All you need to know about Amazon FBA – including the pros & cons
If you’re wondering ‘what is Amazon FBA’ or whether your business should make the most of the service, here’s everything you need to know.
What is Fulfilment by Amazon (FBA)?
Take the stress, and time, out of packaging and posting your Amazon online sales by signing up to Fulfilment by Amazon (FBA). This Amazon service is straightforward – you sell, Amazon packs and ships.
If you sign up to this automated service, it means that you let Amazon handle all of your shipping. So that’s picking, packaging and posting from one of Amazon’s warehouses. What’s more, Amazon will also process all of your returns and refunds. Therefore leaving you more time to focus on growing your business on Amazon Marketplace.
The FBA service can be used by existing and new sellers, and it’s a great way to help a business find its niche on Amazon Marketplace. In fact, the service provides a platform for anyone to sell anything via Amazon – provided it’s legal.
It’s an obvious thing to say, but if Amazon is handling your shipping you need to send your products to Amazon in bulk to make sure the warehouse has enough units to fulfil your orders. But as long as Amazon stays stocked with your products, the orders will be fulfilled for you.
The FBA pros
FBA is the ideal way to sell online, and it’s a popular choice for businesses worldwide on the Amazon platform. Of the two million businesses that are active on Amazon marketplace, nearly half of these are third party sellers. Two thirds of those businesses are using FBA.
So, if you decide to sign up to FBA, what does the service offer your online business?
- QUICK DELIVERY: An important factor for opting for FBA. Amazon gets your products to your customers faster than you can deliver them yourself. Especially if you opt for next day delivery with Amazon Prime Sales. Many customers choose a particular Amazon seller because of the speed of delivery. In fact, Amazon shoppers have come to expect rapid delivery.
- FREE SHIPPING: You can opt for free shipping, at no charge, for your customers. Again drawing buyers to your online selling platform.
- DISCOUNTED SHIPPING RATES: Amazon is a global fulfilment giant with competitive rates. This means you spend less on shipping costs through the FBA platform.
- CUSTOMER SERVICE: 24/7 Amazon customer service for yourself and your customers via one portal. Let Amazon handle any queries about delivery, returns and refunds too
- CONVENIENCE: All of your orders are processed and fulfilled by Amazon in our warehouses (pick, pack and ship) with shipping costs included. As a result, you don’t have to store your products, ever. Amazon can also make sure your goods are properly packaged with Amazon Prep Service
- HANDS-FREE SELLING: Arrange for your supplier to send your products directly to Amazon, so you never even have to handle the goods you’re selling. This can save time and expense, cutting unnecessary steps out of your logistics chain.
- MULTI-PLATFORM SALES: You can even process orders from other platforms (such as eBay and BigCommerce) to leverage the benefits of Amazon’s superior logistics. Find out more about Amazon Multi-Channel Fulfilment solutions (MCF).
- FLEXIBLE OPTION: Do you have a bespoke approach to your branded packaging? FBA has an option for you to package items yourself or pick just the packing options you need.
- CLEAR PAYMENTS: Amazon deducts any fees owed before making any payments to you. This mean there is no confusion about your sales income.
- FREE TO SIGN UP: It’s free to sign up to this service. However, FBA fees will be charged. Use this handy Amazon FBA calculator to help you see if it’s a profitable move for your online business
Considering all the pros, it’s clear that FBA offers convenience. Most importantly, it can improve your customer experience through rapid delivery time. In many cases, FBA can save your business cash compared to the time and money involved to operate your own order fulfilment.
The FBA cons
There aren’t too many downsides to FBA, but there are a couple of important considerations. It’s vital to look at the whole picture before you opt for this service.
OVERALL COSTS: On the face of it, Amazon FBA can eat quite heavily into your profits. It’s important you understand the true cost of delivering these services yourself, so you can genuinely compare which is better for your business.
LARGE ITEMS: If you are selling large bulky items, like furniture, then FBA may not be the best choice for you due to the costs.
LOW VALUE ITEMS: Lower-priced items may eat into your Return On Investment (ROI). This is because the cost to ship may be higher than your profit per unit. By ensuring you know your own margins, you’ll be able to make this assessment.
RELIANCE ON AMAZON: If you put all of your packaging and delivery fulfillment operations in the hands of Amazon, you may be nervous about an over-reliance on outsourcing (what if they suddenly increase prices or the quality of service falls). However, the overall benefits may still be worth the risk. It’s a business decision you need to make. Ultimately if may come down to whether you can deliver the services at a lower cost than Amazon can – and at the same speed.
Amazon Packaging Requirements for FBA
Whilst the Amazon rules on packaging and labels are straight-forward, there are clear guidelines you need to follow if you wish to take up FBA. You can find out more in our article Making Sense of Amazon Packaging Requirements for FBA.
How to join FBA
If you want to let Amazon do the shipping and logistics work for you, leaving you to keep track of your listings, sourcing new stock and maximising ad campaigns, then contact Optimizon to find out more. Our team of experts can advise how to set up your business for FBA.
If you have any other questions regarding what is Amazon FBA, if it is right for your business, or help setting up – we are here to help.
