Entrepreneurial Dangers: Amazon FBA Scams

Sell on Amazon: too easy to be true? If you did some basic research, you might already know the steps to create an FBA Business. E-commerce is not rocket science. But it is an art.

Find a product, source it from China, create a listing, and launch with advertising: nothing special. If you managed to do all of them correctly, you would create a successful business and make big profits. 

In practice, you see one seller succeed when ten others fail. It’s not that they don’t know how to sell, but they haven’t updated their strategy in years. That opens the door to competitors who may not have the customers’ best interests in mind.

Have you ever launched a perfect product that got saturated right when you were about to start selling? Do you remember spending hundreds to rank on page one only to get no sales? What about burning dollars on PPC campaigns?

No matter how easy Amazon FBA looks when portrayed by internet gurus. As a rule, sellers achieve less success than they thought — or it took them way longer than expected. 

The biggest problem? Failing is expensive on Amazon. A beginner could waste all his money before even launching the product. Recovering from a loss can take months only to get back where you started.

Is Amazon FBA a scam? Not if you start your business with the right preparation.

About Amazon FBA Scams

In the beginning, there were rumors that Amazon was a scam. Jeff Bezos’ long term plan made investors lose money in the short term, making it unreliable. But today? Nothing further from the truth.

Amazon, in a few words, stands for customer satisfaction. It only benefits sellers when they approach business with the same principle. These brands wouldn’t exist otherwise.

The problem with Amazon is, people have unrealistic expectations. If you expected to make six figures overnight, would you mind putting down a few thousands? Probably not.

From product research to the launch, you’ll find people who want a piece of those profits. And their means aren’t precisely legit: sneaky payment tactics, refund tricks, listing sabotage, click farms. Perhaps you never heard of the dark side of Amazon?

Getting Started: Don’t Fall For The Same Mistakes Everyone Did

You don’t need to be making millions to become a target. As soon as you join the platform (also see eBay scams), e-com scammers will encourage you to “invest” money with them. Before you know it, you lost thousands of dollars.

There’s, of course, specific reasons businesses fail, and each company has its own. But most of them derive from the person, not the tactics. Three mistakes, in particular:

#1 Impatience

Selling on FBA is a slow process. It takes weeks or months to verify your account, find ideas, ship inventory, and launch the product. You may think: “the sooner I get it done, the sooner I’ll enjoy financial freedom.” Well, Amazon is about accuracy: if you rush on product research, it doesn’t matter how perfect you do the rest.

Thinking you need to take action quickly leads to bad decisions. Scammers are always behind beginners, which makes mistakes unforgiving.

#2 Lack of Experience

Imagine selling on FBA without ever having started a business. You also do it by yourself, no help. How far would you get?

If you come with unrealistic expectations, you’ll feel inclined to listen to those who make you bold promises. Whenever something sounds too good to be true, it leads to deception. 

Learn how FBA works to understand what it takes to succeed. Thus, whenever someone approaches, you’ll be able to tell opportunities from scams.

#3 Fraud Triangle

Amazon cares about customers, not your success (although it’s correlated). If instead of valuing customers, you want to succeed at any cost, you’ll prevent yourself from creating a lasting business.

Let’s say you create misleading listings to drive more sales. When talking to suppliers, you negotiate every penny and sacrifice quality for quantity. You also fake your reviews, because sales come from social proof!

You rationalize: “Once I’m making money, I’ll create a more decent product.” 

But customers find out quickly. Avoid this behavior: you’ll only be fooling yourself. There’s no shortcut.

How To Recognize And Prevent Every Amazon Scam

If you commit to letting behind those three limitations, congratulations: you’re ready to sell on Amazon!

You may already have a plan for each stage of the FBA business. In this guide, we will follow the same order, explaining what problems you should beware of on each case: registration, research, sourcing, listing creation, and launch.

