An Amazon FBA company, also known as a company Fulfilled by Amazon, is an eCommerce company that sells products on Amazon.com. It stores and ships your products through Amazon warehouses. While there are many advantages to this system, there are also many complications that it causes. It is a common misconception that all online companies with third-party storage and shipping are FBA, however the key difference here is that this runs through Amazon’s powerful selling platform. Those that sell items are stored and shipped outside both themselves and Amazon are called Drop Shippers or White Label Shippers, and each have their own unique advantages and disadvantages.
Amazon FBA provides your business with:
• Effective storage
• Customer Service
• Prime Shipping
While the benefits to Amazon are clear (a myriad of fees, and the ability to provide your offerings through its storefront platform), diving deeper into these advantages, we learn an FBA standing also comes with Prime shipping which is an incredible purchase driver across much of the Amazon audience.
Whether you already use a third party shipper, or you send out each of your incredible products yourself, the amazon FBA process streamlines and speeds up your internal logistics needs. Leveraging Amazon’s incredible transportation rates, your per package costs are sure to drop dramatically. This discount is no drop in quality either, as an FBA member, your products will be automatically offered with Prime’s free two-day shipping. One of the major keys to Amazon’s overall success worldwide.
Next up is the wide range of management benefits that Amazon FBA offers. From warehouse safety, utilities, and management to handling all customer service and return concerns, this is a full service management offering that is sure to bring consistent quality to your offerings and their support. It is important to note that there are no minimums for storing and shipping through Amazon, so no matter how big or small your operation is, your company is eligible to use this system.
Well the first and clearest benefit to Amazon FBA for Amazon is ensuring your consistent business. When they hold your inventory, they can be assured that your fantastic company will continue to sell through them. Through many tiers of fees, this system is also an effective, additional revenue stream for the site as well. As Amazon had many of these support services in place already as well as the Prime Shipping system, it was easy for them to scale and the wide adoption of the FBA service is bringing in significant profit.
Moving forward, the FBA system also allows Amazon to track the most in-demand products while expanding their industry reach. Offering services through each stage of the purchase funnel, Amazon is strategically positioning itself to remain the top eCommerce seller throughout the years to come. And these offerings are a strong step in the right direction.
The most obvious benefit of FBA services for your buyers is its quick and efficient delivery practices. From detailed package tracking to quality control and discounted shipping, Amazon’s delivery process is extremely convenient for any buyer. But that’s not all they get out of this deal; many companies can only support certain customer service hours per day.
As eCommerce becomes far more widespread time zones become an issue on top of the normal workday overlap. This brings an added level of service and support that many small, individual sellers can’t afford to achieve and that many large companies do not want to deal with. Amazon has 24/7 customer service that is shared with their FBA sellers.
Moving out of the multitude of FBA specific benefits, an FBA seller is guaranteed to be selling on Amazon. As the number one, worldwide digital shopping platform, Amazon in and of itself is an incredible asset to any eCommerce company looking to succeed in today’s day and age. Many studies have shown that more than half of all online buyers start their purchase research on Amazon and about 87% of them end up making their final product acquisition portal.
All in all, the Amazon.com FBA system has a wide array of compelling advantages to all those involved in regular purchase practices. From the selling platform and seller to the customers themselves, it’s clear to see why so many people are utilizing this full-service eCommerce platform.
While there are many incredible advantages to this selling system, there are also plenty of disadvantages. Leveraging the FBA system is a very nuanced program that is easy to mess up, there are a myriad of fees attached to it that can really eat into your margins, many companies see a large uptick in return rates, tracking inventory becomes far more complicated, and the product comingling system can hurt your quality ratings.
Amazon is quite strict about the how a product must be prepared to be handled by their staff. From the proper formatting when entering an item for sale into the database to getting your items to the right shelf in the correct warehouse, there are many specific nuances of the FBA system that can trip up even the savviest business owner. This business strategy may be a great way to streamline shipping, but getting that inventory in stock, managed, listed, and properly tracked is a whole new beast when utilizing Amazon staff. There are also restrictions on what types of products you can sell through the FBA system, so it’s especially important to do your research before getting started.
Some items you cannot sell as an Amazon FBA provider include:
• Automotive and Powersports
• Composite Wood Products
• CPAP Cleaning and Disinfecting Devices
• Currency, Coins, Cash
• Dietary Supplements
• Drugs & drug paraphernalia
• Explosives, Weapons, and Related Items
• Export Controls
• Food & Beverage
• Gambling & Lottery
• Hazardous and Dangerous Items
• Laser products
• Medical devices and accessories
• Offensive and Controversial Materials
• Pesticides and Pesticide Devices
• Plant and Seed Products
• Recycling electronics
• Surveillance Equipment
• Tobacco & Tobacco-Related Products
• Upholstered Furniture, Bedding, & Other Quilted Products
When it comes to business, money is always the name of the game. How much something can make you, will cost you, and everything in between is consistently one of the major drivers behind every purchase and framework decision. The convenience of FBA does not come without cost.
