Not every Amazon FBA business is the same. Numerous business models abound, and FBA sellers use a myriad of ways to make money through selling on Amazon.
Here at Full-Time FBA, we teach you the proven strategies we have used to make a full-time income selling via Amazon FBA, using only part-time hours. But you won’t see us teaching you every possible strategy known to FBA sellers – and that’s because we believe some strategies are just plain riskier than others and, honestly, aren’t worth risking your Amazon selling account over in order to possibly make some profits.
Doing business is risky by nature. When your money, time, and effort are involved in trying to build up a successful profit-generating business, you’re bound to run into instances when you have to take a risk, not knowing for sure what the outcome will be. Some business strategies, however, are riskier than others. For the rest of this blog post, I want to share with you a few FBA strategies that we would discourage sellers from using because they are so risky.
Note: I’m aware that in telling you my opinion on the risky nature of these strategies I’m opening myself up to argument. Any time I mention my disagreement with one of these strategies in a public forum, I get comments from other sellers on how “You’re wrong about [fill-in-the-blank strategy] because it worked for me.” I’m not saying that these strategies never work for any sellers anywhere – I’m saying they cause enough problems for enough sellers that I would not recommend them. They’re just too risky.
Buying liquidation pallets
Liquidation companies run their businesses by buying up unwanted inventory from retail stores, loading it onto a pallet, and reselling it for pennies on the dollar of the MSRP. These pallets may include perfectly good inventory in new condition – or they may not. They may include returned items or damaged items that have been repackaged. They may include inventory in the center of the pallet (that you’re buying sight-unseen) that isn’t even packaged in the manufacturer’s packaging. They may include counterfeit items. They may include items that don’t have a proven track record of even selling on Amazon for a profit.
Typically these pallets don’t come with an itemized receipt or invoice. There’s no way to prove the authenticity of these items or even that you purchased them legally. The temptation of huge ROI (return on investment) by buying a large amount of inventory at a super low buy cost comes with a huge risk that you’re not only potentially buying a pallet full of duds that won’t sell on Amazon, but also putting your selling account at risk if you sell items that are inauthentic or used-sold-as-new.
Dropshipping involves listing an item for sale as Fulfilled by Merchant on Amazon, without having the item in stock at your place of business. Instead, you have in mind a retailer or wholesaler who is selling this item for a low enough price that you would make a profit by selling the item on Amazon, then ordering it from the third-party site to ship directly to the customer after you make the Amazon sale.
Dropshippers love the fact that they don’t have to invest money into inventory that may or may not sell, but in a lot of cases the concept of dropshipping turns out to be too good to be true. Customers may order a product from you on Amazon, but by the time you order from the third-party site it is out of stock and you have to cancel the order. Or the third party delivers it late. Or delivers the wrong item. Or the customer wants to return the item and creates a new set of problems for you as the seller.
Overall, dropshipping has huge potential to bring you tons of negative feedback and awful seller metrics, and eventually you could lose your selling account altogether. I don’t think it’s worth the time and effort to dropship inventory when you could invest a little of your own money in inventory and build up a solid Amazon selling account with great feedback and metrics that will make you profit for years to come.
Stickerless commingled inventory
FBA sellers have a couple of options for how to handle barcodes on inventory they send to the FBA warehouses. One option is to print out their own barcode label to place over the UPC barcode on the item’s packaging. This barcode label contains info that ties the item to the seller’s Amazon account. Another option is to send in inventory without stickers, also called commingling.
Amazon has actually been promoting the practice of commingling lately because it helps with their goal of making Prime 1-day shipping available across the US – if items are commingled, they can be shipped from more warehouses than if they’re labeled with your own seller account info and have to be shipped from a specific warehouse that may or may not be close to the customer.
The concept sounds great, except that I don’t want to trust my account’s feedback and seller metrics to products sent in to FBA by any other seller. A customer may order from me but receive a co-mingled item from another seller who isn’t as careful as I am about sending in inventory that is in pristine, gift-quality condition, or who might be selling inauthentic inventory, or who might not be selling inventory that exactly matches the description on the product page. I could end up with negative feedback or bad selling metrics based on another seller’s products. Sure, I could save a little time and money by not having to label my inventory, but the risk isn’t worth it to me.
Not grading conditions correctly
When you’re listing your items to sell on Amazon, grading the condition correctly is a huge component of keeping stellar account metrics. It can be tempting to look at the offers for various conditions of the item and think, “I could get so much more profit if I sell this item as like-new rather than very-good.” Even worse is to try to sell items as new when they should be graded as used. You may get more profit in the short term by trying to cheat customers on item condition, but in the long run it’s just about the riskiest practice out there for your selling account.
