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Is Amazon FBA worth it? Pros and cons

Changes in the Facebook & General Consumer Landscape

If you’re trying to turn your business into e-commerce, you may be interested in Amazon’s FBA service.

The benefits of e-commerce are significant: NBC News found that by 2020, many companies were forced to switch to online marketplaces due to the pandemic. In this case, these companies were able to maintain their sales and even break records

Still, the logistical stress of e-commerce can deter many business owners.

This is where Amazon’s fulfillment of Amazon (FBA) comes in. By managing the entire fulfillment process, FBA is an Amazon marketing strategy that allows companies to focus less on logistics and more on what they do best: making their products. Read on for an overview of the program, the benefits of Amazon FBA and its alternatives.

What is Amazon FBA?

The fulfillment process begins when a customer clicks “Check Out” and continues until they receive their order or send a return or exchange. The basic steps for the fulfillment process are as follows:

Warehouse / warehouse storage Packing orders Shipping orders Processes returns or exchanges

Amazon FBA is the Fulfillment by Amazon program. Companies send their products to an Amazon Filling Center. Amazon takes care of:

Amazon FBA even covers customer service, returns and exchanges for these Amazon orders. How much does this comprehensive service cost? Businesses can access this program for $ 39.99 per month. Month, in addition to sales fees

Benefits of Amazon FBA

The benefits of Amazon FBA are immediately obvious, especially if your fulfillment infrastructure is small or non-existent. We’ve also outlined a few additional benefits that you may not be aware of:

Access Amazon Prime – Companies that use Amazon FBA are eligible for Amazon Prime shipping, which means that first-time customers are more likely to click “order” on your Amazon product. Use “The Buy Box” – In a product list, Amazon includes other sellers within what they call “The Buy Box”. An Amazon FBA seller is more likely to win this real estate than sellers who make their own fulfillment. Support Multiple Channel Fulfillment – The Amazon FBA also supports the fulfillment of orders not sold through the Amazon marketplace, so you can support your company’s multiple sales channels.4 Easy to use – Amazon makes their Marketplace extremely easy to use, regardless of your technological skill. FilterBuy CEO David Heacock describes the FBA program as significantly easier than building your own website and fulfillment infrastructure. Join the winning team- Amazon is by far a prominent force in e-commerce. By using Amazon FBA you can take advantage of Amazon instead of trying and failing to compete.5 Lower shipping costs – No one understands scales like Amazon. With FBA, you can take advantage of Amazon’s huge size and ability to reduce shipping rates in a way only a large company can. Speed ​​up shipping – Following the same principle, Amazon can offer your business much faster shipping at no significant extra cost. Make it simple – Amazon FBA streamlines the entire logistics process of fulfillment, making the fee a small price to pay for companies that are unable to build their own logistics infrastructure. Include customer service – FBA takes care of customer service and communication and even returns and exchanges, reducing your own work requirements. Access storage – With FBA you have unlimited storage in all geographical areas that can be used as your business grows

Disadvantages of Amazon FBA

Despite these many advantages, the Amazon FBA still has its drawbacks, including:

Inventory Tracking – Although Amazon provides inventory tracking, it can be an adjustment for companies that are used to being able to physically count their products to manage their inventory. Increased ROI – Amazon prioritizes customer experience and exhibits their “easy return process”. As a result, you may see an increase in your return. Additional Shipments – You still need to pack, label and ship your products to an Amazon warehouse and use their ASIN / UPC barcode system, which can be inconvenient for some small business owners. High Cost – In addition to the monthly fee, you also have to pay Amazon to store your inventory. If you are new to inventory management and your products do not sell, these fees can become painful when your products are in Amazon’s inventory.4 For some companies, these fees also begin to cut their profit margins and force them to leave Amazon. Seller Theft – Amazon has a problem with copy sellers listing their own counterfeit products under your item number. Peter Denbigh from the Watch Ya ‘Mouth game dealt with this disadvantage on his own and suffered from low customer reviews from counterfeit products and lost sales as a result. No direct customer relationship – While it is convenient for Amazon to manage customer service for FBA users, this means that you will not be able to actively target these customers in the future because Amazon maintains their information. Ultimately, your business should still be the one that prioritizes customer satisfaction and builds customer relationships. Uncertainty – Some sellers report difficulty communicating with Amazon, especially when problems occur, such as broken or lost items. For example, if you If you do not follow Amazon’s policies, your profile may shut down completely and you may not be able to appeal to a restart.5

How to sign up for Amazon FBA

If you are ready to join the Amazon FBA, there are 10 simple steps: 3

Sign up for an Amazon Merchant Account for your business. Navigate to Amazon Seller Central. Set up FBA via Amazon Seller Central. Create listings for your products. Add your product listings to the Amazon catalog. Indicate that your products are FBA inventory. Prepare your products using Amazon’s packaging, shipping, and routing guidelines. Create your shipping schedule. Print Amazon shipping labels for your products. Send your inventory to Amazon Filling Centers.

