What is Fulfillment
by Amazon?
Fulfillment by Amazon (FBA) is one of the two
core fulfillment options provided to Amazon sellers. The other is known
Fulfillment by Merchant (FBM)—a system by which the sellers (you) takes care of
packing and shipping orders directly to customers. FBM sellers basically use
Amazon as a platform to reach customers and produce demand.
Amazon, in reality, sums up FBA
pretty well in Seller Central: “You sell it, we ship it.”
Here’s how it works.
FBA Step 1: Deliver your products to
an Amazon fulfillment center.
It goes without saying that the
products you’re delivering to Amazon must already be listed in your Seller
account. You don’t desire your products sitting in an Amazon storehouse if
they’re not, uh, for sale on Amazon.
You’ll require to label all your products,
which you can do by yourself or through Amazon’s FBA Label service. Then, you
ship your inventory either through Amazon or with a carrier of your preference.
FBA Step 2: Amazon takes care of
storage.
When your inventory gets to the
storehouse, Amazon scans the labels you attached; weights and measures each
package, and stores everything accordingly.
You’ll use online inventory tracking
to remain on top of your stock. It’s up to you to ship more inventory to the
warehouse when required.
FBA Step 3: Someone orders your
product on Amazon.
Amazon takes care of picking the
product from inventory, packing it for shipping and delivering it to the
customer.
Plus, after the order has been
placed, Amazon takes liability for Customer Service.
The benefits of Fulfillment by
Amazon
FBA benefit #1: More Time to raise
Your Business
Using Amazon FBM denotes handling
all the inventory, labeling, packing, shipping, tracking, and customer service. If you’re working your e-commerce business out of your
living space or a small office, you possibly don’t have room for all that
noise.
Plus, by handing off those
liabilities to Amazon, you give yourself way more time to focus on the things
that enhance and grow your business: product development, market research,
keyword search, online advertising campaigns, SEO, partnerships, and so on. If
you can’t assign enough time and energy to these practices, your business
simply won’t be sustainable
FBA benefit #2: Make Consumers’
Trust
Americans admire Amazon. More
significantly, Americans believe Amazon. When you order Scooby-Doo
slippers with two-day shipping, you sleep deeply knowing that your feet will be
both cozy and whimsical in 48 hours.
As an FBA seller, your product
listings will significantly demonstrate “Fulfilled by Amazon” for all
prospective buyers to see. The effect this has on your sales is
certain—shoppers automatically believe you more. And customers like to buy from
sellers they trust.
FBA Advantage #3: Automatic Prime
Eligibility
Approximately, two-thirds of U.S
households have Amazon Prime. Overall, almost 85 million consumers are using premier service.
Nobody who pays for Amazon Prime is
going to buy products that aren’t Prime suitable. Why settle for standard
shipping (5-8 business days) when you can get your mason jars in a small period
of that time? Plus, the Prime logo clicks into that trust factor we just talked
about.
Don’t miss out on tens of millions
of trusting, keen customers.
FBA Advantage #4: The Coveted Buy
Box
The Amazon buy box is the white box
situated on the right side of a product details page where the “Add to Cart”
and “Buy Now” buttons live.
In other words, it’s the place where
the money is made on Amazon. To be specific, 82% of Amazon purchases made on
desktops are done during the buy box. That number is even advanced for
purchases made on mobile.
Amazon uses an algorithm to decide
which supplier is represented in the buy box and for how long. The information
of the algorithm is for another blog post, but one factor is applicable here:
FBA sellers get a lot of choices
when it comes to the buy box.
The drawbacks of Fulfillment by
Amazon
We must be clear—Amazon FBA isn’t a
celestial bounty of good times and warm hugs. Before choosing this
fulfillment option, you must know the two principal drawbacks.
FBA Drawback #1: Fees on Fees
As you may remember from an earlier
section of this blog post, Amazon FBA costs money. Actually, all fees
considered, the costs can run pretty high.
Although we’re of the opinion that
these costs are finally worth it, we know that your business may not be in the
position to take them on in addition to essential expenses such as
manufacturing and marketing.
FBA Drawbacks #2: Forfeiting Control
It’s not (that) odd to consider your
e-commerce business as your child. You’ve built this thing from the ground up,
and you’re legally proud of that.
As such, you may not be overjoyed
about the idea of handing over the reins for storage and shipping. If a lack of
personal mistake and control makes you uncomfortable, Amazon FBA isn’t for you.
Thus, is Fulfillment by Amazon worth
It?
The reply to this question really
comes down to three factors: how much you’re shipping per month, how large your
profit margins are, and how niche your market is.
You require to move at least 40
items per month to qualify for FBA. If you’re just hard-hitting that minimum
threshold, it may not be worth the hassle (and the fees) of preparing your
inventory according to Amazon’s strict rules. You’re possibly better off
handling these responsibilities by yourself, or through a smaller fulfillment
company that’s more elastic.
FBA isn’t a fine idea for e-commerce
sellers with small margins. If you are not making much money per scale, it’s a
safe expect that FBA fees are going to bring your margins down to zero, if not
into the red. Although shipping the whole thing on your own isn’t free—in terms
of money or energy—you mustn’t take on any fees that aren’t necessary for your
business.
Sellers of great niche products
(e.g., vintage zines geared towards old-school goth music fans) don’t
necessarily require FBA, either. Memorize that one of FBA’s major advantages is
the eligibility for Prime. If an Amazon customer sees a bunch of fairly identical
products, and only a handful of them are Prime eligible, she’s going to
instantly write off those that are ineligible.
But, not that many people use Amazon
to sell ‘70s goth zines. The people who are in the market for your niche
product possibly don’t care that much about Prime eligibility; they’re just
glad to have found what they were looking for.
Now, if you’re a seller in a
competitive market who moves tons of items per month and drives large margins,
then yeah—FBA is an unbelievable investment. It’s a reliable way to free up
your schedule, earn prospective buyers’ belief and win more sales on the
product details page.
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