Fulfillment by Amazon (FBA) can be your ticket to the eCommerce big leagues. Having Amazon handle orders can boost your bottom line by as much as 20 percent and give you hands-off order processing. However, Amazon FBA isn’t for everyone. So, is Amazon FBA worth it for your business? This article will help you decide if you should sign up or pass.
Amazon FBA Beginners Guide: Definition, Cost, Pros & Cons
What is Amazon FBA?
Instead of packing and shipping orders yourself, FBA allows you to send products to Amazon, and they will ship it to the customer once an item sells. You are outsourcing all order fulfillment tasks to Amazon for a fee. More details on that later.
The first question that comes to mind is how to prepare products for FBA. You’ll need to prep your products so that Amazon can process your items for sale. There are strict requirements that must be met. Failure to comply with Amazon’s guidelines can result in lost sales, delayed processing, rejected shipments, and, worst of all, noncompliance fees. Simpl Fulfillment can do all that for you, guaranteeing that your items are prepped correctly for acceptance by Amazon. We get you in the gate faster.
Once Amazon accepts your items, they handle it from there. Your inventory will be stored in an Amazon warehouse until sold. Then they will pick and pack your orders as each item sells, ensure timely shipment and even provide post-sale customer service.
How much Does FBA Cost?
There are two costs for Amazon FBA fees.
Inventory storage fee
First, there are Amazon FBA storage fees. Your inventory takes up valuable space on the Amazon fulfillment center’s shelves, and Amazon charges a fee for it. Amazon storage costs vary based on the time of year and size of the item. See Amazon’s FBA pricing page for more info.
Amazon fulfillment cost
There are also Amazon FBA fulfillment fees. This is the fee Amazon charges for the fulfillment process: picking, packing, and shipping your items. The fee is charged per item, and size is a significant factor in fee pricing since it costs more to ship large items. See Amazon’s FBA pricing page for more on this.
Factors to Consider Before Taking the Leap
Using Amazon FBA is a golden opportunity for the right type of business. That doesn’t mean it makes sense financially for all businesses. Read on to determine if it’s a good investment for your needs.
Benefits of Amazon FBA
Amazon is the world's largest e-tailer. Using Amazon order fulfillment comes with significant competitive advantages. These three factors can take your sales to the next level. Not to mention, save you time so you can focus on growing your business instead of getting bogged down by time-consuming order fulfillment tasks.
•Your products will be eligible for Amazon Prime with free two-day shipping.
•Your products are more likely to land in the Amazon Buy Box than non-FBA competitors.
•Amazon will handle your post-sale customer service and returns 24/7.
Amazon FBA Drawbacks
OK, so clearly, Amazon FBA has significant benefits. What’s the downside?
•Storage and fulfillment fees can chip away at your profit.
•You have to play by Amazon’s rules, including agreeing to their generous return policy and remitting sales tax in many states.
•Prepping items to send to Amazon is a daunting task due to their strict “receiving” rules. There is no room for error and fees if you do it wrong.
•FBA no longer fulfills Walmart.com and Jet.com orders, potentially limiting your sales channels.
•Your products are perceived as Amazon items, so it’s a lost opportunity to solidify your brand, grow your email list, and gain loyal customers.
Is Amazon FBA worth it?
Amazon offers an excellent service — and they know it. If you want hands-free order fulfillment and can price your products to cover the extra cost, Amazon FBA is a smart way to increase sales. The Amazon FBA calculator is a helpful tool to price your products. If you find yourself struggling to keep up with order fulfillment, it’s also worth considering.
Small businesses with a limited selection of products and few sales probably don’t need it. However, it’s a great way to grow sales if you have cash flow upfront to invest in FBA since items are more likely to sell by being FBA.
Outsourcing logistics frees up your time to focus on marketing activities and other tasks to grow your business and make more money. It can be well worth the fees for the right company.