Fulfillment By Amazon (FBA): Is It Right For You?
Once you become an Amazon seller, you’ll be presented with two options: you can sell your products on Amazon, or you can sell them through Amazon. It’s a simple distinction that can mean a world of difference for your business. But before you decide whether you want your Amazon orders to be fulfilled by your business or by Amazon, there are several different factors for you to consider. Let’s break down the pros and cons of choosing Fulfillment by Amazon.
What Is Fulfillment By Amazon?
Fulfillment by Amazon, or FBA, means that Amazon will handle all of your inventory management and shipping in exchange for service and transaction fees. First, you send your inventory to an Amazon warehouse where it is stored until you make a sale. Then, Amazon employees pick, label and ship your products to your customers. This means you get to bring in the profits while Amazon takes care of the heavy lifting.
Advantages Of Fulfillment By Amazon
There are a number of advantages to using FBA on top of convenience. For one, you save money and space by not having to store and ship inventory yourself. You also save your customers money, since Amazon’s shipping fees are generally cheaper than what you would be able to offer through the USPS or other shipping services. Additionally, FBA items are often eligible for free shipping and, in many cases, Amazon Prime Free Two-Day shipping.
Another advantage of Fulfillment by Amazon is that you don’t even need to have an Amazon seller account to use it. Thanks to Multi-Channel Fulfillment, you can store some or all of your inventory in an FBA warehouse and allow Amazon to handle management and shipping, even if you already have an established website. FBA is a great way to give your customers fast, flexible and consistent delivery times that will keep them coming back for more.
Speaking of customer satisfaction, simply having the FBA logo on your orders can help secure sales. For one, Amazon often gives preference to FBA products in their search results, putting them higher on the list and giving you greater visibility. In addition, seeing the FBA logo gives your listings added consumer trust since shipping times are faster and guaranteed. On top of handling shipping, Amazon also takes care of any returns on FBA products, so the return process will be much easier for your customers.
Disadvantages Of Fulfillment By Amazon
FBA has a number of great benefits for both sellers and customers, but they don’t come without costs. There are a number of Fulfillment by Amazon fees your business will have to cover. They’re listed below from the beginning of the process to the end.
- Inbound Shipping Fees: Fees for shipping your inventory to an Amazon Fulfillment Center.
- FBA Fees: Charged for order handling and picking and packing, which are fixed fees.These fees also cover weight handling, which is a variable fee based on the size and weight of your items.
- Storage Fees: Monthly inventory storage fees and long-term storage fees, which are charged twice a year for items that have been stored for six months or more. Monthly storage fees increase in Q4 (Nov-Dec) due to the holidays.
- Referral Fees: Typically 15% of the total cost of your order. This fee is charged to Amazon sellers whether they are an FBA user or not for using Amazon as a platform.
- Return Fees: Fees for processing returned items, which may include repackaging.
Fulfillment by Amazon fees change frequently, which can make it difficult to determine how much selling with FBA will cost your business. You can use Amazon’s FBA Revenue Calculator to determine the fulfillment costs that you can expect to pay rather than doing mathematical gymnastics.
Aside from fees, there are other drawbacks to FBA, one of the biggest being commingling. Commingling occurs when you and another FBA seller sell the same product and, even though you made the sale, their product is shipped instead. This usually happens because the customer lives closer to the fulfillment center where the other seller stores their product. While you still make the profit from the sale, you can no longer guarantee the quality of the product that arrives on your customer’s doorstep. You could receive backlash from the customer if the product is faulty or counterfeit, even if it wasn’t shipped from your inventory.
Another challenge is determining how much inventory to send Amazon. It’s a delicate balance of sending enough to avoid going out of stock while also not accruing long-term storage fees if inventory doesn’t move quick enough.
In addition to storage fees, FBA users also have to be wary of sales tax compliance issues, since it can be difficult to track which warehouse your inventory is stored in. If you don’t know where your items are, you don’t know where you should register for compliance, which could become a liability issue later on.
With Or Without FBA, You Can Run A Successful Amazon Store With Help From AMZAlert
Now that we’ve answered the questions of “what does Fulfillment by Amazon mean” and “how does Fulfillment by Amazon work,” we want to address the most important one of all: “Can I run a successful Amazon store?” With a little extra help from AMZAlert, you absolutely can — and you can do it with less stress, thanks to our Amazon review monitoring software.
Our review monitoring software helps you track and automatically reply to negative reviews left on your product pages, which can help you troubleshoot issues with Fulfillment by Amazon and beyond. The Amazon review checker even informs you of star rating changes, which fluctuate as you receive new reviews or have them removed by Amazon over time. It’s a simple, time-saving way to connect with your customers and adapt your business to be the best it can be.
Want to learn more about Amazon email notifications and text alerts? Check out which features and packages could make the most difference for your business today.