Alternatives to Amazon FBA

It is important to remember that fulfillment from Amazon is not your only option. Amazon FBA is best for companies that: 7

Want to save time Want to scale their business Want comprehensive support Want to be eligible for Amazon Prime

If your business does not fall into these categories, or if you are still in doubt about Amazon FBA, we will cover your other options below.

Fulfillment in the house

With internal fulfillment, you make sure to store and shop your orders from your place of business or a secondary warehouse. This option is best for companies that:

Low volume ship Has their own logistics network Has complex packing or shipping requirements

However, internal fulfillment has some important disadvantages because it:

Limits the various products you can sell Limits the number of products you can sell Increases costs in some cases

Many companies start with their own fulfillment, and as their business grows, the transition to third-party fulfillment, e.g. Amazon FBA.7

Third party fulfillment

Amazon FBA is a third-party fulfillment program, but it is not the only option. It is best to shop around to find out which third party fulfillment can offer you both the best prices and services. Whether you choose Amazon FBA or another company, here are the questions to ask yourself when making your decision: 8

How Many Ecommerce Sales Do You Make? As your online sales increase, the logistical burden and complexity of the fulfillment and inventory tracking process increases. What kind of products do you sell? Particularly large, fragile, complex or even dangerous goods have specific shipping requirements and concerns. How many sales channels do you have? Not every third party fulfillment service can adequately manage multiple sales channels. Can you effectively track your supply levels? If you are unable to accurately track your inventory, especially if you have perishable or seasonal products, a third-party sales and inventory reporting service is required. Do you have internal customer service? Some fulfillment services also take care of customer service and customer issues, but this can be detrimental to your personal customer relationships. Is your shipment both convenient and affordable? A survey conducted by Amazon showed that shipping was an important part of the online shopping experience for 84 percent of the population. Do you have a place to store your products? As your e-commerce sales grow, you need more space to store products, especially if there are particular concerns about the environment in which they should be stored (i.e., a place that is temperature controlled). Can you process returns? Processing returns can add an extra layer of logistical stress that third-party fulfillment services can minimize. Do you need additional fulfillment software? As your business grows, you will likely need to purchase specialized fulfillment software if you continue to handle orders internally. Are you going to sell internationally? International shipping adds significant logical concerns that third-party services may reduce. Do you need distributed stock? Distributed warehouse allows for shorter shipping windows if your customers are geographically dispersed. Do you need products together? Many third-party fulfillment services can support product bundling so you can enhance your customers’ shopping experience. Are you interested in subscription fulfillment? If you are interested in enabling customers to subscribe to your products, third-party compliance can minimize the additional logistical complexities. What is your budget for fulfillment services? Consider the cost of your internal performance in relation to the rates offered by third parties such as Amazon. Costs to be evaluated include administration, product, receipt, storage, packaging, kitting, and shipping costs.

Take advantage of Amazon’s resources and PDM

So is Amazon FBA worth it? Take advantage of the pros and cons of Amazon FBA.

If you do not already have fulfillment infrastructure, and if you are interested in quickly scaling your business and increasing your sales, then yes. For other companies, Amazon FBA may not be right because the cost-benefit analysis does not add up or because the direct customer relationship is important.

To further scale your business and increase your sales, sign up for our digital marketing agency, Marketing-Ideas Marketing. We give your company a digital marketing strategy to lift your brand and optimize your growth plan.

Contact us today to learn more about other Amazon features, including Amazon marketing cloud, what is AWS, and what is Amazon Explore.

Sources:

NBC News. Small businesses revolving around e-commerce saw record sales over the Black Friday weekend. https://www.nbcnews.com/business/business-news/smalthate-commercel-businesses-who-pivoted-e-commerce-saw-record-sales-during-n1249499 Amazon. Guide to fulfilling e-commerce for the growth of your business. https://sell.amazon.com/learn/ecommerce-fulfillment?ref_=sdus_fba_ecommf_what_h1 Amazon. Fulfillment of Amazon. https://sell.amazon.com/fulfillment-by-amazon.html Intuit Quickbooks. Pros and cons of FBA (Fulfillment by Amazon). https://www.tradegecko.com/blog/ecommerce-tools/pros-and-cons-of-fba-fulfillment-by-amazon Forbes. Are you thinking of selling on Amazon Marketplace? Here are the pros and cons. https://www.forbes.com/sites/pamdanziger/2018/04/27/pros-and-cons-of-amazon-marketplace-for-small-and-mid-sized-businesses/?sh=240fc3b76867 Big Commerce . Utilizes Amazon FBA for your online sales success. https://www.bigcommerce.com/blog/amazon-fba/#the-pros-and-cons-of-fba Amazon. Common opportunities for fulfilling e-commerce. https://sell.amazon.com/learn/ecommerce-fulfillment?ref_=sdus_fba_ecommf_what_h1#three-fulfillment-options Amazon. Checklist: What factors should you consider when scaling fulfillment? https://sell.amazon.com/learn/ecommerce-fulfillment?ref_=sdus_fba_ecommf_what_h1#scaling-fulfillment

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