In this blog, we will walk through everything that you need to know about Fulfillment by Amazon, a service provided to sellers for shipping their products.
Fulfillment by Amazon (FBA)
As the name suggests, Fulfilment by Amazon is a service offered by Amazon to third-party sellers to ship, pack and deliver their products.
If you’re worried about how to pack and ship your products to the customers and are considering fulfillment by Amazon, there are few basic things you need to know before proceeding further.
FBA or Fulfilment by amazon is especially advantageous for sellers who do not have room for storage of inventory. It is different from the merchant-fulfilled network or MFN where the seller takes care of everything including packing, shipping, and customer service. With FBA, all that you will have to do is ship your products to amazon’s fulfillment center or the warehouse and the rest will be taken care of by Amazon.
Should you choose FBA for all of your products?
You must consider all the options available and weigh the pros and cons before deciding the next step. Now that we’re talking about amazon’s fba, there are few things that you must consider before you decide on this.
- Size of the goods
FBA is beneficial for amazon sellers whose products are small and light in weight and that can sell easily.
With FBA, amazon even handles almost all the seller feedback and you do not have to worry about receiving negative feedback. However, if you want to see and respond to every feedback that you get for your product, you can go for FBM (fulfilled by merchant).
With Fba, amazon is in total control of the shipment process right from receiving the order to delivering the product to the buyer. If you are okay with amazon controlling the process, then FBA is the best available option to go for. Otherwise, you always have the option of doing it yourself.
Sellers also prefer fba when they have occupied with something else like launching a new product or creating your brand. Since Amazon handles everything else you can just focus on the task at hand.
Since you store your products at amazon’s warehouse, it is quite obvious that you will have to pay for the storage fees and fulfillment fees.
If you want to choose fba for your products, you have to know how much you will be charged for it. You can then decide whether or not to choose fba by comparing the total costs incurred for both FBA and FBM.
Amazon seller central has fba cost calculators that vary from country to country. However, the cost of fba depends on :
- Order handling
- Storage fees.
The storage fee also depends on how long you store the item in Amazon’s warehouse
- Picking and packing
- Outbound shipping
The cost that you have to pay if you want to ship your products outside amazon like e-bay, etc. is higher than shipping within amazon.
- Weight handling
- Standard-size products weigh fewer than 20 pounds after packaging and their dimension is less than 18” x 14” x 8”.
- The ones that exceed 20 pounds in weight after packaging or have a dimension larger than 18” x 14” x 8” are considered oversized.
- The cost of oversized products is slightly higher than standard-size products.
- Weight handling
If this fee costs less than what would have costed you when you handle everything yourself, then fulfillment by amazon is something you should consider.
What do you get in return for this fee?
- 24/7 Amazon customer service
- All fulfillment and shipping costs are included in this fee (pick, pack, and ship)
- Customer’s trust as your product seems reliable with Amazon’s Fulfillment Label.
- You get access to one of the most dynamic fulfillment networks in the world
Let’s dive in and look at how to set up FBA.
How to set up FBA for your products?
1. Create an Amazon seller account, if you didn’t already.
2. Once you’ve created this and decided on what product you are going to launch, click on set up FBA.
3. Pack the products that you want to transport to amazon’s fulfillment centers abiding by the rules and regulations of packaging and shipping,
4. Amazon will allow a specific warehouse for your product from where all your products will be shipped to the buyers.
What are the pros and cons of FBA?
Let’s look at the merits and demerits of Amazon FBA to help you decide if you should consider choosing FBA for your business.
Advantages of FBA:
- Effortless Shipping:
Since Amazon does all the shipping work for you, you can just keep track of it, make sure your product is in stock, and let Amazon take care of the fulfillment from start to finish. You get a huge job done for a small fee.
As it is fulfilled by amazon, its name will be associated with your products and makes your product appear more reliable to the buyers.
- Damage Reimbursement:
You can store your inventory at amazon’s warehouse and in case your product is damaged at the warehouse, Amazon will reimburse you.
- Prime Customers
You will have access to new prime eligible customers. Prime customers shop twice as much as regular customers. By gaining access to new prime customers, you gradually
- Super-fast delivery
Your products would be delivered to customers within a day or two. You also need not worry about not being able to ship heavy objects without damage.
- Multi-Channel Fulfillment
You even have the facility of MCF or multi-channel fulfillment that is you can ship your products outside amazon too. For instance, you can ship your products on other shopping websites like e-bay, etc.
