The FBA business model (Fulfillment by Amazon) is one of the few business opportunities of its kind. With its built-in scalability, global reach, and enhanced accessibility, Amazon FBA can support continued growth for diverse businesses with ease.
That is if you know how to best utilize this service for yourself!
Fulfillment by Amazon is a direct, easy, and simplified solution to one of the biggest challenges of selling online warehousing inventory. Besides the fact that it allows quick order processing, shipping, and returns, it also gives businesses a chance to leverage Amazon’s reputation to propagate their brand. In fact, by understanding the intricacies of this Amazon Service, you can reach millions of buyers and manage your budget, profit, and processes more efficiently.
Dive into this Amazon Seller Guide with us and supercharge your online sales with these must-know facts about Amazon FBA.
What Is Fulfillment by Amazon?
Or rather, what does Fulfillment by Amazon mean for sellers?
The appeal of Amazon FBA depends a great deal on the size, goals, and profitability of your business. But, to the right category of sellers, it promises a striking difference in sales and brand reputation.
For one, Amazon FBA falls far ahead of retailer shipping. Orders are processed and shipped more quickly. It facilitates customer service for your orders and paves a path for your brand to gain better market reach, visibility, and hence, a higher conversion probability.
Joining FBA also allows you to sell on Amazon Prime, enables two-day shipping for free, and provides a slew of other advantages that attract eligible customers.
But, above all, one of the biggest Amazon FBA advantages is a boost in brand trust. This eCommerce marketplace, known for simplified shopping experiences, has put in work to create an optimized checkout process with credible delivery systems. By building on that infrastructure, you can offer enhanced journeys to your customers and enhance your brand’s reputation ranking.
- Fulfillment by Amazon makes scaling faster and easier.
- FBA handles logistics and customer assistance.
- It ensures well-managed inventory and streamlined cash flow.
- It offers enhanced risk management and mitigation.
- Amazon FBA automatically qualifies seller’s inventory for Amazon Prime.
- FBA also takes care of stale inventory.
Ergo, lots of room to manoeuvre!
The trick lies in making use of every opportunity Fulfillment by Amazon provides without losing control of your inventory. We can help you there by probing in depth and details on how the different aspects of Fulfillment by Amazon & sellers’ profitability go hand in hand.
7 Facts About Fulfillment By Amazon That Sellers Should Consider to Make the Most Out of This Platform
1. Fulfillment By Amazon Costs Can Branch into Various Directions
FBA charges can be categorized into two sections-
| 1. Inventory Storage Charges | 2. Fulfillment Fee |
|---|---|
| This is the cost of storing your products in a warehouse. The space your product occupies in an Amazon warehouse, calculated in cubic feet, determines the storage rates. | This is the cost of overall order fulfillment. It includes picking the product, packing orders, shipping, any related customer service, and shipping your product to the Amazon warehouse, in some instances. |
But that’s just a part of the picture.
Amazon FBA fees, if you use it to fulfill orders from any channel other than Amazon, are relatively higher. Amazon also charges a referral fee for every product you sell, although the rates vary by category.
There are other types of Fulfilment by Amazon costs that you should know about!
- Monthly Selling Fee: Rent you pay Amazon to be able to sell your products on its platform.
- Returns Processing Fee: Price Amazon charges for processing returns or repackaging items.
- Stale Stock Removal Fee: You can pay Amazon to dispose of your old, unsold, or unused stock, saving opportunity cost on the affair in terms of time and effort.
- Inventory Placement Fee: Amazon will place all your eligible stock to a single fulfillment center for the right price.
- Export Fee: You can easily sell across eligible countries with this service.
Once you understand these prices better and categorize your inventory accordingly, you can benefit from FBA with the least amount of hassle.
2. You Can Use FBA with Marketplaces & Channels Other Than Amazon
Outside of Amazon, FBA can be used as a centralized, omnichannel shipping and customer support center. If you are growing your business through a website, other marketplaces, or social media, FBA reduces the noise of order management, giving you more space to grow.
