Amazon FBA: To FBA or not to FBA…
May 11, 2018
- Business •
- Ecommerce •
- Marketing •
Cydney Hatch• May 11, 2018
William Shakespeare, 1564 – 1616. “To be, or not to be: that is the question: Whether ’tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles, And by opposing end them.”
Yep. It just got real…Hamlet is asking some of the BIG questions… life… death…and living…
Like Hamlet, you might be questioning your sanity when running an ecommerce business. There might be times you feel like you are making decisions for the “life” or “death” of your company—which can be stressful!
On top of that, you are busy handling all of your business needs from fulfilling customer orders, customer service, generating sales and products to even finding new business and keeping the growth alive!
Woof, that is a lot to juggle!
But, with that much to consider, what if I told you there was a way to maintain all of these jumbling pieces of your business?
Enter Amazon FBA!
Amazon FBA (Fulfillment by Amazon) can be the answer to a lot of your ecommerce business woes. Essentially, FBA is a centralized place to handle your fulfillment, shipping and customer service needs.
Now, on the surface, this sounds like an ideal solution, but Amazon FBA is not necessarily a great fit for every business. In this article, we will cover everything you need to know to answer the big question: To Amazon FBA or not to FBA…
What is Amazon FBA?
Amazon FBA stands for Fulfillment by Amazon, which is a service that sells and delivers your items on Amazon. When it works right, Amazon FBA can take some of the biggest hassles out of ecommerce business!
Amazon FBA lets you send your inventory to Amazon locations where they store your products and sell/ship them for you as well (this also includes all customer service).
Sounds pretty great, right?
Since Amazon has created one of the most advanced fulfillment networks in the world, your business can benefit from their huge platform. Best of all, FBA can help you scale your business and reach more customers using their established customer network!
How Does Amazon FBA Work?
If you’re wondering how exactly Amazon FBA works, Amazon created a really helpful “How To” video explaining the process in detail:
FBA can help relieve a lot of ecommerce business headaches. All you have to do is follow these simple steps:
1. Set Up an Account
First and foremost, you need to set yourself up on Amazon so you can sell on the platform! Create a Selling on Amazon account and make sure you add the FBA feature. The account creation process will cover your business information, banking information setup as well as setting up your tax forms.
2. List Your Products
Add your products to the Amazon catalog so you can properly list your ecommerce business. You can do this individually or you can use inventory management software to upload an already created list with Amazon’s API.
3. Send Amazon Your Products
Once your account is set up, prepare your products for shipment to one of Amazon’s warehouse facilities.
Make sure these items are prepped for shipping as the format they arrive is how they will be sent from Amazon to customers. Do you have cute shipping paper, stickers, labels or inserts you want to use? If so, they need to be in or on the package when you ship it to Amazon.
If you want some extra help, you can go to Amazon to recieve Amazon preferred prep and shipping supplies delivered directly to your door. Amazon has discounted partner carriers you can use for your shipments to Amazon fulfillment centers.
4. Amazon Lists Your Products
Your products are now ready for purchase. Amazon can now help you sell them online with Amazon Prime and other promotions which will increase sales and customer satisfaction.
5. Amazon Does All the Work
When a customer purchases your item, Amazon does all the rest! No more trips to the post office or worrying about shipping. Amazon will fill the orders and customers will recieve tracking information from them.
Prime customers get fast, free shipping on your products, and all customers can qualify for FREE shipping on eligible orders.
6. You are Done!
Customers will receive your products from the convenience of their front door! If there are problems, Amazon provides customer support and handles the return process. These services are 24/7, so you won’t have to worry about handling unexpected customer complaints at odd hours of the night.
Amazon FBA Pricing and Fees
Now, you might be wondering what does a service like this cost? How could something so helpful be affordable? However, the whole process and pricing model is pretty reasonable if you are smart and consider all possible fees.
Amazon FBA fees are based on the size and weight of your products and where you are sending them. Regardles of location, if you use Fulfillment by Amazon to stock inventory and complete your orders, you’ll pay 2 primary FBA fees.
By the way, keep in mind that during the months of October through December the fees might fluctuate due to high volumes of sales during the holidays!
The first fee is a fulfillment fee. This is the fee that covers your entire shipping process. The second fee is a storage fee which covers the cost of storing your products at an Amazon warehouse.