- Unlimited Storage Space
This is one of the most beneficial advantages of FBA as Amazon has warehouses all over and can hold a lot of goods, you will have access to unlimited storage for a cost. This would otherwise be not possible if you rent a room or a warehouse for storing your inventory.
Disadvantages of FBA:
It is always more important to know the disadvantages of selecting a certain choice. Here are a few demerits of Amazon FBA:
- FBA Cost
Amazon’s FBA service isn’t a good choice for low-cost products because of the way FBA fees are calculated, especially for those who are just getting started in this business. Though it is a handy privilege, it comes at a cost.
- No control over the process
Since the entire fulfillment process is carried out by Amazon, you will have no say in the shipping process, receiving and responding to customer responses.
- Long-Term Storage Fee
Amazon doesn’t like storing products that aren’t actively for sale. It will charge you for this and this will negatively adjust your metrics. Thus, you will have to pay more for items that sit longer. However, you can view all of this in your seller console and arrange for products to be shipped back to your own facility in case of longer storage time.
- Fee Payment Method
You cannot postpone or manage what you owe Amazon. You can neither use the next or previous sale to pay off the dues. Amazon deducts the fees you owe and pay you the rest. If you do not have enough balance to cover the dues, you need to provide a credit card. Though this makes sense, it sometimes isn’t beneficial to the sellers.
- Product Requirements
You must meet the list of requirements Amazon has for products that are to be fulfilled through FBA. You must pay attention to all of your products you are sending off to Amazon, including how packaging, proper labeling, and shipping by following the FBA inventory warehousing guidelines.
- Amazon’s Branding not yours
The packaging box for the products delivered by FBA contains the Amazon Brand logo instead of yours. This seems like a hindrance in promoting your brand.
Best Practices to increase FBA sales:
- Choose the right product:
Product always comes first in the priority matrix of the most important elements to run a successful business. The product that you wish to sell has to be in accordance with the needs and wants of the customers. It is always a good idea to brand and improvise a product before selling it on amazon. A buyer would prefer to spend his money on an upgraded product rather than the most basic version of it.
If you wish to surpass other competitors, sell a product that is in demand and trendy in the market. For example, if iPhone 12 is the new trend in the market, you should consider selling its cover case over that of an iPhone 6 or iPhone 5. Hence, keeping yourself updated with the new trends in the market is the key to bloom your business.
- Choose the right price
Needless to say, price is one of the most significant factors that the customers use to decide whether or not to consider your product. It also influences everything from cash flow to inventory. Whether you incur a profit or loss is solely dependent on how you price your product. How does the product’s price affect your sales? If your product is too low priced, the chances that the buyers would assume it to be of low quality are highly likely. Likewise, if you overprice it many of them wouldn’t bother to spare a glance.
Now, the question is, how should you price your product?
You should check if the price is reasonable from both your and the customers’ perspective. Firstly, calculate all the costs involved like the cost of raw materials, shipping costs, and fixed costs. In this case, calculate the FBA fees using the FBA calculator. Do not forget to include the promotional cost as you will have to pay a certain amount to amazon in the form of PPC and keyword bids. Incorporate a certain percentage of profit margin. Sum up all of these to set your product price.
- Marketing using SEO
Search Engine Optimization (SEO) is one of the best ways to stand out in the Amazon selling business. Using SEO, you optimize your content based on how your customers would search online. SEO makes you more relevant to the buyer.
Including your brand name, simple and clear product description, bidding on relevant keywords increases the chances of converting your click to purchase. This gets you relatively more attention than the others and increases your sales.
The Seller Fulfilled Prime (SFP) option is an Amazon fulfillment option that allows you to store, pack, and ship your own products while allowing your products to be listed as “Prime”. For those who want access to new prime customers and want to exercise control over the shipping process, customer feedback, etc., Seller-Fulfilled Prime is the best option to go for.
Basically, you get to use the Amazon Prime label and have to follow shipping guidelines, but you get to do all of the picking, packing, and shipping of your products. You also have to manage all of the returns and cover all of the shipping costs. Since the customers see the prime label, they expect Prime treatment. So you have to meet their standards no matter how you fulfill the item. So basically, SFP is a lot of work.
However, if you are selling low-cost items, large and oversized products that would cost you high storage fees with Amazon, SFP is a great way to get the “Prime” label while keeping your costs down.
In short, depending on the products, SFP can either be the best of both worlds or too much work done.
Every Amazon Seller is unique so is the sale. There are several ways in which Amazon sellers can successfully achieve what they’ve dreamt of. This blog aims to help you decide if choosing FBA is one of the decisions that you can make in the journey of becoming a successful Amazon Seller.
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