Get Started Selling on Amazon: The Complete Step-by-Step Guide (Part 11 of 12)
Read time: About 8 minutes!
Part 11: Moving Up to Fulfillment by Amazon (FBA)
In Part 10, we covered Improving Your Seller Ratings & Ensuring Your Account is Not Suspended!
You have managed to maintain your account’s health and your little Amazon operation has blown up! Your Amazon business is not so little anymore and you’re getting more orders than you can handle.
In the past, you would have needed to maybe take out a loan in order to hire a few extra employees to help you with order fulfilment, customer service and other aspects of your Amazon.
Thankfully, Amazon changed all that by introducing Fulfillment by Amazon better known as FBA.
A true game-changer.
This is How Amazon Describes FBA
With this innovative service, you send inventory directly to Amazon where it is stored and managed in a secure, climate-controlled facility. When orders are received, Amazon will professionally pick, pack and ship the product directly to your customer.
Amazon.com processes millions of orders a year while consistently ranking as one of the most trusted and highest customer satisfaction rated e-commerce companies. To maintain this unique combination, we have developed one of the most advanced online order processing and fulfillment operations in the world. From the advanced web-to-warehouse, high-speed picking and sorting system to our complete shipping carrier integration, Amazon’s technology results in your customers getting what they ordered, when they ordered it.
Whether you’re considering just a few items and shipments a week or millions of products and orders per year, you can put Amazon’s expertise and experience to work for your business with Fulfillment by Amazon.
How FBA Works!
Put Amazon’s Fulfillment Technology to Work for You.
You sell it, we ship it. Amazon has created one of the most advanced fulfillment networks in the world, and your business can now benefit from our expertise. With Fulfillment by Amazon (FBA) you store your products in Amazon’s fulfillment centers, and we directly pack, ship, and provide customer service for these products.
Enjoy these benefits when you use Fulfillment by Amazon.
Eligible for FREE Super Saver Shipping & Amazon Prime:
Customers love FREE Super Saver Shipping and Amazon Prime. FBA Listings on Amazon.com feature these delivery messages increasing awareness of product eligibility for free shipping.
Your FBA listings on Amazon.com are sorted by the item price without a shipping cost. Amazon assumes they will ship for free with FREE Super Saver Shipping or Prime, which gives you an edge when competing!
Trusted Customer Service and Returns:
FBA listings are displayed with the “Fulfillment by Amazon” logo, so customers know that packing, delivery, customer service and returns are all handled by Amazon.
Fulfill Orders from other Channels:
FBA can fulfill your orders from other sales channels from your inventory stored at an Amazon fulfillment center. You manage your inventory through a simple online user interface, and can direct us to return the inventory in our fulfillment centers at any time.
FBA is not free but from my experience (for most cases) it’s much more economical than hiring a staff.
Here are fees that are associated with FBA.
Inbound Shipping Fee
This is the cost of getting your items to the FBA warehouse. Amazon lets you use UPS partnered shipping so you get Amazon UPS rates which you can probably imagine are the best in the world. A 50 pound box typically ships for around $9-$15 depending on how close you are to your nearest fulfillment center. You can also arrange LTL shipments or choose your own shipper.
The varies depending on the categories that you sell in.
- Handling Fee (for non-media items) – See chart
- Pick & Pack Fee – See chart
- Weight Based Fee – See chart
Storage fees are very low and the first 30 days are free. You can manage your FBA inventory levels and replenish your inventory as needed to keep 30 days worth of sales in stock to prevent paying any FBA storage fees. Even if you do end up paying storage fees, you’ll find that they are very reasonable.
I have been taking advantage of FBA since my 2nd month (September 2015) selling on Amazon. It makes selling on Amazon a strong passive income contender. Here are some wins associated with selling on Amazon via FBA.
Advantages of FBA
Win #1: Access to Amazon’s Most Loyal Customers aka Prime Subscribers
As an FBA seller, you get access to Prime subscribers that pay $99 per year in order to take advantage of free 2-day shipping. As a business person, you couldn’t ask for a better customer base.
Studies show that Prime subscribers buy 150% more than non-Prime customers, are more loyal, and tend to purchase more expensive items compared to non-prime customers.
To be more specific, they spend around $1,340 on Amazon annually, whereas non-Prime customers only spend $529. That’s more than double!
Win #2: Customers are Willing to Pay More for the Same Product
As we mentioned earlier, you can factor the cost of shipping into the price of your product when taking advantage of FBA. Majority of Prime customers are willing to sacrifice a few bucks in order to take advantage of the prompt 2-day delivery.
This helps you eliminate competition especially with newbies that like to engage in “the race to the bottom” – when different sellers keep competing on lowering the price of the product in order to sell more units.
Win #3: Automatically Higher Volume of Sales
While this isn’t a guarantee, we—along with our clients— have found that just by switching over, you’ll see a lift in unit sales volume, to the tune of 20% or more.
Many sellers have reported higher, including double their original volume. Much of this is due to your access to Prime subscribers.
Win #4: FBA Improves Your Chances of Winning the Buy Box
Although no one really knows what the formula to consistently winning the buy box, it’s proven that depending on the product category, you can price up to 2-10% higher than competitors and still win the Buy Box if you are using FBA and competitors aren’t.
This is because shipping is factored into the total cost, so if your item is priced at $50 with Prime free shipping, it still beats out a merchant-fulfilled item at $45 + $5 shipping.
Win #5: Amazon Takes Care of Shipping, Returns, and Customer Service
Last but not least, from a passive income perspective, I find this win the most attractive! When a sale is made, Amazon picks it, packs it, and ships it to your customer. Fast shipping makes for happy customers, and happy customers translate to more sales for you.
All aspects of customer services are handled by Amazon. This automatically saves you time and money, because it eliminates the need to employ additional customer service reps.
Finally, because your items are being stored in Amazon’s fulfillment centers aka FCs, therefore you won’t have to worry about needing any warehouse space for your ever expanding inventory.
My roomates only have to deal with messy boxes every once in awhile when I receive them from my supplier and need to prep them to ship to Amazon’s FCs.
Win #6: Expand by Effortlessly Selling in Overseas Markets
FBA is not only available in the US, it’s available in all Amazon marketplaces i.e. Amazon Europe, Amazon Asia.
This opens doors to a global market and as the ambitious entrepreneur that you are, why wouldn’t you want to take advantage of this?
It’s the #1 reason why as someone who lives outside the US you can easily sell on Amazon. I wrote a blog about it here.
So there you have it. How awesome is FBA?
Go ahead and scale up your Amazon business by taking advantage of the amazing FBA program Amazon offers.
In a future post, I’ll show you a step by step guide to getting started on FBA. But if you’d like to get a head start, check out the additional resources below;
As always, if you have any questions or get stuck and need help completing any of the steps outlined here, leave me a comment below or email me and I’ll be happy to help.
Up Next, Part 12: Scaling Up Your Amazon Operation
This post is a part of the ongoing Get Started Selling on Amazon: The Complete Step-by-Step Guide series, follow the links below to read them: