Fulfillment By Amazon is an excellent service because it allows sellers to concentrate on their business while Amazon takes care all the warehousing, shipping, and other logistics. 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. These include monthly storage fees and long-term 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 option to sellers who sell via channels other than their website. This is called multi-channel fulfilment (MCF).
FBA charges a fee for storage based on how much inventory is stored in your warehouses. This can have a negative impact on unit economics, and is especially costly during busy shopping seasons.
You’ll also need to pay for packing supplies and possibly ship in Amazon boxes. A detailed list of customers is not provided, which can be a crucial piece of information to many ecommerce business. Amazon retains this information. It can be difficult for businesses to conduct a targeted marketing campaign.
FBA vs Dropshipping Customer Service Difference
FBA can be a good option for online merchants who don’t wish to deal with the fulfillment process. Amazon will manage the picking, packaging, shipping, customer support, and returns. This allows the seller to focus on attracting customers to their website and building brand awareness.
Amazon can have a high cost. There are warehouse fees, product storage fees, and fulfillment fees that can take a significant chunk out of your profits. It is possible that your products may not match the description on your website or that they will arrive late.
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 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. Amazon charges fees for storage, restocking and restocking. In addition, they may lose some inventory during the receiving process. These costs can add up over time and significantly impact your profitability.
Research and establish reliable FBA suppliers is essential. 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.
An inventory management tool such as Pacvue can help you track sales and inventory across multiple platforms and channels. It can also help you manage your inventory costs and set realistic pricing. You can use it to optimize coupons and promotions in order to boost revenue. Using a tool like this will also simplify your FBA inventory management and save you time.
Differences with Shipping
FBA is a popular option for sellers as it allows them access to Amazon’s huge customer base. This also increases their sales by giving them the Amazon brand’s credibility in customers’ eyes. But this business model also has some disadvantages.
Many costs are associated with this model of business, including storage fees such as long-term and monthly storage. Additional fees apply for shipping and handling, as well as picking and packing. These fees can be expensive, especially when you have lots of inventory.
Another downside of this business model is that you don’t have control over the goods you’re selling. This can pose a problem when you are trying to build an loyal customer base. Amazon stores all your customer data, making it hard to understand. With this model, you can’t receive a detailed report on search terms of customers or get feedback from them.