Registration

That’s right. You can get scammed before even getting into Amazon. No matter your history, Amazon runs periodical verification procedures to update security. There’re stories of closed accounts, despite selling for years.

Phishing Messages

Seller Central sends messages all the time, which makes it easy to miss a phishing email. When you open, it will look exactly like an Amazon email, designs included. You click and land on a seller central clone, no visual difference.

Since you’re so used to this page, you may not pay attention to the few details that don’t match:

In short, a scammer is about to steal your accounts. When you log into the fake page, it redirects to the real page where you didn’t log in. “That was weird.” You try entering the data again, and everything looks right. 

For now.

Common Red Flags:

How To Prevent It:

Product Research

Product research is the main difference between success and failure. It’s so critical that sellers might spend weeks browsing for products and still find nothing. It’s about trial and error.

Not everyone can reach proficiency in this skill. Naturally, the impatient will look for shortcuts to avoid the hassle. They don’t want to waste time, so they spend money. But was it necessary?

Advance Fee Service

Perhaps a person approached you on social media who guaranteed to help you with anything. Brand registry? Product restrictions? Product research? Leave it for the pros! You just need to pay one upfront fee, and they’ll do the rest.

With this payment trick, however, they no longer need to help you: they can walk away anytime. If you do get the service, it costs far more than expected. You paid for something you could have done for free if you spent money on learning instead.

Giving others control to make those changes suggests you’ll need to share your personal information, which can lead to fraud.

Outsourcing Product Research

You spent days looking and found nothing. You start browsing on websites for product ideas until you stumble with an ad: “We research for you to find the best products to sell, all for less than $49.”

Question: if it’s so good, why are they sharing instead of selling it? When you buy ideas, you never know what you’re buying. Once they share the product analysis, you can’t get a refund. Perhaps they show the same listings to everyone, so it saturates the moment you get in.

Common Red Flags:

How To Prevent It:

Contacting Suppliers

We’ll be buying large orders from distant locations, usually China. We’ve all had the million-dollar question: why do those suppliers settle for less and don’t join Amazon FBA? Although some of them do, manufacturing products doesn’t mean knowing about product research.

For them, it’s beneficial that you succeed in your business, so you always source from them: a long-term business relationship. An unverified supplier, however, may use sneaky tactics to scam you.

Payments Fraud

Suppliers aren’t in business to scam you, but they may take the chance if you’re not careful. For example, some of them:

Sourcing products is risky for both the seller and the manufacturer. Both parties should share the payment risk instead of moving all of it onto the other.

Escrow Fraud

For large orders, escrow services can monitor payments without favoring any party: they ensure a fair deal. Sometimes, you may contact brokers and fake suppliers: they claim to have a business they don’t. Unless you used a reputable Escrow service, you might have lost any money paid upfront.

They may secretly work with the escrow company to rip you off. If you use a trusted firm (like Escrow.com), they may impersonate it, so you would make a mistake with the payment method.

Common Red Flags:

How To Prevent It:

Creating Your Listing

You may think, now that you’ve ordered inventory, you’ve already covered the highest FBA expenses. That’s only true if you’re careful. If you make the mistakes in the listing and launch, you could lose just as much as you paid for inventory and still fail on your business.

Listing Sabotage

Bad news: some competitor wants to bring your listing down to get your sales. The good news? If people try to sabotage your listing, that’s a sign you did a great job researching the product.

If enough customers send Amazon complains about you, they may change your listing, having the same power as you:

If they insist enough, they may change your product weight, color, length, features, anything to confuse actual customers: a subtle way to cause bad reviews.

Since Amazon forces those changes, it takes weeks to revert them.

Listing Hijacking

One day, you find your product making fewer sales than usual. Since the pattern repeats, you try to find out what’s going on. But after looking at every aspect of your business, you can’t find anything wrong.

Amazon Hijacking often happens after offering giveaways/deep discounts, especially when selling commodities. You see, not every buyer has the intention to use your product. Some con men acquire parts of your inventory to resell it later. If their offer is better or cheaper than yours, they get the Buy box.

