Selling on Amazon FBA – Boost or Burden for Your Online Shop?
The online giant’s fulfillment service has a lot of benefits but also quite a few drawbacks. Selling on Amazon FBA can be enticing for beginners who don’t have a lot of capital, as well as for Marketplace veterans looking to free up their time schedule. We have put together all the relevant things you need to know in order for you to make an informed decision today.
What is Amazon FBA?
Selling successfully on Amazon is a tough nut to crack with all the competition nowadays. The FBA program helps sellers in that regard. For a certain fee, the online giant takes over product storage, packaging, shipment, returns and customer service. All very relevant components in your life as a seller. And let’s not forget that signing up for Amazon FBA will label your items as Amazon Prime products. This will get you more customers and a higher seller-rating, thereby also a better ranking in the search results. Find out more about Amazon FBA and who benefits the most from it in this article.
Let’s take a closer look at what Amazon’s fulfillment service makes your life easier – and also how it makes it harder.
The Benefits of Selling on Amazon FBA
Prime Audience Access and Name Association with Amazon – A lot of people downplay this benefit, because of its passive nature. However, with 151.9 million Prime customers (and counting) in the US alone, there’s really no need to talk about why this is a clear benefit. Also having your items carry a “Fulfilled by Amazon” badge will create a certain level of trust with customers, making them more prone to buy your products.
Amazon’s Immense Shipping Infrastructure – As part of the FBA network, you will naturally benefit from any special deals Amazon has with the shipping companies. You will also benefit from the way the online giant handles their own shipping – which is very efficiently. As a regular seller, it is very hard to parallel Amazon’s delivery infrastructure.
24/7 Customer Service – Not only does Amazon’s Customer Support handle returns, inquiries/complaints, and refunds around the clock. The whole service is free of charge for you with the exception of return fees in certain cases.
Multi-Channel Fulfillment and Storage – You’re selling on Amazon, Ebay and Walmart at the same time? No problem, Amazon let’s you fulfill over multiple channels. What’s more, you can also store your multichannel items at an Amazon fulfillment center.
More Chances of Winning the Buy Box – The Amazon Buy Box – Everybody knows what it is and why you need it. Selling on Amazon FBA will heighten your chances of getting a higher share. That’s because, by using Amazon FBA, you already fulfill the highest seller metrics possible in regard to shipping and customer service (since you’re paying Amazon to do it).
The Drawbacks of Selling on Amazon FBA
Loss of Revenue Due to FBA Errors – Any warehouse is susceptible to errors in the areas of inventory or return management. However, in most cases, the errors that Amazon creates are paid for by the sellers themselves. You can get reimbursed by Amazon, but that will take up a lot of your time and cost you a lot of nerves.
Strict Packaging Guidelines – Depending on the items you sell, you may be subject to strict packaging and prep requirements. Before you can send your products to the Amazon fulfillment center, you will have to make sure you fulfill the requirements. You can also let Amazon do that for you, which will cost you extra though.
FBA Fees – Especially when you are new to selling on Amazon – FBA or not – economizing is a big issue. Amazon FBA takes over a lot of necessary services, but also charges you for them. Calculate precisely if the benefits outweigh the costs before you choose to sell over Amazon FBA.
No Direct Customer Contact – As we’ll describe in more detail later on, the customer experience you provide is of vital importance to your shop. Amazon FBA takes over any direct contact you have with your customers, leaving you “only” with your listing as a means of communication.
How to Find Out What Products to Sell on Amazon FBA?
Selling successfully on Amazon FBA will require that you have an attractive product portfolio. Your products have to be economical, unique and have minimal competition. Easy right? Unfortunately, these three factors require more preparation and research than one might think. Here are a few tricks of the trade to help you up your product game.
Find the Best Products to Sell on Amazon With Thorough Research
The Amazon Marketplace trends always adapt to external factors. Lockdowns and restrictions led to a rise in board games, video games and home training equipment as well as supplements. Try to keep these factors in mind when looking for new products.
Now, where to buy these products you want to sell on Amazon FBA? Sourcing platforms such as Wish or Alibaba are a great source for inspiration. The homepages are full of articles that can inspire you during your product search or that you can add to your product portfolio right away.
Amazon also has its own list of best-selling products which is updated hourly. Taking into account the three categories we already mentioned, the following are the top sellers, as of December 2021:
- Toys and games – Tim Burton themed speakers, Hasbro’s “Connect 4” and the original Slinky Walking Spring Toy (the 90’s called, they want their Christmas wishlist back).
- Home training – Hydroflasks, Fitness-trackers and sportswear.
- Video Games – 10$ Xbox and Nintendo gift cards.
Analyze Your Competition
If you are interested in selling new products on Amazon FBA, be sure to enter a market without any big players that may already be holding a monopoly. Especially if one of those big players is called Amazon.
Another nifty trick to check how many other sellers you are up against is to just enter the product name into the search bar and see how many results are shown. By adding certain keywords you can see how the niches are filled at the moment. As an example, we entered “mouse pad” at first and hit 20,000 search results. Quite a big market to go up against.
In a second search, we entered “gaming mouse pad with wrist support” and came up with 2,000 search results. Definitely a more overseeable competition.
