Risks Of Selling on Amazon FBA

Whenever you use a third party platform to build your business you are always in a vulnerable position. You are exposed to the risk that a single policy change could make your business obsolete, and you will have no say in the decision or recourse when you are hit with the consequences.

Amazon is a behemoth in the e-commerce space. So while you want a piece of the action, if you are relying on it as your sole sales channel you are exposing yourself to a lot of risk.

Your best defence is to play by the rules. Knowing Amazon’s Terms of Service will help minimise the risk to your business, but

Unfortunately there is far more to it than just playing by the rules. There are other sellers that engage in Black Hat techniques that seek to game the system for advantage, and take down competitors. Acts of sabotage are all too common and you may be shut down through no fault of your own.

A common tactic is for a competitor to place a large order for your stock, and then a week later return the items for a refund. This spikes your return rate and can hurt your seller rating. If you go above a threshold Amazon may step in and suspend your listing, or at worse your whole account. You then have to prove that you are not selling defective items, or the steps you have taken to prevent future re-occurrence. Whether they agree with you and reinstate selling privileges can be a flip of the coin.

The predatory seller can also leave a negative review on your product which will reduce your star rating. While these types of reviews can be easy to spot (and often include a link to the competitor’s product), there is no doubt that negative reviews can bring down your sales. One the plus side, one or two can actually help you as your reviews will look more balanced.

If you are hit with a full blown account shut down then you will need to remove your items form the FBA warehouse. They can destroy the items for $0.15 a piece, and return them to you for $0.50. This may not sound like much, but if you have 5,000 items in stock then that is $2,500 you are up for to get your products back. Then you have to find a way to store them and sell them.

It is not uncommon for larger sellers to have tens of thousands of items in stock at any one time. So you can imagine how crippling this could be.

If you are suspended or shut down hope is not lost, but definitely have an uphill battle. There are experts that can help you out of this jam.  They are expensive though and there is no guarantee of success.

You will not hear about these risks in most of the sales pitches for the FBA courses out there. It is important that you go into this with your eyes wide open and have a plan b if you are affected by any of these tactics. It will also discourage you from taking shortcuts yourself and putting your account at unnecessary risk.

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