Introduction to Fulfillment by Amazon (FBA)

Amazon’s Prime membership program has been very successful and has enabled Amazon to create a legion of loyal shoppers that make multiple repeat purchases throughout the year. In fact, Prime subscribers spend an average of $1,300 per year compared to non-Prime members who spend about $700 per year. That’s a big difference. A great way to benefit from the Prime program is to participate in Amazon’s Fulfillment by Amazon (FBA) program. In this program you outsource your warehousing, order fulfillment and customer service to Amazon. This means that you store your goods in Amazon’s fulfillment centers across the US and let Amazon do all the order fulfillment for you. They’ll even take care of all the customer service and returns processing as well. This lets you focus more on growing your business instead of dealing with logistical tasks.

Fulfillment by Amazon (FBA) Advantages

Amazon has created one of the most advanced fulfillment networks in the world. There are a lot of benefits that come with using Amazon’s expertise in fulfillment. As mentioned above, with Fulfillment by Amazon (FBA), you store your products in Amazon’s fulfillment centers, and Amazon will pick, pack, ship and provide customer service for these products. Moreover, because these items are sold on Amazon’s marketplace, you will be able to reach more customers than if you focused only on selling on your own website.

Get All the Prime Benefits

Prime members enjoy many benefits that aren’t offered anywhere else. The program is so popular that it’s almost a no-brainer to sign up for a Prime account. For example, Prime members get free Two-Day Shipping on all Prime-eligible products sold on Amazon. In addition to the shipping benefits, Prime members get a bunch of other benefits as well. When you list your products with FBA, your products become eligible for all these Prime benefits. This means that when your product is fulfilled by Amazon, it gets the all-important Prime badge displayed next it. This makes your products more attractive to shoppers and enables you to get a let up on the competition.

Customers Get Amazon’s Customer Service and Returns

Amazon handles customer service and returns for all FBA-eligible orders. When customers see the Prime logo displayed next to your listings, they’ll know that Amazon will be taking care of the packing, delivery, customer service, and returns. This gives them peace of mind and increases their willingness to buy your products. This is a big deal because it eliminates the uncertainty customers may have with dealing with a merchant that they have never heard of. They’ll know that even though the product is sold by you, Amazon will have their back in case they need to return it or have questions or doubts about their order.

No Quantity Minimums to Store Your Products

One of the good things about the FBA program is that you are free to send as little as you want to Amazon. While Amazon may restrict how much inventory you can send to them, there are no minimums in the number of units you must send. This means that you can start with as few as one piece to participate in the program. It’s all up to you.

If you’re just starting out, it is advisable to start with a relatively small amount of inventory and then expand operations. The exact amount depends on your product’s likely demand and the time, cost and effort it takes to get the product to a fulfillment center. Many new participants elect to send small amount of inventory in their initial release. However, this is by no means a golden rule. You can send larger quantities if it makes sense for you. On the flip side, there are many ways to reduce your inventory if you ever feel that you have stored too much inventory in Amazon’s fulfillment centers.

You Can Fulfill Orders from Other Channels

Once your online presence grows beyond just the Amazon marketplace, Fulfillment by Amazon (FBA) can also be used to fulfill orders that weren’t placed on Amazon. If you get an order outside of Amazon (such as on your own website), you will be able to fulfill those orders using the inventory you have stored in Amazon fulfillment centers.

FBA Cost Benefits

With the FBA program, you are only charged for the storage space you occupy and for the orders that get fulfilled on your behalf. The cost of shipping your products is included in your fees. What’s more, there is no extra charge for Amazon Prime Free Two-Day Shipping and free Shipping on eligible orders.

Amazon Canada and Mexico Expansion

As a long-term strategy, you can use your existing Amazon.com seller account to also sell on Amazon’s marketplaces in Canada and Mexico. If you elect to use FBA facilities for products listed on Amazon.ca and Amazon.com.mx, you will be able to reach even more customers across North America.

Seller Fulfilled Prime (SFP)

While in this post we mostly focused on the FBA program, there is another way to benefit from Amazon’s Prime program. Amazon has a new program called Seller Fulfilled Prime (SFP) that lets you expand your participation in the Prime program without using Amazon’s fulfillment centers. With Seller Fulfilled Prime you use your own fulfillment capabilities and choose the products you’d like to offer with the benefits of Prime. If you want to learn more about Seller Fulfilled Prime, you can read our article entitled, “All About Amazon’s Seller Fulfilled Prime Program.”

Conclusion

The Fulfillment by Amazon (FBA) program offers an amazing opportunity to outsource your warehousing, fulfillment and customer service activities to Amazon so you can focus your efforts to expand and improve your business. There are a lot of benefits that can help increase your sales. The main benefit is that the FBA program lets you list your products as Prime-eligible, giving you countless opportunities to reach Prime customers. While the program has its benefits, it can be costly as well, so it is important to keep an eye on FBA expenses. Amazon discussion boards have a lot of stories about merchants who either like FBA or have had a hard time with it. The opportunities are there but it is up to you to take advantage of them in order to improve your business. Make sure to do your due diligence and I’m sure you can benefit from FBA if you plan for it correctly. What’s more, if you combine your participation in FBA with your marketing efforts such as Sponsored Product Ads, you can generate a double whammy for your business.

Business Consulting Services: If you’re a small business owner looking to start or improve an online business then let me show you how to benefit from my experience. I have helped several online resellers grow their businesses by developing an online strategy to sell on Amazon, eBay or any other marketplace. Call me at 310-574-2541 or email me at Pez@Pezlogic.com for a complimentary business review.