And, since Amazon’s service adheres to heightened quality standards, leveraging FBA for other channels can boost your brand reputation amidst a global audience.
3. FBA Is Especially Beneficial for High-Dollar, Large-Size Products
Using FBA is not mandatory. So, how should you choose between Fulfillment by Amazon vs. self shipping for any product?
Be smart about the products you ship using FBA.
- You should either sell quickly (keep the inventory moving), or
- Shipping them via FBA should cost less than general shipping
For example, if you sell a small, light object (think paperback books or phone cases or sanitizers) that sells in large numbers/frequently, FBA is likely to benefit you. But, if they don’t sell so often, the price of Amazon seller fee, fulfillment fee, storage costs, and item-unit costs will overpower the profit you make on the sale.
On the other hand, look at larger items. High on the price, large in size, and otherwise expensive to ship. Compared to individual packing and shipping, using FBA for such sales orders (think furniture, television, etc.) can help save on the fulfillment costs.
4. Getting and Using Fulfillment by Amazon Can Increase Your Buy Box Winning Chances
The product fulfillment method is one of the most critical distinguishers for winning the Buy Box.
Amazon has quantified the Buy Box eligibility across a wide range of variables. These include the shipping time, product price, feedback rate, tracking rate, shipping punctuality, on-time delivery, customer response rate, and a few other factors.
Amazon has also perfected FBA over the years to perform well across all these factors.
That is why, by using Fulfillment by Amazon, you automatically rank well on the most significant Buy Box determinants. Over time, with a good number of successfully processed orders, FBA works in your favor and helps you win the Buy Box- relatively easier for you than for Fulfillment by Merchant sellers.
5. FBA Payments Are Held in Escrow for Waiting Period
With FBA, sellers do not get paid right after an order is processed.
After your items are stocked in an Amazon warehouse and show up on your eStore catalog, it’s officially available to customers. But, for every paid order, the charge (minus Amazon’s cut) is put on hold for a few days. For instance, until the return period is over.
Once the order has successfully lived through the waiting period, Amazon clears the pending payment. The cycle is repeated for every order.
6. A Rapid Increase in Returns Is One of the Biggest Amazon FBA Disadvantages
With FBA, your customers also get the advantage of safe and free returns up until thirty days (typically.) On one hand, this ensures a convenient shopping experience and a successful customer journey.
On the other hand, it could mean an increase in the number of returns for no justifiable reason since the process is so easy.
The problem-
- You are charged a return processing fee every time a customer sends your products back to the FBA warehouse.
- Amazon fulfillment centers determine whether the returned product is sellable or unsellable. That will take time and delay reimbursements.
- When the customer has opened the product, Amazon can charge them a restocking fee, but only if the communications are conducted on time.
Fulfillment by Amazon must be properly handled if you don’t want the easy return policy to impact your profits negatively.
7. Amazon Has the Freedom to Suspend Your FBA Account
It’s a myth that Amazon does not suspend sellers on its FBA platform. As the world’s largest eCommerce marketplace and a customer-centric company, it has and will get rid of sellers if it senses any deviation from its policies.
So, pay attention to your FBA account.
- Don’t operate multiple seller accounts on FBA.
- Sell authentic items.
- If you are a private-label brand, don’t use stickers as brand representation.
- Never use paid product reviews.
- Maintain your Amazon metrics (order rate, fulfillment rate, response rate, etc.)
Since Amazon’s suspension guidelines can be considered open to subjective analysis, given their confusing interpretive nature, you can appeal to them for a suspended account.
Remember, FBA Can Do Wonders If You Know Just How to Utilize It
Fulfillment by Amazon is a competitive platform. But, it has excellent potential. You just need to ensure that FBA works in favor of your Amazon Store and affects your profits positively.
The key lies in understanding the ups and downs of Amazon FBA. Or, take professional assistance to determine a course of action that can help you get the best out of FBA. Either way, when done right, FBA will help you expand your market share, conversions, and sales.
If you have any questions related to Fulfillment by Amazon, drop them at info@suntecindia.com.