You spent on ranking and advertising, but they get the sales. These hijackers are often lazy, jumping on high-profit listings, hoping you don’t notice the steal. On the website, it looks like “Sold By Seller B,” which isn’t related to the listing brand.

Common Red Flags:

How To Prevent It:

Product Launching

After product research, we consider launches the most critical step in your business. You might have created a super-product, but if people can’t find it, nobody will buy it.

To launch well, you need sales and reviews (and ranking). This stage completes once you’re among the top 3-5 listings on page one selling profitably. Unfortunately, it can take a while before you get there, which is why many new sellers are looking for shortcuts.

Usually there no shortcuts and you need to put in the work. Getting money fast is always a enticing pitfall and Get-Rich-Quick Scams will keep you broke.

Manipulated Review Tricks

For a price, people offer to leave five-star reviews to improve your conversions. Here are some things to consider:

Is the buyer really doing you a favor? Or putting you into trouble?

Ranking Services

We’ve all dreamed of the privilege to appear on page one. Ranked listings get sales. Sales help to rank, and rank helps to sell. Or should we say organic ranking?

These days, anybody can throw dollar bills on advertising and appear in front of customers. That doesn’t mean they will rush to buy the product: if it’s not as good, they won’t. 

People won’t buy it unless your product is notably better than the current market leader. Think about it: would you replace your fridge because you found a model that’s 10% more efficient or cheaper? Not likely.

Yet, beginners believe that by ranking, they have launched their product. You may pay hundreds to services like Pageoneify and still lose money. After getting on page one artificially, organic sales pull you back down.

Selling With Associates

If you did the review-for-review trick, you might stumble with these scammers on social media. As you negotiate your review, they mention they could help you rank your product. 

“You need sales to get to the first page. For a commission, I can get you as many sales as you need. I’ll refer to my friends and coordinate them to buy from you at once.”

You need to sell more than the top listings for seven days straight or more. Selling as a beginner is rare, and giveaways are expensive, so you say Yes.

Like clockwork, the associate supplies you with those sales every day. You see all the money on your Seller balance, which is a confidence trick to pay him the commission. The catch? Anybody can cancel the order anytime. But why would they do so all at once?

Because the associate is referring to fake accounts. Each of them has a different address and card number. These orders stay on Pending status for weeks and cancel right after they ship.

Before ordering, he may have encouraged you to raise prices to make money on the launch. It only increases your Amazon fees, because the order won’t complete.

As a second catch, the associate will always choose the most time-consuming shipping plan, so you find out the refund scam too soon. Since the sale canceled, you get no rating boosts from it. 

Common Red Flags:

How To Prevent It:

Putting It All Together

Is FBA worth it? Despite the risks, Amazon is the way to start a business from scratch. It saves a lot of time you’d otherwise spend looking for customers.

If you’re not careful, the mentioned seller scams could cost you all your money, perhaps your identity too. Yet, some sellers have stayed here for years without ever finding any issues.

Long term, however, it’s not FBA fraud that should concern you. Over the years, we know Amazon will update its Terms and Conditions so that they favor their customers. Is that necessarily good/bad for you? In any case, Amazon has control. They own part of your business.

As long as you sell on their platform, they have the power to shut down your store anytime for unexpected reasons. As a seller, you can let Amazon be part of your business plan, but not all of it.

Many successful brands started on Amazon, built reputation, and got out with a client email list. Other than that initial stage, it’s not worth setting a business 100% on Amazon.

What should you expect?

Beginners expect to find brilliant product ideas, buy inventory for cheap, and make millions overnight. Although it’s possible and happens all the time, it’s the exact scenario that attracts scammers.

You can still make big money for far less risk without having those super-star products: create a brand.

We consider FBA a passive business model. Although the traditional method still works, building a brand brings far more benefits: more customers, better quality, upgraded products, and more profits.