What is Amazon FBA program?
FBA is Amazon’s logistics service, that is, Amazon opens its own platform to third-party sellers, integrates their inventory into Amazon’s global logistics network, and provides picking, packaging, and terminal delivery services for them, and Amazon charges service fees.
In 2007, the FBA (fulfillment by Amazon) service was introduced, that is, Amazon opened its own platform to third-party sellers, incorporated their inventory into Amazon’s global logistics network, and provided them with picking, packaging, and terminal delivery services.
Amazon charges for the service. In Amazon, the main purpose of FBA is to improve Amazon’s user experience and increase stickiness, not an important source of financial income.
Pros and cons of Amazon FBA program
When you’re hesitant to join Amazon FBA program, the following pros and cons will help you make the right decision:
Advantage
Here are some of the advantage of Amazon FBA program that you should know.
Have enough time to focus and scale your business
Amazon is responsible for the product packaging and shipping process. It also provides excellent customer service. Stay focused and you have nothing left to do. So you have plenty of time to focus on scaling your business efficiently.
Continuous development
The frees of Amazon FBA program you from the tireless focus of building a brand name for yourself. Thanks to Amazon’s honorable goodwill, you’ll get all the brand recognition you need.
Yes, it is very convenient and your online store will be able to expand significantly.
Larger customer base
Developing a customer base is one of the most difficult tasks any entrepreneur has to face. Nonetheless, with Amazon FBA program, you will be able to enjoy their huge customer base and get great results.
Return and Exchange Policy
This is one of my favorite aspects of the Amazon FBA program model. You don’t have to worry about anything. Whether it’s packaging, shipping or returns. Customer service is a top priority for Amazon FBA. It will enable you to keep loyal customers.
Higher profits
Products that you can’t sell at a high profit on your website, you can sell at a higher price on Amazon. Again, all the credit goes to Amazon and its brand image.
Disadvantages
Amazon FBA also has some disadvantages. Listed below for you to make a more informed decision.
No inventory record
Unfortunately, your unsold products accumulate. It can get big enough that you won’t be able to keep proper inventory records.
Competition is fierce
There’s no question that Amazon FBA program is a healthy bunch of competitors. You will not be able to use FBA alone. There are many other businesses selling the same products as yours. Therefore, it may be difficult to compete with experienced entrepreneurs.
No guarantee of profit
You have to be careful when developing the mix of products you wish to sell, as it is unlikely that every product will bring you a profit.
Shipping Issues
Amazon FBA program makes it impossible on Earth to deliver flammable products.
Blind reliance
If Amazon decides to change its rules and remove your store from its platform, there’s not much you can do. All your efforts will be in vain.
No direct contact with customers
Amazon will keep full records of your customers, unfortunately, you won’t. What if you want to sell the same products to the same customers in the future? oops! Sorry, but you can’t because you’re too dependent on Amazon.
Service charges apply
You won’t be able to start an online business with FBA unless you have significant funding. Also, you need to pay Amazon a fixed amount to use their service.
Shipping Procedure of Amazon FBA program
- Stocking: Provide information about commodity name, quantity, weight, volume, port of departure and destination.
- Inspection: Responsible for inspecting the goods and helping to deal with the items to be inspected.
- Air/Sea: After the goods are confirmed, they will be packaged and boarded according to the logistics plan, and after the warehouse scanning is completed, they will be shipped to FBA warehouses or foreign warehouses.
- Export declaration: export goods declaration, general goods declaration, export tax rebate, ATA declaration, etc.
- Arrival at the port: By air, FBA will arrange customs clearance after the goods arrive at the designated port. And make a reservation and send the goods to FBA’s warehouse.
You can hire an Amazon FBA freight forwarder to handle the entire shipment for you.
The Costs of Amazon FBA program
Here’s the part everyone always wants to jump to — the cost. It’s going to cost money, but it doesn’t have to be a small fortune. For starters, think about things like how Amazon charges fees — in storage, items are charged based on size and weight, not cost.
For you, that means selling low-dollar items through FBA could cost more than it’s worth. Be deliberate in choosing what you do and don’t list through the FBA platform.
You pay storage fees and fulfillment fees with the Amazon FBA program. The more inventory you have stored, the more it’s going to cost you. Amazon also has this nifty thing where your costs go up for items that are stored for longer than 180 days, encouraging people to get and keep products moving.
In addition, Amazon tracks items that are in storage at an Amazon warehouse but are not listed for sale, or stranded inventory. Stranded inventory costs you money, but Amazon helps by providing a stranded inventory report.
You can find settlement fee reports in your reporting section of the Amazon FBA program dashboard, which will allow you to see what kind of fees you’re actually paying to Amazon as a part of this program.
Remember, too, that because of peak holiday demand, you’ll pay higher storage fees to warehouse your inventory during the holiday season than the rest of the year. This is the time to double-check your FBA listings and remove anything that won’t sell, so it’s not just sitting and costing you money.
Yes, there are a few different costs involved with Amazon FBA program, and there are some other factors related to pricing to consider. However, Amazon generally does well to provide useful information and assistance to ensure transparency as much as possible.
