What Is Fulfillment By Amazon?
Many of you may have heard of Amazon FBA.
The main strategy here is to use Amazon and its vast reserve of resources and knowledge to help you do logistics for your company. You will need to come up with a product, market it, entice the customers, direct the customers, deal with customer service (to a degree), manage your own cash flows and financials, and really do most of the business. However, Amazon is, first and foremost, a logistics company. Amazon has bought warehouses in strategic locations in order to cut shipping times while still balancing cost
(a warehouse in Manhattan would indeed ship fast but cost more than a skyscraper). They have also invested heavily in research for optimizing how to store all that stuff they sell.
The process is becoming more and more automated, and someone has to invest the money into the research to build these robotic staffs. You, however, are not that someone. Similar to how Amazon has bought huge server farms and rented out space from them, they also do it with their warehouse space.
The main idea is you send your product to Amazon, and they will do pretty much everything else dealing with logistics. You get to leverage the space and research of Amazon in return for a fee you pay them. Amazon knows how to run multiple businesses at a time as they have the experience of working with people from around the world. They are able to handle the large problems of the business so that you are able to focus more on what needs to be done on your side.
They have the space to provide the storage for your product, and they have the experience to know how to handle maintaining the service. All you would need to do is focus on the website and sending your products to Amazon.
They will be able to handle the rest through their own area of the logistics and supply chain management. Here, it is all about providing the right amount of storage space for each product. Logistics and supply chain management are no easy feats. There is even a whole branch of research into the area at companies and even at universities. While you will need to get your supplier, you will not have to worry about finding a location for your warehouse and staffing it. Furthermore, you can let Amazon handle a large portion of the customer service.
This does not mean you won’t have to do work for your business.
It is still your business. You will still need to be in contact with your customers and your suppliers, but Amazon will take the burden of first-line customer service –if you prefer. With this system, it becomes easier to run a business and selling your own products from the comfort of your own home. Normally, you as the manager would have to worry about the shipping, product storage, and customer basics such as reviews.
But with this system of management in Amazon, it is easier to find what you need for the business, and they are willing to help you along the way as you create the product for yourself. Why does Amazon do this? Aside from the possible promotion of entrepreneurial spirit, Amazon has invested a lot of money and has great locations.
They realize they can make even more money by using some of that space and some of their connections (with certain shipping firms).
You are also required to sign up for an Amazon Seller account, which generally charges fees. There are also incentives to list your products directly on the website instead of other avenues, which drives traffic to their website. As you bring more business for yourself, you invariably bring more business for Amazon because they can advertise and cross-sell directly from your listing.
It is important to realize just how large the name Amazon is. People may even remember how small the company used to be and how it has grown to be all over the world. Recognized by many different large corporations that work together through the management of Amazon for their products. When you agree to be a part of this business connection with Amazon, you are making a deal with them. A deal where they will get advertising as more people see or buy your product.
This way, you get your product sold as they increase their name benefits. Because they want more people headed over to their website, they will make it easier for the business owners to follow through this process. Whether you are an individual that is just starting their own business, or you are part of a company that has existed for decades, they work to make it easier for you so they can benefit as well.
The process within Amazon is, as is most processes with the company, relatively easy to move through. It can be done by anyone, and even if you have never worked with an online store before, you will be able to pick it up quickly. Certain types of products may not be as suited to the deal as others.
Amazon says they should be “e-commerce ready,”which means they are easy to ship and can withstand such an ordeal. If you are selling live cats, this is not for you. You cannot ship such things.
However, if you are selling cat dolls, then this is for you.
Or cat toys. Or cat pictures. Anything that one would generally consider factory-producible merchandise can benefit from Amazon FBA. One thing to note is that if you are not selling a large quantity, it may be better to go your own route. Amazon will happily accept your business and work with you, but if you can only produce a single one-of-a-kind armchair once every three months, it is not worth storing them at Amazon.