One of the most common reasons for Amazon to suspend seller accounts is because of too many used-sold-as-new items. Even if you don’t get suspended over the practice, you’re sure to rack up a ton of negative feedback or returns from unhappy customers, which will likely affect your ability to win the buy box.
Instead of taking this risk, I recommend always grading your used items down from where you think they should be graded. A customer who purchases a “very good” item but receives an item that is actually in “like new” condition will be a happy customer who is much more likely to go out of their way to leave you positive feedback. It’s win-win for you and the customer.
Manipulating feedback or reviews
The Amazon terms of services includes guidelines about sellers not manipulating the systems for reviewing products or giving feedbacks on seller performance. Tampering with those systems in any way is a quick route towards having your account suspended. This includes asking friends or family to buy your product and leave you a review. Amazon is able to track who leaves reviews or feedback, and they can even go so far as to track whether or not you’re friends on social media sites like Facebook.
Asking customers to leave a review or feedback in exchange for money, for gift cards, or for anything else at all is extremely risky, no matter how badly you want your product to be ranked in search results or your seller feedback to give you more time in the buy box. Just don’t do it. At all.
Using debt to buy inventory or grow your FBA business
Without a doubt this last strategy is the one where I get the most disagreements from other sellers, but I stand firm on my stance on this topic. Using debt to build your FBA business is extremely risky, and I don’t advocate it in any form, whether it’s using a credit card, taking out an Amazon loan, or using a service like Payability.
I’ve blogged on this topic in the past, but I’ll give you the short version of my thoughts here: please do not buy inventory that you cannot pay for with cash today. Any number of unforeseen events could prevent you from selling that inventory on Amazon and making the profit you’re hoping for, which would then prevent you from being able to pay back the loan or pay off the credit card. Your account could be suspended. The inventory could become restricted to you as a seller. Your competition on the inventory could increase to the point that you can’t make a profit. Whatever the scenario, you still owe the money for that inventory whether you sell it or not, so just don’t put yourself in that situation. Running a business is stressful enough without adding the burden of debt.
Again, I’m sure there are numerous folks out there who would argue that one or more of the above strategies work just fine for their business. That’s great if it works for them, but I would argue that they’re the outliers. Most sellers shouldn’t use the above strategies because they carry too much risk. There are much more stable, consistent ways to make a great income through Amazon FBA that don’t put your selling account and your hard-earned money at such risk. On this blog and our YouTube channel, we want to point you in the direction of proven strategies for building a successful FBA business in the long term. You can build a solid FBA business without taking such extraordinary risks.
Now, I’d love to hear from you in the comments below! Have you even been tempted to try one of the above strategies? Do you know of some other risky strategies that I might have left off the list above? Let me know by commenting below.
If you’re ready to start your Amazon FBA business with a solid plan that will lead you toward long-term success, then I invite you to check out the JumpStart Amazon course.
In JumpStart Amazon, you will know exactly, step-by-step, how to build up a successful Amazon FBA business from scratch. From setting up your seller account to finding profitable inventory to knowing how to best use your profits, I’ll show you the proven strategies for how to start your Amazon FBA business off on the right foot.
After you experience JumpStart Amazon, you’ll be able to:
- Understand multiple proven strategies to find profitable inventory that sells quickly on Amazon
- Know the right steps that will help make your first Amazon paycheck a big one
- Easily decipher the most misunderstood aspect of selling on Amazon
- Recognize the right inventory items to sell and which ones you should avoid
- Handle brand and category restrictions with ease so that you can sell even more products
- Know the biggest problem with sourcing inventory (and how to overcome it)
- Know the strategies to have your products sell more often than your competition.
- and so much more!
Hello Stephen, this question does not directly relate to the above post. I am just getting started selling on Amazon and have been reading your post about using prep centers. If I were using OA and shipped my inventory directly to a prep center, how would all of my inventory’s information get put into inventory lab? Also would they list the inventory? Feel free to also just direct me towards any articles that give this information. Thank you for all you do!
Stephen Smotherman says
Depending on the prep center, some will enter in the info for you in InventoryLab, while others let you do that part. You will have to ask the prep center you want to use how they handle that. Here are a few helpful posts: https://www.fulltimefba.com/prepcenter
Stephen thank you for this awesome post.I am just a little confused as to what to do if you don’t have the enough money to for inventory and your only option is a loan.i understand why you are opposed to loans but what if that your only recourse.
