Last updated on June 6th, 2023
Written by Mohamed Aden
Multiple fees, not having 100% control of your inventory, remote warehouses—it’s so easy to get lost in the web of Amazon FBA. But on the world’s largest e-commerce platform, it's also natural to wonder if FBA can help your online business take off. Is Amazon FBA worth it? Let’s weigh your options in this detailed guide.
Amazon FBA, or Fulfillment by Amazon, is a service that allows you to outsource order fulfillment to Amazon. This includes storage, packing, and shipping on behalf of sellers. On top of these services, Amazon also takes charge of customer service, such as returns, refunds, reimbursements, and replacements.
The following is an overview of how Amazon FBA works:
It's essential to be aware of the costs associated with Amazon FBA. These include various fees, such as inventory storage, fulfillment fees, and removal fees, if you decide to have your products returned to you. Carefully analyze these fees to ensure that using Amazon FBA aligns with your business strategy and profitability goals.
If you use an Individual Plan, you will be charged $0.99 for each unit sold. On the other hand, the Professional Plan charges a monthly subscription fee of $39.99 regardless of the number of units sold.
Amazon charges FBA fees for its services, including storing, picking, packing, and shipping your products. These fees typically range from 30-40% of your product's price, and they depend on the size and weight of your product.
Amazon also charges monthly inventory and long-term storage fees. These are based on all items stored in the fulfillment center, measured in volume (cubic feet) and calendar month.
There are also fees attributed to additional services, such as returns processing, removal and disposal order, and unplanned services.
When planning your e-commerce business on Amazon, it's essential to understand the differences between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Each has its benefits and drawbacks, impacting your order fulfillment process and overall strategy.
FBM, or Fulfillment by Merchant, is recommended for small-scale businesses that sell below 40 products monthly. This doesn’t include in-house services and benefits. FBM sellers will need to handle everything themselves at every step of the business—starting from product conceptualization, logistics and shipping costs, to customer care and management. This may sound like a lot of hard work, but it also has advantages.
FBM works best for Amazon sellers who want to sell large-sized products and offer a more hands-on approach to handling customer transactions and concerns. Timed and strategized correctly, an FBM business can mean more profit at less expense.
Amazon fulfillment, on the other hand, is perfect for Amazon sellers with small products that sell fast and efficiently. Despite the differences, a seller can register for both services for the different products they offer.
With Amazon handling the logistics and management for your business, you can now focus on developing your brand and products. Here are some of the responsibilities that remain when a seller goes FBA:
When starting an Amazon FBA business, you need to conduct thorough product research to find a profitable niche. This involves analyzing market trends, demand, competition, and potential profit. You can use various analytics tools, such as Helium 10 and Jungle Scout, for this step.
With millions of available products on Amazon, you have to make sure that your products and brand are recognizable among the competition. Focus on your target audience's preferences to ensure your product offers a unique selling point.
As a business owner, it is also your responsibility to ensure the smooth operation of your business. This includes making sure that products are well-stocked in Amazon fulfillment centers according to customer demand.
If your product sells fast, make sure to regularly keep tabs on your inventory. A healthy inventory is one of the deciding factors in Amazon's ranking system, and a poor inventory can negatively affect your listing.
To streamline your inventory storage, consider utilizing FBA inventory management tools provided by Amazon Seller Central.
Before sending your products to the Amazon fulfillment center, you must put up a listing on the website. In doing so, you must ensure that your listing is SEO-friendly. Your product listing must include the following:
Ensure your listing adheres to Amazon's guidelines and provides a clear understanding of your product to potential customers. Invest in professional product photography and copywriting to increase your chances of converting visitors into buyers.
After your product listing goes live and you’ve shipped enough stock to a fulfillment center, it's time to implement marketing strategies that drive traffic, increase sales, and build a loyal customer base. Consider using Amazon Advertising to help improve product visibility for potential customers.
Besides on-platform advertising, build your ecommerce brand outside of Amazon through social media, content marketing, and email campaigns. Offering exclusive discounts during peak shopping periods like Black Friday or for Prime membership users can incentivize purchases and increase customer loyalty.
Remember to continuously analyze your marketing efforts' performance and make data-driven strategies for the best results.
To start selling on Amazon, you must first have an Amazon seller account. You can use this account to register for FBA through Amazon Seller Central.
Once your account is set up, research potential products to sell. Look for items that have a good demand and consider the profit margins. Bear in mind that not all products are eligible for FBA. Find a reliable supplier who can provide quality items at competitive prices. Establish a strong relationship with your supplier for a smooth business process.
Prepare your inventory for shipment by carefully packing and labeling each product according to Amazon's requirements. Failure to meet these guidelines may result in additional fees or delays in processing your shipment.
Finally, send your products to one of Amazon's fulfillment centers.
Starting an Amazon FBA business requires dedication, research, and wise investments. With proper planning and execution, you can have a successful online business in the competitive ecommerce landscape.
At this point, you may already be assessing whether or not selling on Amazon through the FBA program is a good choice. We’ll help you weigh your options so you can make the decision. Here are some of the advantages you can leverage with FBA:
By signing up for the FBA, you can focus on growing your business while remaining competitive in the Amazon marketplace. You get to sleep comfortably, knowing that Amazon professionals are taking care of your customers' needs and concerns 24/7. You also save time by not stressing out about customer returns and going to and from courier offices to ship your items.
Did you know that Amazon already has more than 200 million Prime subscribers? More and more buyers subscribe to Prime because of its free and fast shipping benefits, among many other privileges. In addition, having the 'Fulfillment by Amazon' tagged to your brand automatically earns consumers' trust.
The Buy Box can be found on the lower right side of a product page and is responsible for 80%-90% of Amazon sales. This is why brands fight tooth and nail to have it. Registering for FBA won't guarantee you'll get a Buy Box, but it will give you better chances than those who are not registered.
Amazon is the world’s largest online retailer, and it makes sense to leverage this platform to scale your business. Enrolling your products in the FBA program pushes your chances for success further through exclusive FBA perks and increased visibility.
Though selling on Amazon through FBA has its perks, it isn't for everyone. For starters, FBA would benefit Amazon sellers selling at least 40 items a month. For accounts with fewer online sales, FBA might consume the profit as payment for the service.
Here are some more disadvantages of Amazon FBA:
Once you send your products to Amazon, you let the company take over 99% of the time. They will be handling most of your customer concerns 24/7, giving you less control over resolving customer complaints.
FBA charges for virtually every move you make on the platform. Whether removing or disposing of stock from the fulfillment center or storing them longer than expected, unexpected service fees can add up and eat into your profits.
As an online business owner, you must be wise in your pricing decisions to ensure your products are affordable and you do not pay avoidable fees. Get a full financial picture so your online store succeeds with healthy cash flow. The current sellers' profit can still be stretched with proper planning.
As an ecommerce business owner, you might be considering Amazon FBA for your fulfillment needs. When evaluating the potential benefits of using this service, it is crucial to look at various aspects, including profit margins and customer service.
Selling Products with Amazon FBA can help boost businesses. However, for a small-scale Amazon FBA seller, you need to ensure that you get the full privileges that the business model offers.
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