What are some pros and cons of selling on Amazon FBA?
Amazon garners 200 million unique customers every month that prefer the eCommerce giant over other stores. In Amazon, its Fulfillment By Amazon (FBA) service is becoming popular among sellers. So much so that 73 percent of Amazon sellers in the US avail the FBA service, as per Statista. Many eCommerce stores have seen their profits soar after utilizing FBA, be it an existing seller or a new one.
What is Amazon FBA?
Amazon offers this service to facilitate the third-party sellers in the automation of their shipping services and order completion or fulfillment. Basically, this service takes the shipment responsibility off of the sellers’ shoulders. Enrollment in FBA not only leaves Amazon in charge of shipping but also the refunds and returns, picking up the merchandise and packing it, product warehousing, and so on.
What happens is that Amazon warehouses the sellers’ products and handles all the orders received against them. All a seller has to do is keep sending the products to Amazon and see the sales side of a transaction continuum. Obviously, this service is not free. There is a fee for it, but it is worth the money. You get Amazon’s round-the-clock customer service. What’s more, all costs of fulfillment and shipping are covered by Amazon.
Pros and Cons of Enrolling on Amazon FBA
While Amazon FBA is a desirable option, it has its pros and cons. You will need some time to learn the ins and outs of selling on Amazon. If you want to save some time, you can try a course like Wholesale Ted (here’s a review of that course).
Another thing to consider is that this service might not do well for items with large dimensions or low value. That being stated, here are the pros and cons of selling on FBA.
Pros of FBA
Here are the benefits offered by Amazon FBA:
Access to Prime Customers: You have the access to sell to Amazon Prime Customers when you enroll for FBA. These customers constitute tens of millions that are willing to pay an additional amount for fast and free shipping.
Convenience: Shipping is the major headache of any online business. Packing the products and then shipping them off can be quite troublesome. Imagine having this entire spectrum to be someone else’s responsibility, some who are reliable enough.
You are only concerned with the sales of the project and ensuring that Amazon does have sufficient stocks of your products. The eCommerce platform even handles the orders for you. You get relieved of a huge responsibility for only a few bucks; that is a good bargain.
Storage: FBA is an ideal option if you cannot afford proper or large storage. FBA enables you to store your products in an easily accessible location, i.e., fulfillment centers. These centers are quite huge and can stock a sizable amount of goods. It means you can easily scale up without worrying about stocking your merchandise.
Buy Box: Do you know that 82 percent of Amazon’s sales take place with the Buy Box? It is the white box at the right of the product details page. It prompts the potential buyers to add the item in their shopping cart.
The rate of Buy Box sales gets even higher for mobile purchases. With FBA, you get higher chances to win the Buy Box than any self-fulfilled seller. Having a higher chance of winning this box means a higher chance of increasing your sales. This is a great opportunity, as competition is tough on Amazon where 20 or even more sellers would be offering the same product.
FBA is not limited to the products you are selling on Amazon. This service facilitates multi channel fulfillment which means you can accomplish your orders through any channel with FBA. This is another convenient feature of FBA that makes it highly coveted, as you can easily widen your operations at different channels without worrying about storage and shipping.
Free Shipping for Customers: Customers prefer the stores that offer free shipping. You can be one of them by utilizing the FBA service. However, this facility is available for customers with Amazon Prime membership. Prime customers tend to buy a plethora of products in the shopping season. They would love to have their shipping charges eliminated, rendering your sales ramp up in that season.
24/7 Customer Service Provision: As mentioned earlier, by signing up for FBA, you can use Amazon’s 24/7 customer service. Amazon facilitates the FBA sellers in customer service and offers one platform for all the relevant operations. That makes the customer service provision more convenient and leads to happy and satisfied customers.
Cons of FBA
Here are a few drawbacks of FBA:
Tricky Inventory Management: As you are not dealing with the inventory yourself, it can be hard to keep track of your merchandise. You might have put up your product offering as hundreds or thousands. But it is not going to get sold right away. Since all the products are being stored at Amazon’s fulfillment centers, it will be hard to manage the inventory. You might not be able to follow the number of products available, needed, and required to be reduced.
Higher Cost: FBA might not be that economical for stores that have just started. Money is crucial for these stores and Amazon charges for this service that means additional cost. Moreover, the service is not beneficial for low-cost goods owing to the fee calculation criteria. Also, Amazon charges extra for items that have been there for a long time. This long-term storage fee can be a huge financial burden.
Before enrolling for the service, utilize the FBA calculator to determine if it is worth it.
Higher Returns: Amazon has a loose returns policy. Buyers can return the products without any restriction or limitation. It might be a desirable feature for buyers, but it is definitely cumbersome for you as a vendor. Amazon sends back the products to you for which you were supposed to pay. Now it is changing its policy and planning to send the returns to your warehouse. While it might be a little better, higher returns still remain an issue.
Hands Off: A major part of your business operations is out of your control. You do have lesser responsibility and hassle now, but you are unable to customize and control the shopping experience completely.