Amazon FBA (Fulfillment By Amazon) has made many sellers take a leap of faith, get associated. With facilities like storage, packaging, labeling, and shipping, the FBA sellers can grab a potential to boost their business.
While Amazon FBA gives the small businesses a supreme power to reach out to their customers, there are always certain protocols that you need to follow being an FBA seller.
So, before you sign up for the Amazon FBA services, it’s better to understand and familiarize yourself with the benefits as well as the disadvantages of the same. So let’s dive in deeper to explore this retail powerhouse, throttled by Amazon.
(CAPTION: Orderhive – the inventory management software – dealing with the inventory management of the seller-side stock as well as the Amazon Fulfillment Center stock.)
Benefits of being an Amazon FBA Seller
#1 Hassle-free Shipping and Return Management
There are some seriously hectic steps involved if you plan to tackle the entire shipping and return process on your own, at your own workplace…
Print a Packaging Slip
- Print a Shipping Label
- Fold up a box
- Put the product in the box
- Stick the packaging and shipping labels on the box
- Make it shipping ready
Now, to put it all together, you either need to hire an employee, or dedicate your crucial time. The above-mentioned steps are to be repeated for each and every order that you receive. Let’s assume that you just got 30 orders, who will cater this and how? Definitely not you, but at least 2 – 3 dedicated employees.
Well, if you are an Amazon FBA seller, you are totally relieved of these tasks. All you need to do is, ship a stock of your products to Amazon’s Fulfillment Center and your orders are all taken care of by Amazon.
You literally just need to sit back at your seat and see the sales numbers play around.
That was all about Amazon’s shipping model. Let me now introduce you to Amazon’s ridiculously amazing (trust me, I mistakenly wrote ‘amazon’ instead of ‘amazing’) return management system.
You just need to communicate with your customer and…
- ready the RMA (Return Merchandise Authorization)
- send a refund or replacement.
Apart from this, you need to do nothing. Every procedure apart from the above-mentioned points will be catered by Amazon, the logistics too!
#2 The ‘Amazon PRIME’ Tag
When you opt to become an FBA seller, your listings on Amazon will automatically get a ‘prime’ tag. This tag makes a customer to trust your product; signifies quality, efficiency. This widens your selling margins and gives a boost to your business.
#3 Buy Box – the Homerun
In addition to the ‘Prime’ tag, you also get an opportunity to score the buy box. Buy Box is nothing but a competition and every seller would love to win it. But to grab a buy box, you need to have certain credibilities…
If you are an FBA seller, there are high chances that you receive a buy box. But if you are a small scaled seller, and are yet not able to afford the FBA pricing, these are the steps you can try to achieve a buy box.
- Maintain good seller ratings. Respond to the customers if they have any queries in the feedback section.
- Try to never ship a wrong product. Also, the pricing should be cheaper comparatively.
- Carefully title the products and their descriptions.
- Make sure that you provide a rock solid customer support and keep them satisfied.
#4 Achieve a ‘Global Reach’
Being a global eCommerce giant, Amazon has given businesses associated with it a golden chance to expand their reach into different markets and geographies.
It has gifted the businesses the ability to serve on an international scale, and make their products reach on the other part of the world. Being a US based FBA seller, you can grab an access to all the European countries as well as other geographies like India, Australia, Japan, etc.
#5 Shipping turns even ‘Cheaper’
When you are an Amazon FBA Seller, shipping charges are way too nominal for you. Amazon fulfillment is also catered if your product is listed on any other channel. Let’s see how the numbers are calculated to throw a spotlight on your shipping savings…
If your product is ordered from Amazon itself:
- $1.04 per unit is charged for packaging
- $0.50 – $0.60 is charged per pound for weight handling
- The shipping is free because the order is received from Amazon
Therefore, for items weighing approximately 3 pounds, you pay ~$2.50 for shipping.
If your product was ordered from any other channel but Amazon is fulfilling your shipments:
- $1.90 are the normal shipping charges as the order is received from another channel
- $0.60 per unit for the packaging
- $0.45 per pound is charged for weight handling
Therefore, for items weighing approximately 3 pounds, you pay ~$3.80 for shipping.
Now, if calculated, the above-mentioned costs are way less than what you would pay while doing this all in-house.
#6 Multi-channel Fulfillment (MCF) by Amazon
The biggest benefit of being an Amazon FBA Seller is that you are not at all bound to simply sell on Amazon. You are free to sell your products on any channel that you wish, and Amazon will still provide you the fulfillment services. This particular feature is called Multi-channel Fulfillment by Amazon.
How does Amazon benefit after letting you sell on other marketplaces as well?
