Amazon FBA: The Effective Tool for Sellers

Back in 2006, Amazon Fulfillment by Amazon (FBA) came into existence. The reason it came into existence was that the e-commerce giant decided to expand beyond sales. At that time, Amazon had developed the capability to assist sellers in the last-mile delivery, which led them to create FBA. Amazon Fulfillment turned out to be a profitable model, as it has been allowing sellers to sit back and let the fulfillment centers handle everything.
To date, this model has proven to be very successful for SME sellers. It is particularly important for sellers whose product requirements, such as dimensions, weight per unit, and product category, demand a shipment.
However, some new-age sellers hesitate to use FBA because of the cost. The products they sell are low-cost items. The commission and charges taken by Amazon eat up their entire profits margin. In such a scenario, it is imperative to determine whether one should opt for FBA or not. Here, sellers can understand how this feature is a good deal through the FBA calculator, which provides a real-time cost analysis. This tool allows a real-time cost comparison from seller’s fulfillment to Amazon’s cost of fulfillment to determine the profit margins sellers receive after paying FBA. Thus, this analysis is crucial for a seller to know the benefits of Amazon FBA versus 3rd party shipments.

Why Should One Get Started?

Amazon leaves no way so that their merchants can remain unsatisfied. Continuing with the efforts by Amazon, it encourages sellers to sell ‘smart’. The FBA feature allows every product to be shipped, but only those products should go to Amazon’s fulfillment center to hit sales and cover the costs.
The entire process of packaging, warehousing, maintaining stock, and shipping can be a daunting task. Especially in the case of a seller where managing the whole process becomes a challenge. But, through FBA Amazon, concerns like protection of goods, and shipment, can turn into a hassle-free process. Let us address more of their concerns with the Amazon FBA solutions.

Protection and Packaging of Goods with FBA

The protection of goods can be tricky for sellers. Most of the sellers fail to store and handle the goods. Due to their limited income and lack of facilities, the protection often goes unnoticed. A third-party handling and storage cost is so high that a seller avoids using them. Through FBA, products reside in world-class warehouses, where Amazon protects every unit. If the inventory is lost, caught in a fire, or stolen, Amazon promises to reimburse the entire amount.
It goes the same in the case of packing as well. When it comes to protecting the goods, Amazon deploys their approved third party vendors collectively known as “Supply Chain Connect.” The items are protected to avoid breakage and reduce delivery time. One can choose an authorized supply chain vendor near the location to get a good rebate on the total cost of packaging. It is known as the FBA prep service, and it specializes in preparing inventory for Amazon’s further inspection. Their main focus is on labeling, packaging, and introspecting so that Amazon accepts the product for shipping. Consequently, this increases the chances of sellers to ship more products through FBA, and make profit at the end of the day.

Distribution and Cost-effectiveness with FBA

Amazon takes care of distribution well through its widespread networks. Since a shipment request can come from any part of the world, rather than locating all the products in one place, Amazon ships them to various warehouse units. It helps them to deliver a product way faster. To go ahead, a seller only needs to create a shipping plan, and accordingly, shipments move towards different fulfillment centers. This sub-feature of FBA is called an Inventory placement service.
By far, we studied the ways products are shipped where sellers don’t have to dig deep into their pockets. It also saves one from spending extra on costs that are continuous. The first type of costs are those which come as a liability during storage. As we know, slow-moving inventory can pile up and can be a potential concern for a seller. Because of it, the handling and storage costs associated can rise and can make sellers pay 30% of their earnings only towards the costs.
The second is the most indispensable expense. Customer service management is one such function that requires a continuous expenditure on the system, software, and personnel. It is evident that many cannot afford to incur heavily on this crucial feature.
In both cases, Amazon comes as a rescuer. It offers merchants warehousing and shipment solutions way cheaper than any other fulfillment provider. The fee paid by a merchant is comparatively less than a 3rd party warehouse or managing an in-house store facility. Plus, it offers customer management services to sellers. It routes all the activities to one source and solves the query. 

Improving Inventory Performance with FBA

Amazon not only ships but also keeps track of inventory and the analysis related to it. Through inventory performance, sellers can identify opportunities to grow sales and reduce excess storage costs. For this, each one receives an IPI score that depends on various factors such as the age of the inventory, listing performance of a product, balanced stock (seller clearing unsold inventory), and stocking the popular inventory. Once these criteria are met, a seller’s performance improves, and their IPI score increases. Plus, with FBA a seller gets the prime badge for its product. Thus, a product gets more visibility, and a seller is more likely to win the buy box.
Amazon brings a seller to its dashboard, and there it shows various possible solutions that are available to improve sales. It offers suggestions where a seller can readjust the price of a product, decrease the stock of a less popular product, and manage excess inventory. The display used on the dashboard is easy for a seller to understand and manage.

Go Ahead

Ultimately, Amazon fulfills the most powerful and the most complex part of a retailer’s business cycle and gives convenience in return. Transferring the control to Amazon provides a good way for online conversions to happen. Thus, today, 92% of sellers on Amazon use FBA because this uplifts them in various ways. But before getting enrolled, a seller has to go through numerous eligibility criteria where half of them face elimination. After this, it becomes essential to reach out to an expert who can guide one through the FBA journey.
We have expertise in scaling up brands and introducing them to marketplaces like Amazon. Our dedicated support team for sellers helps them through the various levels and criteria to ensure they do not overpay. All our team requires is one to hit the contact us.

 

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