Both of these fees are further broken down into two size categories:
- Standard: Items that weigh less than 20 pounds and are under 18″x 14″x 8″.
- Oversized: Items that weigh over 20 pounds and are larger than 18″x 14″x 8”.
In addition, Amazon might also have seller fees associated outside of FBA fees.
Fees Outside of FBA Amazon
Now, if you sell your products through other channels like eBay or Etsy, FBA can also help you fulfill those orders. Amazon calls this service Multi-Channel Fulfillment (MCF).
Your inventory storage fees are the same as above but the MCF fulfillment fees are higher. The fees are higher because Amazon wants to push you towards selling solely on their platform.
With MCF shipping, you can use Standard, Expedited 2-Day, and Priority 1-Day methods. Now, if you worry about pricing, compare the shipping rates of what you would pay to do it yourself and you might find Amazon MCF ain’t so bad…but, of course, do your homework and compare!
As mentioned above, Amazon FBA has basic fees associated with their services, but there are a variety of additional, optional fees you should be aware of.
Below are just a few of the additional fees your ecommerce business might incur if you use Amazon FBA services:
- Labeling Fee — Amazon has strict barcode label specifications for your products. This is a fee you can opt to use or—if your products are not labeled correctly—you will be automatically charged.
- FBA Prep Service & FBA Unplanned Prep Service — FBA has strict product packaging and prep guidelines you will need to follow. You can be proactive with these fees or reactive with them. If you send improperly prepped products you might be charged this fee. You will just need to decide how you want to handle it.
- Returns Processing –The FBA returns processing fee applies to customer-returned products sold on Amazon in categories for which Amazon offers free return shipping. These include apparel, most accessories and shoes. If returned products need repackaging for resale, Amazon charges a repackaging fee as well.
- Long-term Storage – The long-term storage fee is in addition to the monthly inventory storage fee. This will apply to products that have stayed on the Amazon fulfillment shelves for at least 180 days.
- Stock Removal Fee – FBA charges a removal fee if you want to move inventory off of Amazon’s shelves.
Let’s decide if this is all worth it in the next section…
Is Amazon FBA Right For You?
Amazon FBA obviously has benefits any ecommerce business can benefit from, but is it worth your time, money and effort? In the end, it all just depends on your business needs, margins and goals, but here is some food for thought:
Reasons to FBA
Amazon and your business can make a great partnership. Here are a few reasons to consider using Amazon FBA:
Are you a smaller business that feels overwhelmed by increasing numbers of orders? Amazon FBA could be really helpful to you if you lack the manpower to keep things growing and maintained.
Let’s get real, if you want to grow your business, you cant afford to make multiple trips to the post office every single day. You need fast shipping options to maintain your sanity and keep your customers happy. If you find yourself in this situation, FBA can save you time and improve your manpower woes!
Utilize the Big Brand Trust
Amazon is a huge, well-known company! By using Amazon FBA, you are leveraging the brand and its loyalty programs to boost your business sales.
Also, if you use Amazon, your customers will trust your business more because they know the level of quality Amazon holds sellers to when it comes to products, shipment and customer service.
Higher Search Rankings
FBA products get special treatment. Amazon’s FBA products get a “leg up” on product searches, espeically in regards to Prime. This leads to higher rankings for FBA products in Amazon’s product search results and thus, more sales, when then means more money for you! Yay!
Amazon Free Shipping & Offers
Amazon FBA products get free shipping on orders over $25 as well as coupon deals! What more could your clients love? With Amazon FBA, your products can be a part of Amazon events that will help promote them.
Prime Free Shipping Eligibility
FBA has the awesome “Prime” badge that incentivizes customers to purchase your item and get it in the nick of time! With Amazon FBA, your customers can get free 2-day shipping on your products, which can help you sell more items.
Prime has nearly 85 million subscribers who look for the Prime logo while shopping. As a result, FBA products can attract far more buyers than non-Prime products—what a nice perk!
You Don’t Have to Break a Sweat Anymore
No more hot-mess experiences like dealing with clients “who never got their packages” or misorders…Amazon takes the hard work out out of customer service as well as shipping!
Why work extra hard when you don’t have to? Let Amazon’s fulfillment centers store your products and do all the legwork for you!
Amazon FBA is a great choice if you need extra help with your ecommerce sales and exposure, you primarily sell on Amazon, you want to streamline your ecommerce sales to one place or you just want to make your life easier and you have some cash to invest in services.