Stephen Smotherman says
There are multiple ways you can start with no money and make it in this business:
1. Find inventory at home that you can sell on Amazon. Used books, CDs, DVDs, old board games, items you have but have never opened (that you’ll never use), and things like that.
2. Sign up for Freecycle and get stuff to sell for free.
3. Go to garage sales and thrift stores. You can find stuff for under $1 and sell on Amazon for over $10.
4. Host a garage sale and use that money to buy inventory.
There are many ways to do this… and I think I might even write up a blog post with more ideas sometime in the future.
Thomas Vilfroy says
Also don’t forget estate sales. With some folks having only good weather for 6-8 months (ie places that get snow), this is an area not to be passed up. Namely if you do books, this is a great way to get inventory,
BUT also know this – if you go to a place like Dollar General or any of the similar $1 stores, do look at the bottom of the book. If there is a dot near the spine, don’t buy it. The dot indicates the books have been liquidated by the publisher (more info here:
Also SOME of the companies that do Estate sales will sell items at 50% on the last day. Do ask the company if they do that. Since the worse they can say is no or you have to do it during certain hours (those usually are for bigger dollar items, based on my experience).
Thank you, Stephen, for this post, and your astute viewpoint on this issue about risk. Regarding #1, do you include “discount warehouses” in the same way as pallet purchases? If we go to one of those places that have shelves upon shelves of products that are being sold dirt cheap, and we sort through to find new items to sell that Scoutify shows having a decent rank and great ROI, what is the potential risk then? Thanks again for your insight.
Stephen Smotherman says
I guess it depends on what the receipt looks like. If you’re going deep on a buy and the receipt does not have a UPC or good description of the item you’re buying then I’d probably stay away. Good question. I hope this helps.
The receipt does not itemize purchases in any way. So I should avoid this type of purchases in the future, it seems! I purchased 10 of one of the items to test, but have no good way of verifying the items with the sales receipt.
Very useful post. Is the Stickerless commingled inventory the same as having AZ
do the labeling for you? Currently, I have AZ label my items for a small fee.
Stephen Smotherman says
No, that is two different things. With stickerless/commingled there are no labels involved.
Trevor Smith says
Hi Stephen, I hope you’re ok with me posting this, I also posted to a Facebook group for help.
Anyone help with this. I’ll try and keep it short. I sent 2 double piemakers into FBA and asked for them to label them. Of course I’ve learnt now that they co-mingled them. So they sent out twice to the same customer a single piemaker. I got the first one back in my inventory. The second one is now I’m told is unsellable for whatever reason? But this item that is unsellable is not the item I sent in as they sent the wrong one out. I’ve been on the phone but they don’t understand the issue!! They are telling me I’ve got to request a removal for the incorrect product. They lost £20 of my products in May and now this. i’m so pissed off. Is there any comeback in this situation?
P.S. i have just had a further message from seller central and they are refusing to refund me. They have sent images of damaged product and strangely the box is saying double piemaker so customer has lied and probably damaged the box them selves. Again it was comingled so I know it wasn’t my product sent. Why can’t they see that. I hate to be negative but I’m very quickly going off this FBA thing. Problem is I’ve invested loads in training etc. Apologies for long message!
Is there any way I can get these people to listen? They know it was comingled, they told me it was!
Stephen Smotherman says
I really wish I cold help you, but this is why we teach to stay away from commingled. Even having Amazon label the items for you, there is a risk that they will think you want to commingle your items. Again, I’m sorry that your luck selling on Amazon has not gone well, but if you focus on the other ways of successfully selling, you’ll start seeing better things happen. I wish you all the best.
Trevor Smith says
Thanks Stephen for your reply, I have learnt the hard way and my last shipment I labelled myself. But what I can’t believe is their complete disregard for my claim. You can’t seem to speak to the people that make the decision. All the best, Trevor.
Then, Stephen, how would you suggest that we grow and scale if we don’t borrow money to do it? Unless you are independently wealthy, you need to get the money from somewhere.
Dom Haines says
Some excellent points here. I can concur on number 6. Using credit cards to access capital you don’t have only puts considerable pressure on yourself to produce results in a short time period. This didn’t work out for me and I would advise against it!
André Matte says
Stickerless commingled inventory
Regarding commingled inventory, I buy from a distributor that sends my purchases straight to Amazon
is that considered commingling
Stephen Smotherman says
Do they (or Amazon once it arrives) put FNSKU stickers on the items for you? If not, then this is commingled inventory.