Amazon has revolutionized eCommerce more than any other company. While Amazon’s size and reach might cause anxiety or fear, there are plenty of opportunities to work with Amazon rather than against it. The easiest way to get started working with Amazon is by taking advantage of Fulfillment by Amazon, also known as FBA.
FBA allows you to ship your products in bulk to Amazon warehouses across the country. Your products then become eligible for Prime 2-day shipping. Amazon takes care of the packaging and shipping, all included in the FBA fees.
At first blush, FBA seems like a very expensive option. The commissions are higher than other channels such as eBay. Without doing the math, it might seem like it isn’t a very good deal. Is FBA too expensive? In reality it is a very good option for most sellers. Here are 4 reasons you may want to get started with FBA:
1. Own the Buy Box
If you are selling a brand name product that other sellers have access to, it can be tough to get visibility on Amazon. By default you will be relegated to the “Other Sellers” box on the page. The most desirable position is to be the default seller when someone hits the “Add to Cart” button, known as the “Buy Box”. In order to be that seller, you need to do have 2 things:
Lowest Price – You need to be the best deal
Best Shipping – You need the best shipping option
You can own the buy box without doing FBA, but as soon as another seller offers their product using FBA, you will get bumped. The quantified value of that depends on your product, but it could mean the difference from selling 1-2 products a month vs selling hundreds.
2. The Whole Fee
For the products I sell, eBay charges me 10%, Amazon charges me 15%. Seems too high, right? But this doesn’t tell the whole story. If we break down all the fees, its much closer. Here is the breakdown for a product sold on Amazon (non FBA), Amazon FBA, and eBay. For this example, we will assume the guitar weights 10lbs, and it is shipped from Salt Lake City, Utah to Chicago, Illinois.
- Amazon – Standard
- Marketplace Commission
- Outbound Shipping
- Handling Fees
- Payment Fees (PayPal or other)
- Total Expenses
- Amazon – Standard
- Amazon – FBA
*Cost of shipping goods to Amazon warehouses.
From this example, FBA is the most expensive option, but only by about 1% of your total cost. There are some overhead fees to consider as well, the complete list of fees can be seen here.
3. Shipping Cost
As you see from the example above, your shipping cost goes down dramatically. This is due to two reasons. The first is that you ship your goods in bulk rather than one by one. The other reason is that when shipping goods to Amazon’s warehouses, the shipping labels are generated through Amazon using their unheard of UPS rates. While it costs me $15 to send a 10 lb. box across the country, I can send a 50 lb box for about $25.
If you normally charge for shipping, with FBA that is included in your FBA handling fees. And that includes 2-day shipping for Prime members. It is a huge incentive for customers, and huge savings for you as a seller.
4. Never Close
I am currently writing this article from a hotel room at Snowbird, Utah. In the winter it is a bustling ski resort. In the summer its a quiet, laid back place to get of town and away from the heat.
As a seller, I pride myself on taking one day or less to ship my products to customers. Once they have paid, it is my responsibility to get the product to them as soon as possible. (I could go on a rant about sellers taking 3-5 days or more to ship, but that’s another topic.)
Last night I received an email stating that Amazon had sold and shipped two items for me. While I was on vacation. Good customer experience and I get to be on vacation. I don’t lose momentum by taking my Amazon listings down for a weekend or a week at a time.
5. Multi Channel Shipping
Just as Amazon sells and ships for me while I am on vacation, you can leverage this benefit on other marketplaces. Called Multi-channel fulfillment, this is a great feature that Amazon offers. Using a different fee schedule, Amazon will pick, pack and ship your orders that originated on eBay, your own site, or any other channel. On my products this turns out to be about the same cost to ship it myself. Some sellers may build their whole business around this service, especially where storage space is limited. Others may use it only occasionally when needed. It is a very convenient option for balancing inventory levels, or for continuing business even when away from your home base.
Give it a try
The Garage Profits method is all about testing different products, channels, and marketing, and scaling up with what works best. This is no different. You can get started with FBA with just one or two items (although you might get better results with a variety of products). Give it a shot, it just might change your business.
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