There are quite a few options to choose from when running a business on Amazon. Like running any business, it is no easy feat. There are many choices to make, problems to solve and challenges to navigate.
One of the big decisions to be made is how you will fulfill your orders. Do you do it yourself (Fulfillment by Merchant – FBM) or do you let Amazon do the heavy lifting for you? (Fulfillment by Amazon – FBA) In this article we’ll look at them both.
Fulfillment By Amazon (FBA)
With around half of all sellers on Amazon coming from third parties, it’s not surprising to find that 66% of them use Fulfillment by Amazon. Here’s why they choose this option.
Effortless Shipping And Handling
Using Fulfillment by Amazon, we’ll call it FBA for short, makes the shipping of your products easy and effortless. If you’ve ever done your own logistics work, you’ll know there is a lot of time and energy taken up by doing it. The more you sell, the more time you’d have to spend packing and shipping. Perhaps you may even find yourself having to outlay money to hire someone to help you. Using FBA allows you to outsource the entire process. It’s one less thing you have to come up with a solution for.
Due to Amazon’s sheer size, they can attract better shipping rates than perhaps you could. This means that they could not only pass those savings onto you, it also means that they can offer cheaper shipping to the consumer. Cheaper shipping means potentially more sales, and possibly more income in your pocket.
Delivery is fast with the FBA option. As soon as an order is placed, Amazon works out where the nearest fulfillment centre is and sends your item from there. Amazon has hundreds of fulfillment centres around the world.
Storing your products is no issue when you choose Fulfillment by Amazon. There are no minimums you must store, so you can start small and build your business up. You can start as low as just one product if you wish. Your aim, as well as Amazon’s aim is to move your product quickly. So if you become a seller with a “high inventory performance score” you will get unlimited storage.
Customer Liaison Is A Breeze
Using Fulfillment By Amazon means you don’t even have to deal with your customers. Amazon will take care of it all. Customer inquiries, returns and all the administration work that comes with that is handled by Amazon. This again saves you time and much angst having to take care of this yourself.
Amazon is excellent at customer service. They offer 24/7 support via phone, email and chat, and have all these bases well covered. Dealing with customers day in and day out is an arduous task and one that I am sure many people would be glad to avoid.
Considering that Amazon has more than 300 million active customers, one big advantage of Fulfillment by Amazon is that it gives you access to Amazon Prime subscribers. In the US alone Amazon Prime Subscribers total 90 million people. That means your products are specifically available to these buyers.
It’s said that the average buyer spends $700 a year on Amazon. A Prime subscriber will spend around $1300 a year. So, using Amazon FBA could be an option to make more money.
Fulfillment By Merchant (FBM)
If you choose Fulfillment by merchant or FBM for short, you are choosing to take complete control of all your shipping and handling processes. So instead of paying a fee to have Amazon take care of it for you, you choose to do it all yourself.
You’d do this when the items that you sell are completely exclusive to you and your brand. Taking care of all aspects of the business will help you build credibility of both the brand and the online store.
The fulfillment by Merchant option could also work for you before you become a large volume seller. Whilst your order volume is low and the shipping process is still manageable. Something to watch though is that you are meeting the standards expected by both Amazon and your customer.
Some other advantages of choosing Fulfillment By Merchant are:
Complete control of all aspects
You are in total control. As you are still running your entire business, including your shipping and handling, you are still totally in charge of the show. This means you are not at risk of any unavoidable losses due to policy changes at Amazon.
Without the added costs you may have of warehousing and other fees charged by Amazon, the margins on your products may be higher.
Building your specific brand is easier when you do the shipping yourself. Also, when you are dealing with your customers personally, they get to know you, and your brand.
Choosing the Fulfilment by Merchant means there may be less paperwork to deal with when dealing directly with your customer.
It also means you can have greater control over your inventory. Being able to see it yourself and perhaps even touch it, means you can have a better idea of what’s in stock. You’ll be able to get a better feel for what sells well and what changes are needed to improve your success.
Taking care of this side of your business without help from Amazon means that there will be less unexpected costs. As the person in control, you are aware of all finances, and expenses along the way.
But wait, there’s more…
Another “player” fast becoming popular is a mixture of both Fulfillment by Amazon and Fulfillment by Merchant. Not yet available in Australia, Seller Fulfilled Prime gives you the best of both worlds. You can have access to the Prime Subscribers network, but you still take care of the shipping, handling and packaging yourself.
Whichever option you choose, be sure to do your research thoroughly. Like any other business decision it’s important to ensure that you are well informed. As a business owner, it is your responsibility to be completely aware of all costs and potential pitfalls in any decision you make. Many a business has failed simply because the research down was not intensive enough and major hazards were not foreseen.