Reasons to Not FBA
Sometimes, the easy answer isn’t always the best answer. Believe it or not, there are some reasons why Amazon FBA might not be the best choice for your ecommerce business, especially when you sell on other ecommerce channels.
In the end, it all depends on your business needs, margins and goals, but here is some food for thought:
Items You Are Selling
As mentioned above, Amazon charges additional fees for large and heavy items. So, if you are selling framed prints, pieces of furniture or heavier items, FBA might not be the service for you.
For example, the fees that come with a heavy, $10 desk weight will take a large percentage of your profit margin in comparison to a small and light item that sells for $30. The lighter and smaller object will put more money in your pocket while you could end up losing money on the heavier item. Think about what you are selling!
Amazon comingles qualified products that come from different sellers. They do this to save you money, so you don’t have to get FBA approved labels for every item you sell.
Sounds like a positive, right? Wrong.
Amazon strategically stores and ship items of the same product ID based on proximity to the shipping destination. This ensures the fastest-shipping time but this hurts quality assurance.
For example, if I am selling a jade bracelet in New York and shipping it to Florida, Amazon’s system might find an identical product sold by a closer seller to ship to my Florida customer rather than ship from my inventory.
All the items are the same, so there should be no problems right? Think again.
Product quality control is hard to manage with this system in place. If you put in the effort to get quality products, create beautiful shipping visuals etc it wont matter because your customers might not be getting your exact products.
There are a lot of fees to consider and things can get pretty expensive. If you can’t afford the startup costs, Amazon FBA might not be a great decision for you.
What’s really important when choosing whether to go with FBA (Fulfillment by Amazon) or self-fulfill your Amazon orders is the total costs and hidden fees associated with both options.
Using Amazon can be a little cheaper than packing and shipping yourself, or can be more expensive, especially if you account for the costs of shipping the items to Amazon (which is really inexpensive, though) plus storage fees.
Tedious Shipping Rules
Amazon FBA requires you to ship products to their warehouses in a specific way. So, in some situations, you may have to individually label 1,000 glowsticks…or to pay to have Amazon do that busy work for you.
In some situations, Amazon’s shipping rules might not be a big deal. In others, they might be a deal-breaker.
Amazon Might Ban You
After researching business cases, there have been many that have lost their business listing for things outside of their control.
The threat of getting banned on Amazon is just like social media accounts and other platforms that have banning checks in place. After researching, I found that the top reason for getting your Amazon seller’s account revoked could be for numerous negative feedback on product quality violations.
Due to things like comingling items as well as getting a small percentage of returns or negative feedback this can become a real problem for your business.
Amazon Favors the Customer
Amazon has a huge customer base. That can be great for you, but a lot of the time, their policies favor the customer over you—which can mean that you have to “eat” a lot of customer-related costs.
For example, customers can bypass return shipping fees by stating their product arrived damaged or that it did not match the listing. Other times, they can use the products and ship them back stating that they arrive used or were low quality .
When buyers pull these sorts of shenanigans, who pays the penalty? You do.
Sometimes, your ecommerce software might not easily integrate with Amazon FBA. If it doesn’t match up nicely, you could end up wasting a lot of time manually entering in MCF orders. Make sure you use newer platforms like Shopify, Bigcommerce or Woocommerce so you can easily integrate into FBA.
You might already have a fulfillment service that works, so Amazon MCF may not be the best idea for sales outside of Amazon. A lot of the time, multichannel sellers find that combining FBA with their current services might not be a good fit as it can add up and become confusing.
Amazon FBA might not be a great choice if you want to handle things your own way and with special care, you sell very little on Amazon or you just don’t sell a lot of items generally.
To FBA or Not to FBA?
The objective of Amazon FBA is to save businesses time and provide them with a variety of services they can use to grow. However, whether the pros outweigh the cons really just depends on your business.
The decision of whether or not to fulfill through Amazon should be a well-calculated decision. Sellers need to evaluate the many factors and fees associated with their products and overall business plans.
Sellers may also decide that some of their products may be suitable for FBA but others are more appropriate to fulfill themselves. And, ultimately, that decision is up to you.
What benefits or horrors have you experienced working with Amazon FBA? Did I miss any important points? If so, comment and share your thoughts!