeds for fulfillment.

To be generous, let's say that the gross profit of the items is 30%. This leaves $3,000 gross profit or less for the average FBA seller.

This is notwithstanding any other costs related to the business. Amazon charges for shipping the products to them (albeit discounted), as well as charges for labeling products and storage fees at their warehouses.

You may also incur costs related to warehousing, and this does not take into account any cost of marketing required to grow your business.

As I looked into this more and more, it became clearer and clearer to me that, while there is the possibility to make money in FBA selling, FBA selling was starting to look a lot like Amway / mlm / pyramid scheme selling, in a few significant ways.

1. The disproportionate amount of income distribution, where most people are making little to no money or even losing money, and the top echelons are making enough to keep the dream alive for the rest of the poor bastards at the bottom.

2. The prevalence of get-rich-quick styled e-books and YouTube channels dedicated to hawking FBA courses. Amway makes a large portion of their money from selling promotional videos and content dedicated to helping their sales representatives "more successful." To Amazon's credit, they don't directly do this, but they turn a blind eye to the thousands of Udemy and YouTube people who do. In truth, it's spawned a whole industry of people pushing the FBA lifestyle. And there's a high likelihood these people are making way more money doing that than they ever would doing FBA.

So, in short, while I can't call FBA selling a scam, I would urge caution to those who are tempted by the bold claims FBA sellers are prone to make here.

In any case, if it seems to be promoting a blog, Udemy or YouTube course, and relies heavily on throwing large numbers at you to dazzle your senses, I urge you towards skepticism.

submitted by /u/johnvandyke2
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