Amazon is an online shopper’s paradise. With the number of products available on one website, you can find everything you can possibly need and want. Regardless if you’re planning to buy toys, sandals, clothing, and jewelry, Amazon has it all. It also provides unique services which allowed them to stand out from the competition.
Almost everyone in the world knows Amazon this way – as one of the largest online selling platforms. But not everyone knows that it actually offers another service called Fulfillment By Amazon or commonly called as FBA. You can check this FBA course if you are interested in learning about it with details.
This has been used by many businesses operating in different industries and if you want to leverage yours, FBA might be the perfect solution for you, and if you find that somewhere down the line an FBA business isn’t for you, you can always look to sell your Amazon business to an aggregator.
Before you read on, you may want to check out the comprehensive article “How To Start An Amazon Business” which takes you through the different Amazon sales models and their associated fees, that way you can figure out whether Amazon is a good fit for your business.
FBA 101: Defined
In a nutshell, Fulfillment by Amazon is a simple process which allows businesses like yours to make use of Amazon’s services as if it was your own. It begins when your business ships your products to Amazon’s fulfillment centers. You can think of these centers as your business’ warehouses.
Once a customer buys from you, Amazon packs and ships the product. They will also handle customer complaints and inquiries on behalf of your business. Since Amazon works behind the scenes, you can have more time to manage other things in the business.
While FBA might seem very appealing to every business, it’s important that you consider its pros and cons first. This information will help you set your expectations and figure out if this service will be helpful for your business in the long run.
FBA 101: Pros Vs. Cons
The simplicity of FBA’s processes doesn’t mean that its benefits to your business are also at a minimal. On the contrary, the simplicity of the FBA makes it easy for your business to increase productivity. To drive the point home, take note of the pros FBA can bring to your business:
1. No hassle for shipping and returns
Packing and sending a single product demands a lot of hard work. You have to prepare all the necessary documents and slips, prepare the box, pack the product and have the shipping guys pick it up. Sure, this might be easier when a single customer ordered one product in a day but what if you have 40 or 60 customers every day? Amazon’s FBA takes this task away from you. You basically have to ship your products to them and watch your profit increase. They will handle everything for you. And given the experience they have in the business, you can assure that your customers are in good hands.
2. Cheap shipping
Money is an important resource in any business. Fortunately, Amazon’s FBA doesn’t take too much of it – you’ll only pay for very cheap shipping rates. If you’re selling your products through Amazon, you’ll only have to pay around $1.04 per product as your shipping cost. For the handling costs, it’s $0.50 – $0.60 per pound.
3. Automatic Prime
Amazon Prime is one of Amazon’s service which has enticed more and more people to do business with them. And if you pay for Amazon’s FBA, your business can give the same service to your own customers. Everything you sell will qualify for Amazon Prime shipping which means that all Prime members can enjoy free two-day shipping for your products. And you don’t have to worry about additional fees because you’ll be charged with the same rate. This means that even if your customer ordered via Prime or regular shipping, you’d be paying the same amount. This is an excellent way of creating value for your money.
4. Multi-channel fulfillment
Using Amazon’s FBA doesn’t limit your business to only sell products through Amazon. You can use any channel that you want such as blogs, social media and even on your own websites. If you’re looking for other marketing channels to help you out, check Entrepreneur Journal Review. And regardless of the channel you choose, Amazon will still work for your business. You can focus on your marketing and let Amazon handle everything else.
5. Buy Box priority
Your business will always have competitors. If you don’t keep up with the times, you’ll end up losing your customers and business. Amazon’s FBA can be your leverage. Every product you sell online has an emblem which states “Fulfilled by Amazon.” Since Amazon has been a trustworthy brand through the years, yours can create the same impression too. This can become the reason why you’ll be able to haul in more customers.
But just like anything else in this world, nothing could become the be-all and end-all to all your business’s dilemma. There might be some resources available to help you out but these also come with a few setbacks – and Amazon’s FBA is an example. Unfortunately, this service also has several cons, and some of these are:
1. Losing track or having a stale inventory
Not storing your products on your own warehouse has its own set of cons. The most common is being unable to keep track of your products. Sure, you might be able to count everything if you only have a hundred products stored in Amazon’s fulfillment centers but if it reaches to a thousand, it’s never the same thing. Additionally, you also have to pay attention to products which have become stale in the inventory. Or else, you’ll end up paying for facilities which you’re not using.
2. Pooled inventory
With the number of benefits a business can get through Amazon’s FBA, it’s no surprise that many businesses are using the service. This can be good for Amazon’s business but not for you. Since your products and those from other sellers are stored in one location, a lot of things can happen namely: the product you shipped to the warehouse might not be the same product your customer receives, or your customer might receive the “same product” but is either a counterfeit or defective. It’s uncommon for these to happen but there’s always a possibility.
3. Difficulty in shipping products to Amazon
Before your business can use Amazon’s fulfillment centers, you have to label all of your products individually and pack them into many shipments before sending them off. If you have a lot of products to sell, shipping to FBA might mean at least different shipments which can add to your costs.
4. Lack of branding opportunities
Working with Amazon can help yu gain customers. It has been doing business for years, so customers are easily convinced. But if you look at it from another angle, creating this kind of mindset in your customers is actually bad for your business. Working with a well-established company can make it difficult for you to create your brand. Instead of letting customers know your business exists, they would think that they’re doing business with Amazon. Having your products packed in a box full of Amazon’s stickers and brand doesn’t help either. If you’re very keen on your business brand, Amazon’s FBA might not be the best solution for you.
Decisions Require Time
If you’re a business owner, you would always want your business to thrive and succeed in the long run. After all, your business might be your greatest investment up to date. If you want to achieve that goal, don’t be afraid to consider options which are out of the box. If you think FBA will work well with your business, go ahead and consider different factors along the way. Think about its pros and cons, and how your business can be affected once you use this service. This might take time and effort on your part but keep in mind that slow and steady is always the best way to go in business.