Fulfillment by Amazon is a great service that lets sellers concentrate on selling while Amazon takes care of all the warehousing and shipping. It’s important that you understand the costs so you can decide if this is right for your business.
Many sellers end up paying significant fees for storing their inventory at an Amazon warehouse. These include monthly storage fees and long-term storage fees.
Differences in Costs between FBA and dropshipping
FBA allows sellers to use Amazon’s warehouses and shipping network to fulfill customer orders. This model is best suited for fast-selling products that are compatible with Amazon Prime, which offers customers free, expedited shipping on eligible items. Amazon also offers multi-channel fulfillment to sellers that sell on channels other than the seller’s own website.
FBA is based upon the amount of space that you store in your warehouses. This can have a negative impact on unit economics, and is especially costly during busy shopping seasons.
You may also have to pay for packaging materials and ship your products in Amazon-branded boxes. This can be a problem because it overshadows any branding you might have planned. Also, you don’t receive a list of all your customers. This is an important piece of data for many ecommerce companies. Amazon retains this information. This can be a challenge for businesses that wish to run a targeted email marketing campaign.
Customer Service Differences
FBA is an excellent option for online sellers who do not want to manage 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. This allows the seller’s focus to be on attracting more customers to their website, and building brand recognition.
Amazon’s service can be expensive. Warehouse fees, product-storage fees, and fulfilment fees can take a big chunk out of profits. Additionally, there is the possibility that your orders will be shipped late, or that the products won’t be as described on your website.
If you run into a problem with your orders, it can be difficult to resolve the issue because you don’t have direct contact with your supplier. If you can’t reach anyone immediately, you might have to wait days to hear from your supplier.
Inventory Management
While FBA inventory is a great option for many eCommerce sellers, it comes with some drawbacks. Amazon will own the inventory you send until it’s sold. They also have fees for storage and restocking. In addition, they may lose some inventory during the receiving process. These costs add up and can have a major impact on your profits.
You should research and find reliable suppliers to supply your FBA stock. They must be able meet your quality standards, and deliver items on time. It is important to have a backup supplier in the event that your first choice suffers from delays or a breakdown in quality control.
An inventory management tool such as Pacvue can help you track sales and inventory across multiple platforms and channels. It can help set realistic prices, manage inventory costs, and prevent overstocking. It can help you maximize promotions and coupons in order to increase revenue. It will also help you manage your FBA inventory and save time.
Differences with Shipping
Fulfillment by Amazon (FBA) is popular among sellers, as it gives them access to the vast customer base that Amazon has. It also gives them the credibility of Amazon’s brand in customers’ minds, which increases sales potential. The business model does have its disadvantages.
There are many costs associated with this business model, such as monthly inventory storage fees and long-term storage fees. Shipping, picking and packaging, and weight-handling fees are all additional costs. These fees can be very expensive, especially if you have a lot of inventory that doesn’t sell quickly.
The fact that you can’t control what you’re promoting is another disadvantage. This can cause problems if your goal is to build up a loyal following of customers. Amazon keeps all of your customer information, which makes it difficult to know who you are. With this model, you can’t receive a detailed report on search terms of customers or get feedback from them.
