As sellers and vendors on Amazon will soon come to realise when starting out on the marketplace is that Amazon loves to use acronyms. ASIN, CRaP, AVC, ASC and so on. One of the acronyms you have probably seen flying about is FBA.
What is Amazon FBA?
FBA stands for Fulfilled By Amazon and is a service that Amazon offers to its third-party sellers to take the stress out of packing and delivery.
By signing up for this service, you are allowing Amazon to handle all of your shipping. From picking and packaging to posting the order out from one of Amazon’s warehouses. Another benefit of this service is that Amazon will also process all of your returns and refunds.
The FBA service is available to existing and new sellers the only thing they will require is that your products are shipped to Amazon in bulk.
What are the pros and cons of FBA?
Pros of Amazon FBA:
Convenience
The biggest benefit of this service is the convenience it offers. As your orders are processed and fulfilled by Amazon in their warehouses with shipping costs included, you don’t have to store your products, Amazon makes sure your goods are properly packaged, delivered efficiently and all returns are handled. Allowing you as the seller to relax and focus on business growth.
Free Shipping
According to a Shopify study, “49% of people abandon their shopping cart because extra costs at checkout were too high… including shipping”. With Amazon FBS you can opt for free shipping for your customers, giving consumers an incentive to check out.
Quick Delivery
Delivery speed can be the difference between a consumer converting or shopping elsewhere. Amazon gets your products to your customers faster than you can deliver them yourself, especially if you opt for next-day delivery with Amazon Prime. Many customers choose to shop on Amazon because of the speed of delivery, meaning your conversion rate is likely to go up as a result.
Discounted Shipping Rates
Due to the size of Amazon’s global shipping operation, they can offer very competitive shipping rates to those signed up to FBA.
Customer Service
Most of those in retail or have first-hand experience dealing with customers will tell you that customer service is often one of the hardest aspects of the role. A perk of FBA is that Amazon offers 24/7 customer service for yourself and your customers via one portal, dealing with queries about delivery, returns and even refunds.
Clear, Easy Payments
Amazon deducts any fees owed before making any payments to you. This means there is no confusion about your sales income.
Flexible Options Available
If your product requires a more bespoke packaging or if this is something you want control over for your brand, FBA has an option for you to package items yourself, or similarly just the packing option if you need to.
Cons of Amazon FBA
Overall Costs
Due to the fees, Amazon FBA can eat quite heavily into your profits. It’s important that you compare the costs of doing it yourself with the cost of FBA and decide which is better for your business.
Low-Value Items
If your product list is predominantly made up of lower-priced items, this could see FBA dramatically decreasing your Return on Investment (ROI), as the cost to ship may be higher than your profit per unit.
Ultimately it is down to the maths whether Amazon FBA is right for your business as margins vary from seller to seller. If you need more help, contact Arthia today to find out more. Our team of Amazon specialists can advise on how to set up your business for FBA.