Upsides and Downsides of an Amazon FBA
I will be real quick with this one, every neophyte who wants to sell their products on amazon scuffles on deciding which account should be established, should it be the modern FBA (Fulfillment by Amazon), or should they just stick to traditional FBM,(Fulfillment by the merchant).
Most of the Amazon sellers commit a mistake on this one. The main motive here should be on choosing the right account in order to increase the business as well as bottom line.
For being a successful Amazon seller it is really crucial to choose between Amazon FBA and FBM.
I hope this blog helps you to decide what is better for your product and business.
What is FBA and what is its use?
This is a common dilemma faced by every seller of amazon. Fulfillment by Amazon (FBA) holds an edge over the Fulfillment by the merchant due to some reasons.
Well, for the starters the sellers who use FBA account outrun their competitors through faster delivery and they have access to a wider customer base. You will be startled to know that there is a good side as well as a bad side for being an FBA seller. Well FBA is not right for every amazon seller, it really will depend on the kind of products you are offering and what type of business you are dealing in.
Let’s just discuss possi+tives as well as negatives of being an FBA seller:
Pro# 1 Amazon takes heed of shipping, returns and customer services
When any sale is made, it is amazon taking all the elbow grease for you. It is amazon who will pick, pack and ship it to your customers. oh, in case if the customers remain unsatisfied due to the late delivery of your product or damaged product received, Amazon will handle that too. This will reduce the time of your shipping which will make your customers happy, and happy customers will multiply your sales.
Pro# 2 You get access to all the prime subscribers
Prime subscribers are the ones who pay $99 per year in order to avail of the benefits of free 2 days shipping. Prime subscribers are loyal as well as dedicated, so they make 1.5 times more purchases than nonprime subscribers. This provides you with a much wider customer base, that is approximately 50 million, ahh that’s a lot of dough to make.
Pro# 3 Outfoxing your competitors with buy box
Ahh, the ever amazing buy box wins everyone’s, heart. And also, you can quote 2-10% higher and still outrun your competitors if they aren't an FBA. Isn’t it startling? It is because the shipping is subsumed in the total cost, if you price your item, say for 30$ then with prime free shipping it still will outdo your competitor’s item at $25 + $5 shipping. So that is a win-win right.
Even the rose, so enticing has its own flaws, FBA is no exception. That is, from a considerable distance things, perhaps are a bed of roses, but every rose has its thorns. So, here are some of the cons of being an FBA seller.
Con# 1 No, to shipping certain items
Some product is perilous and are assumed to be dangerous which includes flammable liquids and flammable solids and aerosols. This product will not be shipped by amazon fulfillment centers.
Oops, beauty products fall in this category.
Con# 2 Upfront capital required
Well, unlike dropshipping, FBA requires upfront capital. However, if you have upfront capital then eureka, it's the icing on the cake, and you win the battle with your competitors. Investing upfront capital can be a barrier to entry for many of your opponents, so just grab it.
Cons# 3 Difficult to keep track of inventory
I would like to elaborate this one a little more, as it has been a serious bone of contention.
Fulfillment by amazon itself means that your inventories are with amazon fulfillment centers, and not you. So, as you store more and more items, it becomes really knotty as well as toilsome to keep a track on it, as you cannot tangibly see what items you have in your stock.
Employing some inventory management system is a requisite, as sometimes it becomes really laborious to keep on checking the items in your inventory.
Another thing is if your inventory is sitting for 6-12 months or for more than 12 months in any of the Amazon fulfillment centers than it will be assessed a long term storage fee of $11.25 for the former and $22.5 for the latter.
The most commonly slighted problems of amazon seller is blocked obsolete inventories.
Well, it is alarming when your inventory is slow-moving, it usually means something is overlooked.
Obsolete also is referred to as stale inventory, sits on your profit and eats up all your cash flow like a pesky termite. Obsolete inventories make you shell out an extra penny from your pocket. If you don’t have a good strategy for these inventories, sooner or later everything will come tumbling down.
We also spoke to many of the amazon sellers, one thing that troubles them all, is to keep their smash hits in stock. Now, what are these smash hits? These are any product which sells in large numbers. You should always try to keep these items in your stock as it is really crucial to your business.
Hooray, this will make you a quick buck.
Con# 4 FBA, not for every product
It will totally be your decision about which items can reap you more profit if put into FBA. Products having low margins and low volumes are generally not considered profitable to sell in FBA. Plus, heavy products if put into FBA will require higher storage fees, perhaps blowing all your profits.
For all of its advantages, FBA is something of a double-edged sword. So, It’s you, who eventually has to make a decision about FBA. If you really think FBA is beneficial for your product then don’t think of the fees as a cost, as it will often be recouped in terms of high price and high sales volume. In this cutthroat competition taking the big decision will perhaps give you an advantage over your opponents. So just take it.
Well in addition to this, there are amazon service providers all every spoonful of sugar helps the medicine to go down.