There are storage fees, selling fees, stocking fees, referral fees, high volume listing fees, refund fees and plain old shipping costs; it may not seem like a lot but each and every fee can add up. All that being said, there are many different packages that can negate some of these fees depending on business traits such as your volume, turn-over rate, advertising needs, and placement requirements; just to name a few.
This is the regular seller plan, then we hit the fulfillment fees per unit, storage fees, stocking fees, referral fees, and the like. When shipping products of a standard weight and size that are neither fragile nor dangerous, the average FBA seller pays around $6,000 for every $40,000 brought in as revenue. Creating this calculation required many assumptions, for a more specified and accurate understanding of what your company could be paying, try out Amazon’s Cost Calculator.
Amazon has amazing customer service. In most cases this is a great thing but, when looking at eCommerce purchasing, it can lead to more returns. The biggest drivers here are the convenience of returns and speed of getting that refund back. Convenience and simplicity are the core of good business, but it can sometimes be a double-edged sword.
Tracking your inventory is another issue many FBA sellers run into as it can be challenging to stay informed when everything is being run by a third-party. This problem becomes more complicated when selling across multiple platforms too as there are very few integrated tracking software options that can tell you what is sitting in each warehouse. From what’s gathering dust to what’s being returned more than sold, out of sight can be detrimentally out of mind, especially when taking into account Amazon’s much higher long-term storage fees.
Amazon offers streamlined comingling systems to help lower the stocking and shipping complications of similar or exact match products. This means that companies selling the same product on Amazon are able to pool their inventories and their fees. However, this does mean that there’s no guarantee of quality or oversight. Your storefront may get the bad reviews for another seller’s unscrupulous practices. In fact, there have been many cases of the wrong sellers getting blamed and even banned from selling through Amazon due to a pooled company’s counterfeit or damaged products.
Countless businesses have found Amazon’s FBA system an invaluable tool for taking full advantage of their experienced staff and unparalleled shipping capabilities, but that’s not to say that they don’t have their issues. Any seller looking to get involved in the FBA model, and any buyer considering an FBA acquisition should be aware of the fact and issues that commonly arise as an FBA owner.
Whether you have a fully established brand or a new company trying out its very first sales, there are common core elements that make up every successful Amazon seller. From the proper marketing to effective use of FBA, and every single decision in between, setting your business up for success from the get-go will be the difference between success and bankruptcy. Here are some tips on what an effectively built Amazon FBA seller looks like.
Like any effective business, what you are providing to your customers will be the first key to your success. If you’re not yet sure what will sell well or quickly, one of the best ways to get an idea is to simply look at who is already doing well. What do Amazon’s top sellers and top rated sellers all have in common? Keep in mind, becoming a direct competitor with a behemoth right out of the gate is probably not the way to go, but you can surely see what markets, draws, and strategies are gaining traction.
Another significant consideration here is bundling. It’s pretty well known at this point that there’s something for everyone on the Amazon marketplace already, but how things are presented, sold, and combined can be an impactful differentiator that encourages consumers to pick your products. Not only can bundling products help you stand out, but they can also allow you to raise your margins on each sale by pricing your product in that sweet spot in between productively and reasonably.
It’s okay to start small, in fact it’s the best choice in the first place. Before your brand has an effective standing on the Amazon storefront, providing a particular product in limited batches is a great way to mitigate expenses while still gaining that ever necessary traction. In this stage, the most important thing you can focus on is understanding your audience and gaining both an awareness and trust within that community.
Establishing your company and offerings within your target market is a complicated and multi-faceted process. Starting off with a volume that you can pay the proper attention to is a solid foundation, but there’s more to it. Draw in consumers with effective pricing models and quality offerings. Back it up with reliable service, that’s where FBA comes in. At the start, a small company can run into countless barriers, especially in packaging, storing, and shipping costs.
Amazon.com stands in a world of its own, and to properly leverage it, you’ll have to speak the language. In this case, the ‘language’ of Amazon is the listings, they’re how everything is shown, communicated, and purchased. For the customer, your listing is where your company’s value begins and remember, first impressions are invaluable.
The first draw of any eCommerce product listing is the image. It’s important to leverage appealing and concise pictures. Many starting out make the mistake of taking cluttered pictures with multiple products, colors, and more. This confuses the buyer, remember that people looking at your listing will, most likely, be swiftly scrolling through hundreds of listings on a mobile device. Clarity and quality are key.
