What are the pros and cons of selling on Amazon FBA? – News anyway
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Amazon gathers 200 million unique customers every month who prefer the e-commerce giant to other stores. At Amazon, its Fulfillment By Amazon (FBA) service is becoming popular among sellers. So much so that 73% of Amazon sellers in the United States use the FBA service, according to Statista. Many e-commerce stores have seen their profits skyrocket after using FBA, whether they are an existing seller or a new one.
What is Amazon FBA?
Amazon offers this service to facilitate third-party sellers in automating their shipping services and completing or fulfilling orders. Basically, this service takes the responsibility of shipping off the shoulders of the sellers. Signing up for FBA not only leaves Amazon in charge of shipping, but also refunds and returns, recovery of merchandise and packaging, product storage, and more.
What happens is that Amazon stores the products of the sellers and handles all the orders received against them. All a seller has to do is keep sending the products to Amazon and see the sell side of a continuum of transactions. Obviously, this service is not free. There is a fee for it, but it’s worth it. You get 24 hour Amazon customer service. In addition, all processing and shipping costs are covered by Amazon.
Pros and Cons of Listing on Amazon FBA
While Amazon FBA is a desirable option, it does have its pros and cons. You will need some time to learn the ins and outs of selling on Amazon. If you want to save time, you can try a course like Wholesale Ted (here is an opinion of this course).
Another thing to consider is that this service may not work well for large or low value items. That being said, here are the pros and cons of selling on FBA.
Benefits of Fulfillment by Amazon
Here are the benefits offered by Amazon FBA:
Access to privileged customers: You have the option to sell to Amazon Prime customers when you sign up for Fulfillment by Amazon. These customers constitute tens of millions who are willing to pay extra for fast and free delivery.
Convenience: Shipping is the biggest headache for any online business. Packing products and then shipping them can be quite inconvenient. Imagine that all of this spectrum was the responsibility of someone else, some reliable enough.
You are only concerned with the sales of the project and make sure that Amazon has sufficient stocks of your products. The ecommerce platform even handles orders for you. You are relieved of a huge responsibility for just a few dollars; It’s a good thing.
Storage: Fulfillment by Amazon is an ideal option if you can’t afford proper or large storage. Fulfillment by Amazon allows you to store your products in an easily accessible location, i.e. distribution centers. These centers are quite huge and can store a significant amount of goods. This means that you can easily scale without worrying about stocking your merchandise.
Buy a box: Did you know that 82% of Amazon’s sales are made with the Buy Box? This is the white box to the right of the product details page. It invites potential buyers to add the item to their shopping cart.
The Buy Box sell rate is even higher for mobile purchases. With Fulfillment by Amazon, you’re more likely to win the Buy Box than any standalone seller. Having a greater chance of winning this box means a greater chance of increasing your sales. This is a great opportunity, as there is stiff competition on Amazon where 20 or even more sellers would offer the same product.
Fulfillment by Amazon isn’t just limited to the products you sell on Amazon. This service facilitates multi-channel fulfillment, which means you can fulfill your orders through any channel with Fulfillment by Amazon. This is another handy feature of Fulfillment by Amazon that makes it highly coveted because you can easily expand your operations across different channels without worrying about storage and shipping.
Free delivery for customers: Customers prefer stores that offer free shipping. You can be one of them using the Fulfillment by Amazon service. However, this feature is available for customers who are subscribed to Amazon Prime. Preferred customers tend to purchase a plethora of products during shopping season. They would like their shipping costs to be eliminated which would increase your sales during this season.
24/7 customer service: As mentioned earlier, by signing up for Fulfillment by Amazon, you can use Amazon 24/7 customer support. Amazon facilitates FBA sellers in customer service and provides a platform for all relevant transactions. This makes the provision of customer service more convenient and leads to happy and satisfied customers.
Disadvantages of Fulfillment by Amazon
Here are some disadvantages of FBA:
Delicate inventory management: Since you don’t take care of the inventory yourself, it can be difficult to keep track of your merchandise. You may have presented your product offering in hundreds or thousands. But it won’t be sold right away. Since all products are stored in Amazon fulfillment centers, it will be difficult to manage inventory. You may not be able to keep track of how many products are available, needed, and need to be reduced.
Higher cost: Fulfillment by Amazon may not be that economical for stores that are just starting out. Money is crucial for these stores and Amazon charges for this service which means additional costs. In addition, the service is not beneficial for low-cost goods due to the criteria for calculating the royalty. Additionally, Amazon charges additional fees for items that have been around for a long time. These long-term storage costs can be a huge financial burden.
Before signing up for the service, use the Fulfillment by Amazon calculator to determine if it’s worth it.
Higher returns: Amazon has a flexible return policy. Buyers can return the products without any restriction or limitation. This might be a desirable feature for buyers, but it is definitely cumbersome for you as a seller. Amazon returns the products you were supposed to pay for. Now he’s changing his policy and planning to send the returns to your warehouse. While it could be a bit better, higher yields are still a problem.
Do not touch: Much of your business operations are out of your control. You have less responsibility and hassle now, but you can’t completely customize and control the shopping experience.