Fulfillment by Amazon is a great service that lets sellers concentrate on selling while Amazon takes care of all the warehousing and shipping. However, it’s important to understand the costs involved so you can determine whether this is a good fit for your business.
Amazon’s warehouses charge a large amount for sellers to store their stock. They include long-term and monthly storage fees.
FBA Vs Dropshipping – FBA Vs Dropshipping Costs
FBA allows sellers to use Amazon’s warehouses and shipping network to fulfill customer orders. This model is most suitable for fast-selling items compatible with Amazon Prime. Prime allows customers to receive free, expedited shipment on certain eligible items. Amazon offers this option to sellers who sell via channels other than their website. This is called multi-channel fulfilment (MCF).
With FBA, you pay a storage fee based on the cubic square footage of inventory stored in the warehouses. This can have an impact on the unit economics. It is also expensive during high-volume shopping seasons.
You will also be required to purchase packaging supplies, and you may even have to ship using Amazon’s boxes. (This can obscure any branding which might have been planned in the shipping experience. The list of your customers, which is crucial for many online businesses, will not be provided. Amazon retains this information. This can be a challenge for businesses that wish to run a targeted email marketing campaign.
Customer Service
FBA can be a good option for online merchants who don’t wish to deal with the fulfillment process. They can send their inventory to Amazon’s warehouse and Amazon will handle picking, packing, shipping, customer service, and returns for them. The seller can focus on building their brand and attracting customers to the website.
Amazon’s service can be expensive. The costs of warehouses, product storage, and fulfillment can be a major drain on your profits. It is possible that your products may not match the description on your website or that they will arrive late.
When you have a problem with an order, it may be difficult to resolve because you are not in direct contact with the supplier. You can call the customer support line of your supplier. But if no one answers, you could have to wait a few days.
Inventory Management Differences
FBA inventory can be a good option for eCommerce sellers. However, there are some downsides. For one, Amazon owns the inventory that you send them until it is sold. Also, they charge for storage and replenishment. They could also lose some inventory in the receiving process. These costs can accumulate over time, and have a significant impact on your profitability.
For your FBA inventory, it is crucial to find and work with reliable suppliers. They must be able meet your quality standards, and deliver items on time. In the event your primary supplier experiences delays or quality control breakdowns, a backup is vital.
A good inventory management tool, such as Pacvue, can help you track inventory and sales across multiple channels and platforms. It can assist you in setting realistic pricing, preventing overstocking and managing inventory costs. It can also help you optimize promotions and coupons to increase revenue. A tool such as this can also help simplify FBA Inventory Management and save you valuable time.
Differences with Shipping
FBA (Fulfillment By Amazon) is an option that sellers choose because it gives them the opportunity to reach Amazon’s massive customer base. This also increases their sales by giving them the Amazon brand’s credibility in customers’ eyes. However, this business model has its drawbacks as well.
Many costs are associated with this model of business, including storage fees such as long-term and monthly storage. Shipping, picking and packaging, and weight-handling fees are all additional costs. These fees can add up, especially if your inventory is large and doesn’t move quickly.
Another downside of this business model is that you don’t have control over the goods you’re selling. This can be problematic if you’re trying to build a loyal customer base. It’s also difficult to understand your customer base since Amazon holds that information for you. With this model, you can’t receive a detailed report on search terms of customers or get feedback from them.