If you have highly customized work, this also may not be the best place for you to hawk your wares. Unique or customized works require more involvement between the customer and the producer, and because you are not moving large quantities, you do not have as much of an incentive to utilize a large logistics system.
BENEFITS OF THE MODEL
While Amazon certainly gains a lot from this aspect of their business, you also reap the profits. There are numerous benefits to using Amazon FBA, which includes some of the features that may seem exclusively held to Amazon only. Amazon outlines some of the benefits on their website, but there are numerous others. First, you get Amazon’s name attached to your business.
This may not seem like it means a lot, but the trust Amazon has built with its customers is all encompassed in its name. If you are running your own website, you need to build that trust first. In an age when there are so many fraudulent websites and scams, it can be hard to get that trust. But if you use Amazon as the logistics manager, you customers will know that the product actually exists, and they won’t be throwing money into the unknown.
Or worse, have their personal information stolen. Furthermore, Amazon will handle the customer service and returns. They state that they handle all of this for items purchased from Amazon. That now includes your merchandise. And with a seller account, you can sell in Canada and Mexico. Don’t speak Spanish or French?
How will your customers from Quebec or Mexico interact with you?
Should you just forget about them? You won’t have to worry about that if Amazon takes care of it for you.
You won’t have to worry about dealing with returns and re-shelving your product, either, as Amazon will do that for you as well. Just make sure to check their Returns Processing Fees, because certain items will cost you a bit more to return to your inventory. Amazon also has a very convenient, easy to understand, and well-programmed returns area of their website where your customers can do everything electronically. You won’t have to waste time dealing with clients who just want to return something because of a defect; instead, you could be out getting new customers.
That customer service is not only limited to a few hours a week, either. You may need to sleep, but Amazon does not.
An alternative for you is to hire a sales and customer service team, but that costs more money, and you are trying to keep your costs as low as possible. Amazon will answer those customer service inquiries 24 hours a day, 7 days a week, 365 days a year. There is no day that Amazon is off and cannot take your customers’calls. Remember, you still need to talk to your customers, but for the simple stuff, you won’t need to hire extra staff or become some kind of robot. Another major advantage to using Amazon for your fulfillment is the free shipping associated with the Prime Accounts. Many people buy things online often and do not like to pay extra shipping charges for every single item the purchase.
If you are shipping things yourself, you will either need to factor the cost of shipping into your business or pass it on to your customers. No one wants to find a great gift then realize they have to pay another 15% just to get it to their door.
That is a big driver behind Amazon Prime accounts: free shipping. Since your merchandise will be stored in an Amazon warehouse and shipped using Amazon’s partner carriers, you will reap the benefit of that business structure. Prime Members on Amazon can get your product shipped to them for free. People love to hear something is free, even if it only saves them a little bit of their money. Moreover, for those who do not have Prime accounts, there is still the possibility that your product will ship to them for free. Under the Small and Light program, you will be able to ship certain products (presumably they are small in size and light in weight) for free to all customers. Usually, these are your high-turnover products that sell quickly and are not that expensive. These are often packaged in with other, more bulky orders, to optimize the volume of a box.
They ship for free because the carriers do not charge much more for the negligible weight and no size increase (they are packed into every nook and cranny of the already measured box for the bigger thing). That shipped merchandise gets to the customer faster, too. Fulfillment by Merchant products, sold on Amazon, still needs to be picked and packed by the merchant (that would be you). Amazon is more likely better than you at doing this, and they are certainly better than some merchants.
This means that you can get your products to your customers faster than companies who try to do it themselves. Furthermore, when Amazon finally develops their 2-hour delivery system by drone, do you expect to be able to beat that? Most companies do not. Certainly, Amazon will reserve drone service for their own products for some time, but it will likely come to pass eventually that FBA customers will also be able to ship by drone. By that time, it may not be as novel to do so, but certainly, it will look cooler for your product to be shipping to your customer in a couple of hours by a flying robot than your competitor who takes five days to send the same thing in the regular, boring snail mail.
