It’s no secret that the Amazon Marketplace has taken off and has quickly become a mainstay in consumer shopping. As an Amazon seller, you want to be sure you are doing everything that you possibly can to make your goods visible, accessible, and affordable.
If you’re trying to figure out how to be successful selling on Amazon, you have probably taken note of the Fulfillment By Amazon (FBA) program. We’re laying out some of the key pros and cons of the FBA program to help you make the best decision for your Amazon business.
Eligibility for Prime: Amazon Prime customers are among the most loyal customer bases in the market today. Customers who have enrolled in Amazon Prime pay a yearly fee of $99 and in turn receive access to free 2-day, next day, or even same day shipping on thousands of Prime eligible items.
According to Fortune, as of 2016, Prime customers made up more than half of Amazon’s customer base spending more than $1,200 per year on average compared to $500 spent by non-Prime members. Prime customers are spending the majority of their money on items that are Prime eligible and actively seek out products that will ship for free with Amazon Prime even if the list price of the item is slightly higher than the same product that is not Prime eligible.
Amazon Handles it All: To participate in the FBA program, a seller ships their entire inventory to Amazon to warehouse. When an item is sold, Amazon picks, packs, and ships the item. If there is a return or customer service issue, Amazon will handle that as well. With Amazon handling so many aspects of your sales process, it gives you more availability to focus on growing your business.
Amazon Affiliated Shops are Generally More Trusted: Because Amazon is such a broad marketplace open to many sellers all over the world, it is littered with items of poor quality or even counterfeit popular products. Many people shy away from products sold by third-party sellers for these reasons. Customers feel protected from these issues when they purchase from an Amazon FBA seller because Amazon sets the gold standard for customer service in the market today due to their liberal return policy. Customers are more likely to purchase from a seller enrolled in FBA because they know that Amazon will have their back should they not be happy with their purchase or other issues arise.
Subject to Amazon-Approved Warehousing: To be eligible for Prime status you must warehouse your inventory through an Amazon-approved third-party warehouse. Amazon has their own requirements and systems that their sellers are subject to abide by. Often times the cost of warehousing with Amazon is inflated compared to unaffiliated warehousing, such as one your international freight forwarder could provide.
Not Every Item is Profitable Through FBA: Someone has to pay for the express shipping that Prime members enjoy and it is often redirected back to the FBA sellers. Not every product is profitable or competitive when Amazon’s fees are attached. Sellers need to take into account the cost of the product, importing charges, Amazon’s fees, as well as expected profit before deciding if it is worth it to sell a product through FBA. If the price cannot remain competitive and still bring the seller a profit it’s not worth it to be sold through FBA but can still be sold third-party to avoid fees.
Must Have Inventory Upfront: Items that are purchased with Amazon Prime are required to ship within a mandatory 6-hour window. This makes it impossible for FBA sellers to drop ship items and therefore must have inventory on hand. This may require some research and understanding of the Amazon market as well as the demand for your product. The seller must also have the capital to not only purchase their items upfront but to also pay to warehouse them until they are sold. Amazon also places strict regulations on maintaining inventory levels and your product could lose search ranking if it repeatedly runs out of stock.
Regardless of whether or not you decide that selling on Amazon through the FBA program is right for you, ETC International Freight Systems has many services in place to assist Amazon sellers. We specialize in the unique shipping and warehousing needs of Amazon affiliate sellers so that you can spend more time doing what you do best... finding the next great product to sell!