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What is Fulfillment By Amazon (FBA) and Should I Use It as a Seller?

Amazon FBA | What is Fulfillment by Amazon? Should I Use It?

Today eCommerce has taken on more forms than ever. New marketplaces, social media, ever evolving advertising, make choosing the method and options to sell your products more confusing than ever. Selling on Amazon via Fulfilled by Amazon (FBA) is one such option. Using FBA gives sellers a variety of benefits, and can significantly improve the revenue of your business. This article is going to outline the basics of FBA, the benefits and considerations of FBA, which can help sellers make informed decisions on whether this platform is right for them.

The Basics

Fulfilled by Amazon is an option for Amazon Sellers to send their products into Amazon’s fulfillment centers. According to Amazon there are multiple benefits to their service for sellers:

  • Your products are eligible for Amazon Prime free Two-Day Shipping, FREE Shipping, and other benefits.
  • Customers get Amazon’s trusted customer service and returns.
  • Our services let your business grow quickly.
  • It’s cost-effective and simple.

Source: https://services.amazon.com/fulfillment-by-amazon/benefits.html

Sounds great right? Let us go into more detail!

The Statistics

Growing Percentage of Buyers: Amazon Prime has taken an increasingly large footprint in American Households. According to digitalcommerce360:

  • 82% of US Households have an Amazon Prime Membership
  • As of 2019 – Prime Members make up for 57% of Amazon Shoppers
  • Since 2015 this number has increased year over year.

Source: https://www.digitalcommerce360.com/2019/07/11/82-of-us-households-have-a-amazon-prime-membership/

Higher Spend: Furthermore, according to CIRP which is a statistical think tank Amazon Prime Members spend more money on average through the platform than non-Prime members. The group estimates non-Prime members to spend on average $700 per year, while Prime members spend upwards of $1,300 per year as of 2017.

Source: http://files.constantcontact.com/150f9af2201/77e5428e-4173-4044-bf3a-8e3e8cb8d8f1.pdf

Conclusion: Buyers have become accustomed to Amazon Prime. They associate the Prime Logo with fast shipping, quality products, and stellar service. All of these things bring added value to the customer.

Practical Benefits

  • Increase in Sales – Most sellers want to try Amazon FBA for one reason – to increase their sales. As noted in the statistics above, an ever increasing number of buyers are using Prime, etc. Furthermore, in general 3rd-party sellers are doing excellent on Amazon. In fact, third party sellers in 2018 sells 160 billion in 2018 and first party Amazon sales for 117 billion. This is a significant difference and shows the great impact third party sellers do on the Amazon Marketplace.

Source: https://www.businessinsider.com/amazon-third-party-sellers-record-high-sales-2019-5

  • Buybox Win – According to Amazon FBA listings are more likely to win the buybox. The buybox is a significant tool that Amazon sellers covet, as their listing gets maximum viability on the product listing page. This is especially important when there are multiple sellers of the product and or if you are not the brand owner of the product. While Amazon does not specifically say that having a FBA listing will guarantee the buybox, in general if your account is in good standing, have a professional account, and price competitively having a FBA listing will dramatically increase the odds of winning a buybox listing.

Source: https://sellercentral.amazon.com/gp/…

  • Feedback Removal – Feedback removal is always a tricky topic for sellers. Amazon historically has been very strict in the removal of seller feedback. While the strictness of their policies wax and wane, one should sell on Amazon with the expectation that buyer feedback is there to stay with a limited number of exceptions. One benefit to using FBA services is that Amazon will “Strike-Through” feedback that is in direct relation to Amazon’s fulfillment services. (In other words, shipping times, delivery status, missed delivery window, improper packaging, etc). In general this rule does NOT include feedback which complain about product issues (incorrect product, damaged product, etc) that can not be directly proven to be the fault of Amazon.
amazon FBA Feedback Removal

Source: https://sellercentral.amazon.com/gp/help/help.html?itemID=G20231&language=en_US

Furthermore, the feedback removal guidelines for FBA orders only apply to FBA orders. Multi-Channel fulfillment orders, Merchant Fulfilled Orders, Seller Fulfilled Prime Orders, etc. do not apply to this guideline and Amazon will leave the feedback in tact without edit.

amazon fba

Source: https://sellercentral.amazon.com/gp/help/G201101660?language=en_US&ref=ag_G201101660_cont_G20231

  • Elimination of Physical Storage Space – Amazon will hold your products at their fulfillment centers, for a fee.
  • Amazon Provides Customer Service – Amazon provides the majority of customer service for FBA listings. Amazon handles:
    • Returns
    • Replacements
    • Response to Customers – In Most Instances
    • However, please keep in mind that the seller is still responsible for their sales and products. While Amazon handles the customer service, this does not exempt the seller from providing quality products, dealing with quality claims, and some customers will still message the seller directly. It is the sellers responsibility to answer these messages and to forward the customer to the proper channel.
  • Multi – Channel Fulfillment – Selling on Amazon FBA allows for Multi – Channel Fulfillment. In other words, Amazon will directly fulfill orders to marketplaces other than Amazon at a set fee schedule.

Source: https://services.amazon.com/fulfillment-by-amazon/multi-channel.html?ref_=asus_fba_ben_multi

The Fine Print

  • Fees – Fees are the buggyman of all eCommerce sales! Having a clear understanding of fees can help the seller make great decisions regarding which sales channel to use, how to accurately source and forecast, and help optimize your storage and inventory needs.

FBA’s competitive fees and shipping capabilities can help you cut costs, while providing valuable benefits such as free shipping for your customers, increased exposure for your products, and premier customer service. FBA also gives you access to optional features and services to help you manage and grow your business.

Source: https://services.amazon.com/fulfillment-by-amazon/pricing.html

  • Control of Inventory – Inventory is an important part of any eCommerce business. Using FBA takes into account a few additional inventory issues – such as shipment to Amazon, deadlines, processing times, etc. FBA requires forecasting and planning so that each seller has an appropriate amount of inventory, without being overstocked and paying to much in storage fees. Luckily Amazon does provide detailed reports and performance   summaries of your FBA performance. To access these reports please follow the steps below:
    • Go to your Seller Central homepage.
    • Go down to your Inventory Planning block – bottom right hand of the page and click “View Inventory Dashboard”
amazon fba
  • From here a seller can access a wide range of reports, and data which can help them plan their inventory.

Conclusion:

Amazon FBA is an excellent channel to sell your products. With the proper knowledge and understanding of this platform – the amount of profits you make can increase exponentially! This guide gives a general overview of the FBA platform. Please stay tuned for future posts that go into details about a variety of topics, look out for a new instructional video series, and as always My Amazon Guy is here for you! We can assist with any and all aspects of Amazon FBA and much much more!

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