Last week, we looked at how to sell successfully on Amazon. This week’s blog will continue to focus on Amazon and look at how to help sellers getting started with Amazon FBA (Fulfilment by Amazon), which continues to do well according to a recent report by Baird Equity Research.
What is FBA?
You pay a little fee each month and in return, Amazon takes care of packing and shipping your orders. You send your inventory to Amazon so that every time you get a sale, they send pickers through their warehouse to select the product and send it to its new owner.
If anything goes wrong with the order or delivery, Amazon takes care of things. They also offer help in the way of 24/7 customer support in the languages of the marketplaces it sells in and provide tracking information.
Advantages of FBA
- Frees Up Time: You can’t put a price tag on having time to grow your business and focus on strengthening it.
- Storage Space: It’s entirely taken care of, and you don’t have to worry about stepping over boxes to reach your bed or kitchen.
- Reputation: Amazon’s got a solid name and buyers trust it. When you back up your line with Amazon, you increase your chances of landing a sale.
- Shipping Protocols: Don’t want to hassle yourself with complicated customs regulations and shipping practices? You don’t even have to make it a whisper of a thought.
- Amazon Prime: FBA translates into automatic qualification for Amazon Prime, which your Amazon Prime buyers will be very happy about.
- Returns: Amazon will take care of all of that for you, from talking to the buyer to sending them a new product.
- Sell Volume: The FBA fees, along with Amazon’s commission, may seem like it’s hard to get a profit — until you see just how much more your sell rate has increased.
- Listings: Yup, you can use other people’s listings for your own, adding even more time saved by using FBA.
- Money-making Tips: Bundle and multipack your items for even bigger profits.
Disadvantages of FBA
- Cost: FBA isn’t free, and can eat up your profit margin if you sell large, heavy and/or inexpensive items.
- Co-mingling: Your inventory is sorted by like, and the product that goes to your buyer may not necessarily be the one you sent Amazon.
- Order Volume: It can be tricky to ascertain how full you need to keep your inventory, particularly around busy times like holidays.
- Control: You give up a lot of it because Amazon packs and ships their way, so you don’t get to suss out cheaper materials or routes.
- Sending to Amazon: You have to follow very specific ways of sending your inventory to Amazon, like labelling products individually.
- Competition: We don’t want to say you’ll have to start sleeping with one eye open, but you should definitely be aware of Amazon cutting into your potential revenue.
- Part-Time vs. Full-Time: If selling on Amazon is your sole occupation, it can pay off to use FBA. But if you’re a casual seller, then the costs may cut into your profit margin too much.
- Patience: It may take time to see a profit, and the trial-and-error period — where you may be in the hole for a while — can be uncomfortable to bear.
- What to Sell? Market research is necessary to know what the efficient-selling items are — and which ones to steer clear of.
Gathering Up the Required Tools & Accessories
Here’s a list of some basics that you will need in order to run a successful FBA business.
- Large boxes
- Black permanent markers
- Printer labels
- Box Shipping labels
- Polybags with suffocation warning
- Box packaging tape
- Bubble wrap
Common FBA Mistakes to Avoid
As a newbie, you’ll be learning the ropes so here’s some common mistakes you can avoid with FBA.
In general, you want to sell for three times your cost price to account for Amazon fees and shipping costs. Check out what the competition is currently selling an item for to see if there is a profit margin there you can compete with.
Some product categories are restricted for sellers—make sure you are approved in the categories of products you’re sourcing.
Low value items
Amazon’s FBA fee structure is set up in favour of higher priced items, therefore you are better to sell higher value products than lots of low value ones. Also, it is better to sell less bulky goods to save on shipping costs.
Use Amazon’s sales ranking
Sellers can use Amazon’s sales ranking to help identify products that could be worth selling or products that aren’t worth pursuing.
So there you have it, some great advice to get you started on FBA if you choose that path. When you sign up to Amazon, one thing you’ll need to decide is if you want to be an Individual or Professional Seller. If you’re serious about your FBA venture you’ll need to set up the Professional account sooner rather than later. You’ll also need to decide on a store name so choose wisely and ensure it’s relevant to the products you’re selling or may be selling further down the line.