Expand on Your Niche
Speaking of niches: As an experienced Amazon seller, you may have already built up a certain niche-authority that your customers appreciate. Expand on that niche and offer your customers more quality products by ways of cross-selling or higher quality products by ways of upselling. As an example, you can offer “Thank You” cards to follow up on the wedding cards you are already selling, or you can start selling dog treats or dog food to pair with the leashes in your listing.
Selling On Amazon FBA – Fees To Take Into Account
By using the online giant’s FBA service, you will be able to circumvent many fees of your own, such as shipping and storage fees. Not to mention the customer service team that you won’t have to be paying. However, selling on Amazon FBA – like any business service– will incur an own amount of fees.
What’s important to know at this point is that the cost of Amazon FBA is dynamic. Meaning that it depends on criteria such as the type and quantity of the products being stored and sent, the duration of storage, seasonality, and so on.
There are two types of fulfillment fees you have to particularly take into consideration.
- Order fulfillment fees
- Monthly storage costs
The costs that you will have to carry when it comes to FBA selling on Amazon naturally depend on how many SKUs you have booked and what kind of items you are shipping. You can find an up-to-date and detailed list of costs here. Also keep in mind that if your product sits in the FBA warehouse for more than a year, Amazon will charge you additional fees for long-term storage:
Hidden Fees on Fulfillment by Amazon
Also keep in mind the hidden fees that are not listed on Amazon’s official website. As an example, there are costs that you will have to cover due to FBA errors. These errors can take many different forms. Either an item is not booked correctly, or not returned, or it was returned but not booked. Whatever the case, these mistakes are bound to happen in the fulfillment centers.
With each of these errors, you will lose money. Quite a lot of it, in fact – the median amount of money that our clients retrieved through FBA errors is € 6000/Year. What you can do in these cases is either manage these cases yourself, a tedious affair involving a lot of paperwork, or you can automate it and let a software solution do it for you. If you choose the latter, take a look at our Lost & Found solution.
We have just the article for you if you want to read more on this topic of FBA fees on Amazon in detail.
Is Amazon FBA Still Worth it?
Many things on Amazon change constantly and it doesn’t look like that’s going to change in the next years. That’s why it’s important to continuously ask yourself the question of whether selling on Amazon FBA will remain relevant. A hot topic for discussion is whether Amazon FBA remains profitable even nowadays.
A lot of companies and experts answer with an enthusiastic “yes, of course!” while a more honest answer would go along the lines of “that depends on the situation.”
It Depends on the Marketplace
For one, it will depend on how you and your store are set up momentarily. If you’re a professional seller, you will find it particularly difficult to evade selling on Amazon with FBA. The amount of time you save and the heightened Buy Box opportunities alone speak for selling with Amazon FBA.
Another important factor is that you take into account the current marketplace situation. It has never been more difficult than now to sell on Amazon. The reason for that is the sheer volume of products you can find on the platform. The chances of you sourcing a product that everyone’s looking for – and nobody is selling – are very slim.
We also have good news, though. Amazon has never had as much traffic as it does nowadays. With 200 million visitors in a month, you don’t necessarily need a unique product to make revenue. Here’s some more good news: all these visitors are looking for the same thing. A good product tied to a great customer journey.
It Depends on Your Customer Journey
Good products are a basic requirement for every sale. A perfect customer experience, however, stays in the minds of the shoppers just as effectively. Maybe even more so when done correctly.
It is true that, when selling on Amazon FBA, the online giant takes away the option of speaking to your customers directly. They are taking care of that now, after all. You can use the free time for various things that will improve your customers’ experience. You can have high-quality photos of your products made, improve your product descriptions, or work on your pricing strategy.
Especially on a huge platform like Amazon, it’s always the unique selling propositions that ultimately encourage people to click on “Add to cart.”
So, is selling on Amazon FBA worth it for you? It depends. How can you prove to customers that your store is better than those of your competitors? Better prices? Cool bundles? Great images that convey the feeling the product emits – even when you are just scrolling by on your smartphone?
Well implemented, all these factors will make selling on Amazon FBA worth it. However, sellers that are currently selling moderately, maybe because they don’t feel like optimizing their store, will not miraculously sell more just because they are now using the online giant’s fulfillment service.
There are many things to take into consideration when it comes to FBA selling on Amazon. Is your product portfolio big enough or do you need some more inspiration from other sourcing platforms or Amazon itself? Does it make sense for you to start selling on Amazon directly or should you maybe think of improving the experience you offer your customers first? What hidden costs do you have to take into account?
All these questions are answered in detail above. We can say one thing for sure though. Selling on Amazon FBA alone is not enough to make your online store successful. It will however help you to overcome many difficulties that sellers face.
There are definitely a lot of courses and video tutorials out there that can help you navigate the waters of Fulfillment by Amazon. Especially when it comes to selling on Amazon FBA for beginners, there are many helpful videos from knowledgeable people you can watch. What you shouldn’t do, however, is book a course that costs a lot of money. You can get all the necessary info you need for free.
That depends. How lively is your online store? FBA is likely to complement an already successful online presence and listing. However, if you sell on a mediocre level – possibly because you are not optimizing your listing constantly – Fulfillment by Amazon won’t miraculously elevate your store out of mediocrity.
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