A quick guide to Amazon FBA & when you should consider it for your business
Amazon FBA (Fulfillment by Amazon) is an order fulfilment system created and operated by Amazon for sellers on their marketplace. Sellers use Amazon FBA by sending their products to Amazon’s fulfilment centres.
Using FBA, sellers utilize Amazon's vast logistics network and expertise. It means offering customers benefits like Amazon’s discounted delivery options, parcel tracking and Amazon customer support.
Amazon offer competitive rates to collect large amounts of inventory from sellers. They use sophisticated technology to receive product orders, pack, deliver and track the products. The system incorporates both sales made on the Amazon's marketplace and sales made on other sites.
FBA sellers benefit by outsourcing both their warehousing and shipping processes. It gives sellers the ability to focus on other areas of their business. It benefits both parties as FBA products are more likely to win the Buy Box and Amazon makes its cut from the fees.
Amazon FBA Fees
Amazon charges a fee for handling, packing and distribution services, which is charged by weight. The cost of Amazon FBA can have a major financial impact for a business. It's vital to know all the costs before you consider using FBA. Amazon provide an FBA revenue calculator to help seller’s control their costs.
There's extensive information on Amazon's site outlining fees.
The other fee is for storing products in Amazon warehouses, the cost of which is calculated per cubic foot of space used. Sellers must be vigilant to ensure their inventory is turning over quickly. This can be done using Amazon’s inventory health report.
The cost of FBA storage is relatively low for fast moving inventory. Over time, fees can escalate and become expensive for non-movers.
A Selling Point for Customers
Amazon works hard to create a brand renowned for customer service and ease of use. The FBA tag is a big selling point for customers because Amazon provides customer service for all FBA products.
This can help stop negative feedback or shipping errors being attributed to a seller. It's a major driver for many buyers who trust Amazon customer support and can contact them easily if they need to.
It all means that some businesses can get the edge by being FBA, when their competitors are not. They have the luxury of being able to price above non-FBA sellers and still appeal to many buyers.
Using Amazon FBA can:
- Boost sales
- Improve customer confidence
- Remove the costs and hassle of shipping
- Reduce storage costs
Using FBA can be profitable for certain SKUs, but it's also a highly competitive market and can be expensive. Amazon FBA doesn't make sense for some sellers (and certain products) because it means giving control of vital functions, like inventory management, logistics and customer support to Amazon.
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