For everyone in the eCommerce industry, it is common knowledge that Amazon works with third-party sellers. But did you know that almost half of all Amazon sales in 2020 came from them?
You can probably guess that a lot of these sellers were using (and are still using) the FBA platform devised by Amazon. It’s obvious that FBA can be a profitable business venture if you follow the right steps.
It gives you a lot of opportunities to grow your business, you can later on even sell Amazon business ownership for the best price if you make all the right steps. And this guide will teach you all the things you need to know on how to succeed with this business model.
What exactly is Amazon FBA?
Fulfillment by Amazon (FBA) is a service created by Amazon that enables third-party sellers to automate their order fulfillment and shipping services. Basically, it only comes down to you making a sale while Amazon deals with the order fulfillment (they ship the product).
Businesses enrolled in Amazon FBA can let Amazon manage all the shipping, including refunds and returns, along with product warehousing, packing, and so on.
On top of that, a vendor gets to enjoy 24/7 Amazon customer service, access to one of the most dynamic fulfillment networks in the world. They also get all fulfillment and shipping costs included under one fee (picking, packing, and shipping).
Amazon FBA benefits
Amazon’s FBA program has numerous benefits and that is why so many businesses use this opportunity. However, you are about to see both the positive and negative sides of pursuing it.
These two sections will help you fill any knowledge gaps you might have. Remember, as an entrepreneur, you need to be aware of all business aspects to remain competitive. If you remain in the dark, that can keep you from improving your FBA business.
Easy shipping and returns
When you have to pack and ship an order, you need to set aside some time and put in some work into it. This includes printing a packing slip and a shipping label, folding the box, and placing the item in the packaging properly along with the shipping label. The package is then left to the shipping staff to pick it up.
But, if you enroll and become a part of the FBA program, you only have to send your product to Amazon and they will deal with everything else for you. You just have to watch the sales come in and that’s it.
Affordable shipping
Amazon offers to ship and pack at a very attractive price. If you’re dealing with $1.04 per unit in packing costs and somewhere between $0.50 to $0.60 per pound of weight in handling costs then the shipping is free. So, if you sell items that weigh 3 pounds on average, you would have to pay about $2.50 per order for shipping.
If you sell items through any other channel and Amazon fulfills them for you, then your standard-sized parcel ships for $1.90, the packing stands at $0.60, and you would have to deal with $0.45 per pound of weight in handling.
Automatic Amazon Prime
If you decide to work with Amazon FBA, your items become qualified for Amazon Prime shipping. All Prime members can get free two-day shipping for your products, which is a big sales motivator.
Amazon FBA challenges
Even though the benefits of the FBA model are very attractive, not everything is perfect. Take a look at the downsides of this model.
Stale inventory
Unfortunately, if you have hundreds or even thousands of products in Amazon FBA, there are chances that not all of them will sell. You can end up with a bit of stale inventory that you are paying rent for and not selling.
Pooled inventory
There are numerous sellers relying on Amazon FBA and there are thousands of products stored in Amazon’s warehouses, which means that every merchant gets their own bin location for every product.
However, it also means that your inventory will be pooled with the same products from other sellers. And this is something that can happen too often.
In other words, there is a chance that the physical product your customer receives may not be the exact one you sent to Amazon.
How can you get started?
Getting started with Amazon FBA is not difficult if you follow the steps below:
- Set up FBA. If you already have a Selling On Amazon account, just add FBA to your account. If you haven’t sold on Amazon before, set up your Amazon selling account first and then add FBA.
- Create your product listings. You should add all the products you like to offer to the Amazon catalog one at a time, in bulk, or by integrating your inventory management software with Amazon’s API.
- Have your products prepared. Prepare, pack, and label your products properly to ensure smooth and safe transportation to the fulfillment center so that your products can quickly become available to your customers.
- Ship your products to Amazon. Devise a clear shipping plan, print Amazon shipment ID labels, and send your shipments to Amazon fulfillment centers.
Keep in mind that once your products arrive at the fulfillment center, they become available for customers to buy them.
Tips for better results
The FBA business partnership is not something new. In other words, this means that there is plenty of valuable insight to be used as a result of the accumulated experience. This kind of help can be crucial if you want good FBA sales from the beginning.
Use analytics tools
Rely on analytics tools to do product research on the most profitable products and popular items that are available on Amazon. This can help you determine which are the best product categories to sell in. Remember, the bestsellers are at the top for a good reason.
Be careful with your product selection
Consider sales rank, but also consider what you get in return. High-ranking products are competitive, but they will sell quickly and keep the inventory moving. Low-ranking products could cause stale inventory and long-term fees.
Bundle items when possible
One of the most difficult parts of selling on Amazon is competing with numerous other (near-identical) listings that may have a handful of reviews or be a few bucks in price difference, but otherwise indiscernible. Stand out by creating bundled listings to draw attention and offer more value for your customers’ money.
Build your brand
Take time to create a brand and put it in a position that creates success and reaches your target audience. This is not only about being in the buy box. It is about making sure that you offer high-quality products and that you can source them from a reputable manufacturer or distributor.
Ensure that you get good reviews of your products and that is how you will secure metrics that can help you maximize your sales chances.
Final thoughts
Leveraging the power of Amazon FBA can bring you so much more out of your online sales. However, this is only possible if done correctly and your products have to be profitable.
Go through this guide again and determine what you can take from it to boost your business’s chances of success on Amazon. Also, be patient and don’t give up if you don’t see the desired results right away.