Amazon offers sellers a broad set of services aimed to simplify business routines. One of them is Amazon FBA, which takes all seller operations about storing, packing, and shipping orders. This beginners guide will help you understand how to sell with Amazon FBA.
Also, you will take a closer look at FBA enrollment steps and fees and find out the benefits of the service. We’ll go over some helpful tips on gaining the maximum from FBA.
Get started with selling on Amazon FBA
FBA is a great way for experienced retailers to expand their businesses and new sellers to gain momentum in the industry, for it opens new horizons and significantly facilitates the selling, storing, and shipping processes.
What is more important, FBA isn’t limited to the US market only but allows shipping products worldwide.
To enroll in FBA, you need to:
- Make sure you have a Seller Central account.
- Set up FBA for it.
- Pack and send your products to the fulfillment centers, following the company’s packing guidelines and shipping and routing requirements.
When it comes to the services, Amazon takes care of storing products, picking and packing them, shipping them to buyers, handling returns and refunds, and providing around-the-clock customer support.
Surely, Amazon charges you for all the services mentioned above. So, it’s worth getting familiar with fees beforehand.
Fees
When signing up for FBA, sellers have to specify a credit card and a bank account. Amazon uses them to charge and cover all the fees. All the money earned from sales will automatically get to the same card every 14 days.
FBA members can face the following expenses:
Fulfillment fee
It largely depends on the size and weight of products as well as the marketplace they are sold in. The larger the inventory, the more seller has to pay. It also includes:
- Storage fee
- Long-term storage fee (charged after 365 days).
- Unplanned service fee (charged if the seller fails to meet Amazon’s requirement when shipping products to its warehouses).
Removal fee
It’s charged per item removed. If the seller decides to ship products back from Amazon warehouses, they’ll have to pay Amazon
International shipping fee
It’s charged if the seller specifies that they want to market products globally.
The exact figures can be calculated using an Amazon FBA calculator designed for the purpose.
In addition, Amazon tracks items that are in storage at Amazon warehouses but aren’t listed for sale. Such products get into the stranded inventory and cost an extra fee. However, Amazon provides a stranded inventory report, which allows taking care of the issue in time.
Benefits of selling with Amazon FBA
Let’s see what advantages you’ll gain from being an FBA member:
Limitless storage space
Hardly anyone can compete with Amazon in terms of storage capacities. The company doesn’t limit you in any way, though it might be pricey. You only have to keep track of the listings and restock your inventory when it runs low.
Fast and free shipping
Being part of FBA makes you eligible for the Amazon Prime program. It ensures your products will reach their prime buyers faster at no cost, thereby boosting your ranking on the platform.
Moreover, if you decide to sell worldwide, it will eventually cost less with FBA, even taking all the corresponding fees into account.
More sales
Every Amazon seller dreams of holding the Buy Box, a prize known to boost sales. The company determines the winner using a special algorithm so the results are mostly unforeseen. Nevertheless, one of the metrics Amazon takes into account is your fulfillment method. FBA sellers are proven to be more likely to win the Buy Box and have their products higher in the search results.
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Hassle-free customer service
FBA membership frees you from the most time-consuming task — customer service. Amazon will take over their concerns and resolve all issues without your involvement. You, in turn, can fully concentrate on other essential aspects of your business.
Things to consider before you start to sell with Amazon FBA
Despite the obvious merits of FBA, there are also things you might want to consider before enrolling:
Not the case for all
Amazon takes the burden of fulfillment and delivery, however, doesn’t do it for free. For those who just start their path as a retailer, the spending might be too high.
This also includes sellers of low-cost items. Amazon charges based on size and weight, as a result, the fees for such products may offset the margin. Surely, FBA doesn’t seem to be the right solution in this case.
Inventory mix-up
Amazon stores similar products together, regardless of the seller, and ships them if the product doesn’t have a barcode. It’s also called stickerless inventory.
Although your products reach the buyer faster, products of some other retailers can be used to fulfill your orders, and you won’t even know if they’re of high quality or not, which can worsen your standing and result in fraud or even account suspensions.
More returns
An increased number of returns is a typical concern of all FBA sellers. The reason is Amazon’s easy returns policy which means the company accepts returns on the first buyer’s demand. Still, the Amazon team will process the return request itself and even arrange the delivery back to your facility.
Tips for optimizing FBA
Here are some pieces of advice that will help you to make the most of FBA:
- Start small. Start with several small-sized products. Take some time and try to gain some experience with FBA on them.
2. Choose products wisely. Try to calculate your returns on the sale of the product you decided to market. You might deem it to be a bestseller, while others might decide otherwise. Choose the most profitable products, like electronics and accessories for it, video games, or books.
3. Follow product prep requirements. The company has specific requirements for products you’re willing to send to them for FBA. These include proper packing, labeling, and shipping to Amazon’s warehouses. Some of them can be vague or tricky.
4. Bundle your items. It can help you distinguish yourself among other sellers that market similar products, by offering more but at a slightly higher price.
5. Track your performance. Amazon has a special metric for FBA products – Inventory Performance Index (IPI). It factors in several parameters and displays how your inventory performs. Make necessary adjustments to improve your stats, by removing the excess inventory and boosting your sell-through rate. The IPI is calculated based on:
- In-stock inventory
- Excess inventory
- Stranded inventory
- Sell-through rates
6. Avoid long-term storage. You’re going to pay more for the inventory that isn’t selling well and stays in warehouses for too long.
7. Consider consulting a tax expert. If you run your business in one state while items are stored in a different state, you might encounter some issues with Sales Tax, with no clue which rate to use.
8. Create your brand. It can eventually be a viable idea to take some time and create your own brand. It’ll benefit you in many ways, starting from the Buy Box to ensuring that you sell quality goods sourced from reputable producers or distributors.
Summary
To sum up, FBA is a great service to expand your business and go beyond your local market. It costs a lot but it offers a lot.
Surely, FBA has its pluses and minuses, and it’s up to you whether to use it or not. With all the information above, it should be easier for you to make a decision. If you want to get the most from selling with Amazon FBA on your Magento Marketplace, take a look at our Magento Amazon integration service.
