3-June-2022

Should you sell through Amazon FBA?

Introduction to Amazon FBA

In layman terms, FBA or “Fulfilment by Amazon” is a storage and fulfillment model where the products are stored in Amazon’s warehouses and delivered via Amazon’s distribution network. But FBA is more than just a delivery model for a seller. Amazon handles order receiving, picking and packaging before shipping the products to the customers from its fulfilment centres. Post-sales activities such as facilitating product returns, managing refunds and providing customer service are also taken care of by Amazon.

Reasons to opt-in for FBA service

Apart from saving the capital investment required to set up storage, also frees up time and effort
Managing all the above processes – storage, fulfilment and after sales service, by a seller would mean capital investment for setting up storage facilities, equipment, recurring operating expenses e.g., rent, staffing & training etc. and putting in the necessary time and effort to perform these tasks. However, Fulfilment by Amazon is not as capital-intensive. All a seller needs to do is to ship the inventory to the registered fulfilment centres. Once the inventory reaches Amazon centres, it takes over the entire order fulfilment process, right from receiving the customer’s orders to delivering the right products to them and handling return/ refunds, if any. This means fewer upfront costs of doing business, which in turn would release the capital that can be utilized for scaling up the business – management, promotion, sales, etc.

Eligible for Amazon Prime Badge
When using FBA services, the listings automatically qualify under the “Amazon Prime” subscription model and are awarded a prime badge. This means that the customers availing Prime subscription would be offered free and fast delivery for products present in FBA. Research shows that the most important trigger for cart abandonment is “unexpected shipping costs”, which is eliminated via Prime.

Also, when a customer sees Amazon Prime tagged to a product, it helps build their confidence in the purchasing decision. Furthermore, Prime tag gives more visibility to the listings as Amazon has a dedicated section/ filter for such products.

Expands reach via Amazon’s logistics network
Owing to the business volume handled by Amazon, it enjoys the best shipping rate from the logistic partners. As a result of which, it can pass the benefit of lower shipping costs to the customers which sellers would otherwise not be able to if they handle the shipping by themselves. Also, Amazon’s distribution network enables the sellers to spread across and penetrate deeper into various geographies/ cities/ zip codes which otherwise would be either expensive or difficult to reach.

Access to Amazon’s customer service
Amazon customer service has been ranked one of the best in the world for decades now and FBA provides easy access to this top-notch, super-efficient 24/7 customer service.

While all the above comes at a cost, Amazon releases lucrative offers from time to time to attract sellers to avail this service e.g., first 3 months free for any new enrolments, etc.

How does FBA help in sales upliftment?

Amazon itself claims that sending products to FBA would result in 20-25% uplift in Amazon sales for a business. This is because Amazon gives more visibility to FBA products. But one must be wondering why Amazon does that and what’s in store for them. Let’s break it down for a seller to understand why Amazon encourages them to opt for FBA:

Assured inventory and no chance of seller cancellation due to OOS
Amazon is well known for offering best-in-class customer experience and to ensure the same, it discourages/ penalizes sellers from making any pre-fulfilment cancellations by setting strict targets (should be less than 2%). However, in case of FBA, this is being taken care of as Amazon has inventory available with them, which ensures that there will be no chances of seller induced cancellations.

Products are in fulfillable condition and are ready to be shipped
Amazon does stringent QC of the stock while inbounding the shipment received from the seller and hence knows that the product is in fulfillable condition. This would mean that the chances of return would be lower for FBA orders, which is aligned with Amazon’s motto of ensuring customer delight.

Superior delivery promise as compared to, when the product is with the Merchant
Owing to Amazon’s extensive distribution network, Amazon has easy and quicker access to various zip codes. This means the product can be delivered to the customers in the least possible time – same-day delivery, next day delivery, 2-day delivery etc. The pick-up and connection time is reduced by at least 24-36 hours even in metros via FBA.

Final Thoughts

Amazon FBA is one the prime growth accelerants that can breathe life into your Amazon business and help gain visibility in a short period of time. However, every business is not created equal and depending upon the category, product type, business situation and cost considerations, one can take a different route when planning logistics support for your Amazon business.

Enrolling into Amazon FBA and managing multiple warehouses can seem like a daunting task when you don’t have an expert to guide you on a variety of aspects including shipment creation, inventory management, taxation, claims process etc. Get in touch with us if you are looking to bring onboard a trusted partner who can help you navigate through the high tides of the competitive Amazon business.

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