Fulfillment is a service offered by Amazon that allows sellers the freedom to concentrate on sales, while Amazon manages all the logistics and storage. However, it’s important to understand the costs involved so you can determine whether this is a good fit for your business.
Sellers end up paying a lot of money to store their inventory in an Amazon warehouse. They include long-term and monthly storage fees.
Costs
FBA allows Amazon sellers to utilize their warehouses and shipping networks to fill 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 fulfillment service to sellers selling through other channels than their own site, also known as Multi-Channel Fulfillment (MCF).
With FBA, you pay a storage fee based on the cubic square footage of inventory stored in the warehouses. This can affect unit economics. It can also be expensive, especially during the peak shopping season.
Additionally, you must pay for packaging supplies and may have to ship in Amazon-branded boxes (which can overshadow any branding that might have been planned for the product shipping experience). The list of your customers, which is crucial for many online businesses, will not be provided. Amazon keeps this information. This can be a challenge for businesses that wish to run a targeted email marketing campaign.
Customer Service
FBA is a great option for online retailers who don’t want to handle the fulfillment process. Amazon will take care of picking, packing and shipping their products, as well as customer service and returns. The seller can focus on building their brand and attracting customers to the website.
Amazon can have a high cost. The costs of warehouses, product storage, and fulfillment can be a major drain on your profits. It’s also possible that you will ship your orders late or that the product description is not accurate.
You may find it difficult to resolve a problem when you cannot contact your supplier directly. Call the customer service number of your supplier. However, if you are not able to reach someone immediately, it may take days for you to receive a response.
Inventory Management
While FBA inventory is a great option for many eCommerce sellers, it comes with some drawbacks. Amazon retains ownership of the inventory until it has been sold. Also, they charge for storage and replenishment. They could also lose some inventory in the receiving process. These costs add up and can have a major impact on your profits.
Research and establish reliable FBA suppliers is essential. 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.
Pacvue’s inventory management system can be used to track sales across channels and platforms. It can also help you manage your inventory costs and set realistic pricing. It can help you maximize promotions and coupons in order to increase revenue. A tool such as this can also help simplify FBA Inventory Management and save you valuable time.
How does shipping differ between FBA and dropshipping
FBA (Fulfillment By Amazon) is an option that sellers choose because it gives them the opportunity to reach Amazon’s massive customer base. Amazon also becomes more credible to customers in their minds. However, this business model has its drawbacks as well.
The business model has many costs such as storage fees, monthly fees and fees for long-term inventory storage. There are also additional charges for shipping, packing and picking, and weight handling. These fees can be very expensive, especially if you have a lot of inventory that doesn’t sell quickly.
This business model has another downside: you have no control over what you sell. This can be problematic if you’re trying to build a loyal customer base. 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.