It’s always a win-win situation for Amazon with FBA. This global eCommerce giant makes a crazy profit after providing all fulfillment services.
- The very first benefit that Amazon has is that an FBA seller pays a certain amount for the services that Amazon provides.
- Secondly, every day Amazon improvises and adds a new product to their own catalog.
- Most importantly, Amazon makes an approximate profit of 15% after fulfilling these services.
But overall, this eases off too much pressure off the seller’s head. So, ultimately a win-win situation we have here, isn’t it!
#7 Seller Co-Mingling Services
There are high probabilities that you might receive an order for something that is out of bounds for your dedicated fulfillment center to deliver. In such cases, being an FBA seller, you can opt for co-mingling services from Amazon, and the above-mentioned criteria will be taken care of automatically.
Now, how does seller co-mingling work?
1.Become an FBA authorized seller
2.Opt for the seller co-mingling service.
3.If an order is received from a geography where your allocated fulfillment center cannot deliver, Amazon will deliver that particular product from a different seller’s stock and later update it accordingly.
Where you can think of resting assured of this facility, there’s another side of it as well.
You might never know what quality product is delivered to your customer. You would have stocked the best, but what about the other seller? It’s not necessary that even they stocked the best.
There are high chances of receiving a negative review this way, although Amazon can help you take care of that later, your seller reputation is certainly at stake.
Also, if you are selling a unique product on Amazon, seller co-mingling is of no use to you.
Disadvantages of being an Amazon FBA Seller
#1 Very Limited or Lack of Control
As you decide to get associated and sell on a marketplace, certainly if someone else owns it, they have their own protocols to be followed. You are required to abide by their rules, anyhow.
Amazon focuses on the products that are sold through it, and not on the sellers. Sellers have their own business to do, so gradually they have to follow the set of rules put up by Amazon.
All this means that you have very limited means to showcase your own brand presence. All you can do is maintain the quality of your products, and try to grab as many positive feedbacks possible. With all this, you will get high chances to win a buy box and thus plenty of business opportunities.
And then there are high chances to receive such emails if you breach the online selling policy of Amazon, even though you are an Amazon FBA seller.
#2 ‘Suggested Products’ might affect your ‘Selling Ratio’.
It’s obvious that you are not the only seller selling a particular product on this marketplace giant. There are other sellers as well who are selling something very much related to your product, with a better quality than yours, at a cheaper price than yours (not always).
This is where your competition begins!
How can the scenarios mentioned in the image above effect your selling?
- Frequently bought together: There are chances that you listed just one product instead of a bundling it with some other related product. In such cases, some other seller, who has made a bundle and is selling two or three products together at a reasonable price, can grab the deal that you were to have. Again, as said, Amazon doesn’t focus on sellers, but on products.
- Customers also bought… The product listings can impact a customer mindset a lot. There can be instances where the customer came in for window shopping, liked your product and is about to add it to the cart. At the same moment, displayed is a list of suggested products. One good, attractive listing and your deal is snatched.
#3 ‘Pricing’ – a matter to think on.
Sometimes, for most small scaled sellers, the costs and pricing involved in the entire FBA process might outweigh the benefits.
- High Costs: Amazon does charge the sellers who get associated in FBA for the services like order handling, packaging, and storing. Excluding these costs, the cost of shipping the products to the Amazon’s warehouse is another part. Also, the storage and shipping costs depend on the size of the product – larger the size, larger the cost.
- For slow-moving products: Again, for the slow-moving products, the costs can add up rapidly. It doesn’t really make sense to store the products that cannot be sold quickly.
#4 Pooled Inventory – No Fixed Allocated Stocking Spot
There is always a constant inward of stock from different sellers in a fulfillment center, Amazon can never dedicate a portion of its warehouse to any seller. In this case, the products in the racks are pooled with the related products from other sellers as well.
Because of this, sometimes, the product delivered to the customer might turn out to be the product from a different seller. And if that product turns out to be faulty or off-quality, you can just not do anything but accept a negative review. Amazon certainly helps you out in tackling with the negative reviews, but still, this would be a big disadvantage to a seller.
Sellers have experienced such mishaps, which eventually led to a suspension of their account. Happens quite rarely, but definitely a disaster.
#5 Amazon Owns the Customer Relationship
The marketplace giant, Amazon, might certainly be a great way for the small and medium business owners to sell on a major scale, but the customers eventually belong to Amazon.
You can never remarket to Amazon or actively sell to those customers in the future again (rare chances), just because Amazon holds the right to own the customer relationship.
But, in the end, must say that being an Amazon FBA Seller has its own perks. Also talking about the disadvantages that it has, there is definitely something that you need to exert to pull out something worthy of being called ‘success’.