Amazon FBA is a program for brands and sellers who wish to offload the logistical challenges to Amazon. Amazon shipped over 5 billion items in 2017 with Prime according to Jeff Bezos, so we can safely say they know how to handle logistics.
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What is FBA?
FBA stands for Fulfillment By Amazon, and it works exactly as the name implies. All orders, storage, deliveries, and customer service inquiries are fulfilled by Amazon.
This essentially means you will no longer struggle to sort out the logistics of selling products.
Anyone who has ever tried to sell anything online has faced several challenges. Here are a few:
- Discovering and creating the right product
- Branding the product and company
- Payment processing thousands of transactions
- Sorting, packaging, and delivery of goods in a timely manner
- Great customer service
FBA rids you of the last couple of problems mentioned above. It is a solution that provides two fully-staffed departments for your business. Your logistics and customer service are in good hands.
Why should you use Amazon FBA?
In simple terms, you should use Amazon FBA because it will save you a load of time and hassle. Remember, Amazon FBA has birthed numerous 7 and 8-figure businesses because of this.
Packaging and delivery of goods is a process that takes your precious time. Expedited shipping is available at an extra cost from the post office. Customer service is also a never-ending challenge with the volume of inquiries coming in.
Without Amazon FBA, you have to solve the problem of selling your products, while juggling the massive challenges of packaging, fast deliveries, and around the clock customer service — all with your small team.
Of course, FBA isn’t for everyone. Let’s take a look at the pros and cons of FBA so you can make an informed business decision.
Pros of Using Fulfillment by Amazon (FBA)
There’s a reason why over half of all sellers use FBA. Here are some of the reasons why.
Logistics Nightmare No More
This is primarily why sellers choose a fulfillment service like FBA.
Business-savvy decision makers know that resources are limited. In today’s world, you will need to spend money on products and ads while investing time in growing the business. You can’t possibly tackle the challenge of logistics and compete with Amazon’s fast delivery times while growing your business.
The Best Delivery in the World
You will pay a fee so that Amazon, an exemplary veteran of logistics, can get your products to paying customers in just two days. For free.
In some ways, the Amazon marketplace is a pay to win system. FBA enables free shipping for all Amazon customers on eligible orders and free two-day shipping for Amazon Prime members.
Today’s buyers are keen on delivery. They want two things around delivery and two things only.
Free shipping and fast shipping.
By offering free shipping, you are making it that much easier for the customers to make that purchase. Shipping in two days? Consumers will surely have an easier time considering the purchase.
24/7 Customer Support
Can you offer this level of service with your current team? How much would it cost to hire people to operate your customer support channels 24/7?
Amazon FBA has you covered.
Amazon provides 24/7 customer support through various channels and they also handle all returns. Processing returns is never fun, so it’s a good thing FBA customer support also does this… for a fee.
Prime Members Spend More
Did you know that Prime Members spend $1300 (2017 reports) per year while non-prime members spend $700 per year?
By having free Prime shipping eligible items, you are offering your products right to the big spenders. Many Prime members also filter their search results with Prime-status items only. This allows them to find the best price and also have the off-chance of getting their items within just one business day.
Better User Experience
Objectively speaking, FBA does increase sales for the majority of sellers for the reasons above. Free and faster shipping means it makes the customer happy.
The cherry on top for you, though?
It’s the fact that your items will convert better.
FBA helps you earn the “Buy Box” status – the same box that 82% of Amazon sales go through. This is part of optimizing your listing according to Amazon’s algorithms, so make sure you read up on this subject.
More Sales, Better Rankings
In turn, all of the pros help your brand rank at the top of the search results. Providing fast deliveries to Prime spenders with conversion-optimized product pages means you’ll sell more items.
The more sales, the higher the rankings on Amazon. Don’t forget to make your customers happy!
Cons of Using Fulfillment by Amazon (FBA)
Amazon FBA isn’t perfect, but it’s close. Here are some of the potential downsides of using FBA.
Everything Comes With a Price
Amazon can keep FBA open to vetted sellers because they have a logical fee structure. They will have a fee for Fulfillment (packing, shipping, customer service, processing returns) and a fee for storage. Keep reading and get educated on our detailed FBA fee structure below.
You Still Have to Prep and Package Items
It’s not as bad as it sounds, but Amazon does have a strict policy on quality control. This means you will have to follow their guidelines to the tee on how to prep your products and ship them to Amazon’s warehouses.
Or you could pay an additional fee for Amazon to do all the work.
Lack of Branding Options
You already know how all Amazon deliveries arrive. It comes in a box with Amazon-branded taping around it. There is virtually zero personalization.
If you are operating a business with brand identity and uniqueness in mind, you’ll find it quite difficult to offer such things with FBA.
The FBA Process
FBA is the preferred method of fulfilling orders on the Seller Central platform by the majority of sellers. This is how it works:
Step 1: Send your products to Amazon
- You send your new or used products to Amazon’s fulfillment centers.
- Upload your listings to Seller Central.
- Let Amazon fulfill all or part of your inventory.
- Print PDF labels provided by Amazon or use FBA’s Label Service.
- Use Amazon’s discounted shipping or select your own carrier.
Step 2: Amazon stores your products
- Amazon catalogs and stores your products in our ready-to-ship inventory.
- Amazon receives and scans your inventory.
- We record Unit dimensions for storage.
- You monitor inventory using our integrated tracking system.
Step 3: Customers order your products
- Amazon fulfills orders placed directly on Amazon or fulfillment requests you submit for sales not on Amazon.
- Your listings rank by price with no shipping costs since they are eligible for free shipping.
- Amazon Prime members can upgrade shipping options for your eligible FBA listings.
Step 4: Amazon picks and packs your products
- Fulfillment by Amazon picks your products from inventory and packs them for delivery.
- Amazon locates your products using our advanced web-to-warehouse, high-speed picking and sorting system.
- Customers can combine your orders with other products fulfilled by Amazon.
Step 5: Amazon ships your products
- Amazon ships the products to your customers from a network of fulfillment centers.
- Amazon ships customer orders using the method they choose.
- We provide tracking information for customers.
- For orders on Amazon, customers can contact us for customer service.
FBA Fee Schedule Breakdown
Product Size Tiers: Standard-size vs oversize
A standard-sized item is one that, when fully packaged, weighs 20 lb. or less and does not exceed:
- 18″ on its longest side
- 14″ on its median side
- 8″ on its shortest side
Any item exceeding these dimensions is considered oversized
*Note: Most of your products fall under the small standard-size
Average Amazon FBA fees are approximately 35%-45% of our sales price. Fees change based on size and price.
Storage Fees
Fees vary by product-size tier and by month. Although standard-size products are often smaller than oversized products, they require more complex and costly shelving, drawers, and bins for storage. Fees are charged by the cubic foot, however, so overall storage fees for standard-size products may be less than that of oversized products, based on volume.
Conclusion
Amazon’s FBA is an incredible growth-oriented solution for brands and sellers.
With FBA in your arsenal, all you have to do is focus on selling and growing your business and Amazon will take care of the delivery and customer service. Let’s remember that Amazon is the largest e-commerce retailer in the world and built the largest fulfillment service with years of industry knowhow.
FBA will help your brand launch and maintain a high level of service at an affordable cost.
Current sellers using FBA share the biggest problems which are the lack of branding options and costs which do not scale. Meaning, if your business is thriving with FBA, you’ll eventually have to start looking for ways to optimize your operational costs and profit margin.
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