Is Amazon FBA a pyramid scheme?

Written By Ecommerce Beast

Every article is researched and written by e-commerce experts and then peer-reviewed by our team of editors.

Amazon FBA, or Fulfillment by Amazon, is a program that allows individuals and businesses to sell their products on Amazon’s online marketplace while outsourcing the warehousing, shipping, and customer service functions to Amazon.

Amazon is a highly reputable and trustworthy company with a strong track record of providing quality products and services to millions of customers worldwide. The company has built its reputation on a foundation of regulatory compliance and customer satisfaction, and it has consistently delivered on these values over the years. It accounts for over 10% of all retail sales in the US, and over 35% of all online retail sales. Amazon FBA is legit!

Even academic institutions like Harvard & MIT have written hundreds of papers on why businesses and individuals can benefit from selling on Amazon. So a brief answer to this question would be a hard No. While there are risks involved in any business venture, Amazon FBA is not a scam. It has been highly successful for millions of sellers (over 6 million just in the US) who have been able to effectively market and sell their products on Amazon. Obviously, there have also been thousands of sellers who have not been successful and lost money selling on the platform, just like any other business.

Some people have questioned whether Amazon FBA is a pyramid scheme (or a scam), but there is absolutely no evidence to support this claim. In this article, I will explain why Amazon FBA is not a pyramid scheme and provide logical arguments and statistics to support this statement.

What is a Pyramid Scheme?

First, let’s define what a pyramid scheme is. A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. Pyramid schemes are illegal in many countries because they are unsustainable and rely on continuous recruitment to generate revenue, which ultimately leaves many participants with losses.

Is Amazon FBA Legit? (or is it a pyramid scheme)

Amazon FBA is a legitimate program that allows sellers to leverage Amazon’s vast customer base and infrastructure to sell their products. It is not a recruitment-based model, nor is it dependent on continuously recruiting new sellers or customers. Amazon FBA sellers sell their products directly to Amazon customers and do not need to recruit others to do the same.

Moreover, Amazon FBA sellers earn revenue by selling their products, not by recruiting new sellers or customers. The income earned by Amazon FBA sellers is directly tied to the quality and demand of their products, not to their ability to recruit new sellers or customers. This is evidenced by the fact that Amazon FBA sellers pay fees based on their sales volume, not based on the number of people they recruit into the program.

According to Amazon’s 2020 financial report, third-party seller services, which includes Amazon FBA, generated $80.5 billion in revenue, up 55% from the previous year. This indicates that the program is highly successful and profitable for sellers who are able to effectively market and sell their products on Amazon.

Furthermore, Amazon FBA provides significant benefits to sellers, including access to Amazon’s vast customer base, storage and shipping infrastructure, and customer service support. These benefits enable sellers to scale their businesses quickly and efficiently, without the need to invest in expensive warehousing and logistics infrastructure.

One reason why people sometimes think that Amazon FBA is a scam is because a lot of sellers get banned on Amazon for not following their Terms of Service. Amazon’s TOS are highly complex and detailed, so sometimes less detail-oriented or shady sellers get quickly banned. However, these policies also ensure that it remains a relatively fair playing field, and more importantly, Amazon’s customers stay protected from unethical and untrustworthy sellers.

We have covered the question of Amazon FBA being a scam or not in a separate detailed article that explores this question with emphasis on facts and findings from experts in the field.

In conclusion, Amazon FBA is not a pyramid scheme. It is a legitimate program that provides significant benefits to sellers who are able to effectively market and sell their products on Amazon. Amazon FBA sellers earn revenue by selling their products, not by recruiting new sellers or customers, and the program is highly successful and profitable for those who are able to leverage its benefits. Therefore, it is important to differentiate between a legitimate program like Amazon FBA and illegal pyramid schemes, which can cause significant financial losses to participants.