It’s 2021 and it’s no secret that Amazon FBA has completely changed the e-commerce world. In fact, one could say that FBA has turned everything upside down. Amazon is not only the king of the internet jungle but they have also fine-tuned the FBA model to attract more than 2.5 million sellers worldwide! With just over 300 million active customers, it is no wonder that the FBA program has attracted countless business owners vying for access to these customers. It simply makes good business sense to gain access and sell as much as possible during the current gold rush we are currently experiencing.
Before going into the true power of the FBA program, it’s important to cover a few basics. What is FBA? Well, it stands for “Fulfilled by Amazon.” In a nutshell, if you are a seller, you source products from either overseas or in your country and coordinate shipping of these products to various Amazon warehouses. Once they are checked in, you are now “in stock” and ready to sell to customers. Once someone places an order from your listing, Amazon packs, preps, and ships this order to the customer. Amazon will even deal with customer service issues! Amazon will also manage any returns and refunds that come up. There really is no other selling model like it in the world.
If you ask any product-based business owner, they will tell you that they absolutely HATE logistics and warehousing. Coordinating a warehouse to make sure your orders are shipped out on time is a true nightmare. Thankfully, Amazon FBA takes away this burden. Long gone are the days of warehousing delays for orders. Logistics is a true time suck for most business owners and one of the top reasons people are flocking to the FBA program. Spending countless hours on fulfillment is simply not worth it.
Another aspect outsourced through FBA is returns. Returns are a pain. With Amazon FBA, you will no longer have to deal with return management, providing return labels, or angry customer emails. This is all taken care of for you. Amazon even inspects all returned goods to make sure they are still in a “sellable” condition. It’s truly a magical system that Amazon has created. As a seller on Amazon, any extra hour that you can shuttle over to product innovation and new launches is extremely valuable.
Effortless Customer Service
Most customers on Amazon interface with Amazon customer service reps, not third-party sellers. Amazon has designed it this way to be a one-stop-shop in a sense. Having Amazon provide 24/7 responses to customers via phone, email, and chat is a great benefit to selling through the FBA program. Fewer customer issues the better for any seller. Now, you will still get some direct emails from customers but the vast majority will simply deal with Amazon and never personally reach out to you. At the end of the day, the customer is owned by Amazon, not the FBA seller.
Amazon Scales, Everyone Scales
Amazon continues to grow and expand their fulfillment network which benefits each seller in the FBA program. This is truly one of the biggest benefits of the program. As Amazon scales, your business scales. For example, all FBA sellers get the automatic 2-day shipping times for Prime members. Amazon has recently started to offer free 1-day shipping depending on where the customer lives. Since this is directly tied to how Amazon spreads out a seller’s inventory across warehouses, you automatically get these faster shipping times for orders. Amazon is headed in a direction where the goal is 1-day and even 12-hour shipping times. Sellers can only achieve this if they are part of the FBA program and taking full advantage of the efficiencies Amazon has invested in across their warehousing network (now, over 110 of them! Thirty-three more are in the works).
Another common complaint is cost fluctuation for fulfillment and shipping rates always changing for customers. Sellers kiss those issues goodbye with the FBA program. With FBA, sellers enjoy the trickle-down effect of cost-saving shipping rates for customers. As Amazon improves their FBA program, sellers benefit significantly. Whatever shipping options Amazon offers, sellers, get to take full advantage of them.
As your business grows on Amazon, you will eventually need more space to store your inventory. With Amazon FBA, that will never be an issue. Unlike managing your own warehouse, storing larger orders with Amazon is a breeze. As long as sellers maintain strong IPI (Inventory Performance Index) scores, they can utilize endless storage space for their inventory. Utilizing Amazon’s warehouses is truly hands-free and stress-free. Amazon even goes so far as to reimburse sellers if any inventory is lost or damaged within their warehouses.
Sellers eventually want to expand to other selling channels like Shopify and others. Well, guess what? Amazon fulfills those channels as well! Amazon offers a program called MCF or “Multi-Channel Fulfillment.” This is a fantastic program for Shopify sites. For example, let’s say you are advertising on Instagram and are bringing some healthy traffic to your Shopify site. When customers order through your site, you would fulfill the order using Amazon’s MCF program. The beauty of this program is that fulfillment costs are significantly cheaper than if you were selling the same product with Amazon FBA all the while, you are still never managing warehouses or your inventory. Lastly, the Shopify customer automatically receives tracking details from Amazon, which is extremely convenient. It’s an underutilized program that has real benefits for sellers in all categories.
This benefit is a little less obvious. Branding is everything on Amazon. Customers are becoming pickier and more decisive. For business owners to reach the top five spots on search results for their products, everything from the product design to beautiful packaging matters. Putting all this effort into a product line then NOT offering 2-day shipping would be damaging to the brand’s image. When a customer searches for products now, they are expecting to see the Prime shipping badge on each listing. Not seeing the badge reduces buyer’s confidence in the listing. This is just reality. Three-to-five-day shipping times are no longer acceptable. To maintain a premium brand image, one needs to be part of the FBA program with the exception of sellers of large oversize items like furniture. As a seller, you have mere seconds to make a good impression on a customer and to gain their trust in your brand. Making the mistake of NOT being in the FBA program could be fatal for sales.
Buy Box Boost
There is a lot of debate regarding the “buy box” on Amazon. But one thing is certain, if you are selling using FBA, you automatically get ranked higher than others on search results. Amazon favors sellers using their programs which makes a lot of sense business-wise for Amazon. These programs exist to provide seamless shopping experiences for customers so Amazon is going to boost sellers who utilize them. Sellers should take every advantage they can get to win over a customer.
Hasta la Vista Overhead!
What business owner enjoys bloated overhead? Try none. With Amazon FBA, say goodbye to employees, systems, software, and burdensome storage requirements! More of your focus can be allocated to running your business, expanding product lines, and shifting capital to ever-increasing inventory.
A No Brainer
If you haven’t sold using the Amazon FBA program, then you haven’t been paying attention. It should be clear by now that FBA is king and will be king for the foreseeable future. Not only does FBA reduce logistical and customer service headaches but it also streamlines businesses to a level that is unheard of in the e-commerce space. Getting your product in front of millions of eyeballs is the name of the game. FBA is the solution and a very cost-efficient one!
Jon Elder runs Black Label Advisor, a consultancy focused on helping brands expand their business on Amazon and reach countless new customers. Having grown his own Amazon private label business to 8 figures and exiting for mid-7 figures, he has a passion for helping other business owners achieve the same level of success. You can contact him by emailing him at firstname.lastname@example.org.