Leverage effective SEO and attention drawing content. Getting someone to open your listing is the first step. Utilizing strong pictures in combination with the right titles, search terms, and key words is just the beginning of the battle on a highly populated selling platform like Amazon.com
No matter how eCommerce businesses innovate, content remains king. On Amazon, the bullet points are the most significant parts of your listing content. If your bullet points do not simultaneously appeal to consumers while answering their biggest product questions, it’s likely that they’ll simply bounce to the next listing. It’s a cluttered market, making your offerings compelling, clear, and concise will be what sets your brand above the noise.
The nature of eCommerce can take the experience and connection out of purchase actions, however, that doesn’t mean that extraordinary care and response can’t be your differentiating factors. If your company run into issues and still get that 5 star review, customers will take notice. It’s impossible to get everything right every single time, there are just too many factors at play. But there are great ways to recover and bring your company to a whole new level in the eyes of your target audience.
From answering the simplest of questions, even if you’ve put the answer everywhere already, all the way to gifts for those who had to wait or refunds for things that were not your fault, the way your company treats its customers is going to directly affect reviews, word of mouth growth, and brand standing. It is also important to note that responding gracefully and helpfully to bad reviews can lead to improved ratings and impressed consumers.
Every consumer connection point is an opportunity to impress. Listings, FAQs, product descriptions, these are the obvious points of marketing opportunities. But there are plenty more, often overlooked, strategies for standing out both to your consumers and to Amazon’s listing algorithms.
There’s Amazon’s marketing services, keyword use, software that adjusts pricing and repricing to keep your offerings competitive at all times. Leveraging social media to connect with consumers is an effective use of the digital community, however simply posting your listings across social media is not going to win you any favors. Leverage brand personality and cross promotion to drive consumer following, increased review rates, and more invaluable tools to boost your brand awareness as well as the way Amazon’s algorithm views your offerings.
Overall, there are many strengths that come with the Amazon.com seller platform, but successful Amazon businesses so more than exist on the popular digital storefront, they leverage its many impactful features strategically to drive success and consumer awareness. The basic building blocks of a successful and profitable Amazon FBA seller are product offerings, brand building, effective listings, effective communications, and both consistent and constant promoting across platforms and marketing opportunities.
When a company is looking to become an FBA seller, they must first become an Amazon Seller. To do this, you will need an official email address or Amazon customer account, a chargeable credit card, a government issued ID, tax information, a phone number and a direct deposit enabled bank account. From there, you will begin specifying your initial SKU lines meaning the products you will be selling. After that, your products must be gathered, logged, labelled and sent to Amazon following strict guidelines.
Once Amazon receives your inventory, your listings go live and any consumer, anywhere can buy your product. That is the end of what you, as the seller, will need to worry about initially. One of the key advantages of this system is an automatic registration for Amazon Prime shipping, this is a free 2-day delivery service that drives incredible customer satisfaction.
Tracking your FBA inventory can become challenging as it is no longer being held by you or your staff. With a storage limit of 10 cubic feet and a maximum Inventory Performance Index, or IPI, of 500, keeping an eye on your inventory is an absolutely necessary part of keeping your business alive online. This can be manages through Amazon’s Seller Central or through many SaaS platforms specializing in FBA Inventory Tracking.
All in all, Amazon’s FBA registration process is just as streamlined as its wildly popular selling storefront. However, there are plenty of particular guidelines that require extra work as well as an intricate attention to detail that do take some getting used to. There are many benefits to the system overall and getting registered is a pretty basic and simple process, but an FBA model isn’t for everyone. It’s important to consider your desired offerings, product volume, service areas, and inventory turnover periods when deciding if this is the right path for you.
There are limitless opportunities for business success within the digital world. Amazon.com is the largest and fastest growing eCommerce platform today. With a multitude of strategic offerings, that fact is not going to change any time soon. Leveraging their incredible eCommerce foothold, incalculable companies have found success within their fields and even branched into new and exciting industries.
All that being said, there are specific pros, cons, and strategies that will make all the difference for any savvy business owner as they walk bravely into their new endeavors. Streamlining business frameworks as well as the costs that come with daily operations, Amazon offers incredible and consolidated services. However, those services come at a cost, have very particular restrictions, and open many sellers up to the dangers of other business’ problems through their comingling practices.
There are certain practices that mitigate risk, drive consistent success, and help optimize each and every one of your company’s online offerings. These center on what a company is selling, how they’re presenting it, and their all around integrity both in services and in communications. But nothing comes without risk or cost.
All in all, Amazon is an unparalleled opportunity for many individual sellers that would classically not stand a chance at competing with large suppliers. Their FBA system allows smaller sellers access to the incredible shipping deals and care that is normally reserved for companies with monumental volume. However, this comes at a price and demands an intricate inventory and listing system. It’s not a strategy that will work for everyone, but it is an amazing investment for those who will put in the time, energy, and dedication that success on this globally renowned platform demands.