If you are interested in starting your business on Amazon FBA or if you already have an established Amazon FBA store that is getting results, it is time to schedule a consultation with an experienced and knowledgeable business broker. Our business broker services provide extensive support and insight so that you can successfully sell your company if and when the time comes.
Jeff Bezos has reported that many people are already successful in selling on the platform, but this also means that the competition is increasing. There are a couple of biggest challenges in 2020 that make it more important than ever for Amazon FBA sellers to evaluate their inventory and current relationships with sellers. These common challenges include cash flow, price wars, excessive competition, restrictions in categories, customer returns, altering sales tax laws, seller feedback, product reviews, and inconsistent communication from Amazon. All of these issues can challenge your currently structured Amazon FBA business in big ways. These challenges for Amazon FBA sellers should be accounted for in your big picture strategic plan as well as in your day to day practicing. Approximately 50% of sales made on Amazon today come from third parties, which means the income potential for Amazon FBA sellers is significant. This, however, does still mean that there are challenges for Amazon FBA sellers because of this widening competition. Cash flow is one of these big problems.
Amazon pays third party sellers only every two weeks. This means that an Amazon FBA seller has to put out the money for inventory long before they start to see income generated from that same inventory. One of the most common challenges for Amazon FBA sellers is that they hire manufacturers in China to generate inventory for them. Manufacturers usually charge around 25% of the inventory costs before they are even willing to begin production. This could mean that production time could be increased around 1-2 months.
The remaining balance for the inventory is paid only after the manufacturer has completed production and then it is shipped to you. Shipping can take anywhere from a few weeks to a couple of months before it reaches your desired Amazon FBA warehouse, depending on how you choose to ship it by sea or by air. This could mean that the payment for the items that ultimately sell on Amazon could be a few months out after you have originally purchased that inventory.
With many different products, this becomes even bigger challenges for Amazon FBA sellers who have to keep track of all of the moving parts and pieces in these complex businesses. Having a primary focus on cash flow can make it much more likely that you’ll be able to sell your company successfully in the future.