Another major advantage that is often overlooked is data security. Unless you are employing a development team for your website, your store may not be secure. Your customers do not want to receive an email that their credit card information has been stolen as a direct result of your website being hacked.
However, if you list on Amazon, the payments can go through their website. It should be no surprise that a huge corporation like Amazon has a lot of money invested in internet security and will always be vigilant about it. Even if you use another service for your payments on your website, you can add Amazon as another avenue. Since you need an account and can sell on their website, does this mean you should shut down your own website?
Absolutely not! While Amazon has a great reputation and a lot of resources for you,
you may already have an established website that your customers know and prefer. That is no problem whatsoever because another advantage to FBA is that you can still fulfill orders from other channels. Keep in mind that Amazon cannot cross-sell on their website if you do not list it there, so there are slightly higher fees associated with fulfillment through a channel that is not Amazon.com. However, if you have a well-established website, you have two choices.
You just need to let Amazon know when you to ship. This is considered going through a non-Amazon channel, and, as stated, involves a higher fee. Conversely, if you can’t program or don’t want to deal with SEO to get yourself to the first page on search engines, you can easily set yourself up Amazon only. You don’t have to worry about security (as mentioned), but you also don’t have to worry about programming, servers, your site crashing, overloaded payment systems (unless you have some kind of amazing product you won’t crash Amazon). This is great for entrepreneurs who are looking just to get into the game. It cuts technology costs, in knowledge, time, and money, to nothing. That is good news for anyone who wants to work on marketing and finding customers –or, in other words, building the business itself.
Setting Yourself Up
The process of getting set up on FBA itself is not that difficult.
You simply sign up for a Seller Account on Amazon, and you can start. After you have your account, you will need to enter your product listings (assuming you will be using Amazon’s platform for your sales). If you already have a large inventory system, you will benefit from the use of the Amazon API. A word of caution to those who are starting out or not: make sure you have a system in place for inventory management.
If you are used to going to the back storeroom to check on inventory and doing it once a month, you won’t be able to do that anymore. Your product will be at the Amazon warehouses, and you won’t be able to physically access them. This means you will need to have a system in place to avoid “stale inventory.”If you have your own products (not using a factory), you will need to make sure everything is packed and ready to go before you send it to Amazon. You need to pack your trinkets in whatever array you expect to sell them on the website.
They will need to be inside boxes, ready to ship, too, before you send them off to Amazon. If you are going to be using a supplier factory, you should make sure to communicate to your supplier that your product will need to be ready-to-ship individually. That is unless you will be taking the shipments directly to your own facilities and packing them before sending them on to Amazon.
That case, however, is probably going to cost you most unless you have some kind of highly streamlined, proprietary packing process. You can also pay Amazon for certain services, which will be covered below. The next step is getting your products to Amazon. You can contract with one of their preferred carriers, which includes over 20 different companies.
You can take your choice (just ask your current carrier if they are an Amazon partner). If you prefer to contract with a non-partner, you will not only miss out on the discounts: if you are shipping truckloads (literal truckloads, not figurative truckloads), you will need to make an appointment for the delivery to their warehouses. Amazon does not haphazardly receive product from anyone and store it in their facilities. They would not be so efficient if that is how they operated. The exact details you will need to read through yourself, as different types of shipments, different weights, products, and other considerations must be reviewed. Note Amazon will not fulfill orders on flammable liquids/ solids and aerosols.
That may seem irrelevant and commonsensical, but if you are selling certain cosmetic products, they will fall under this category. Just make sure the guidelines match up with your product. Furthermore, certain products can be listed and sold on Amazon, but Amazon will not store or ship them.
You need to make sure your product does not fall into this latter category, too.
You may wonder how Amazon keeps track of all those packages it receives.
Some of the more innovative ideas include using RFID chips and scanning incoming trucks –why take time and employees to confirm an incoming shipment when a truck rolling through the door can achieve the same thing and never require more than a few deciwatts of electricity? There is a whole area dedicated to finding efficiencies in such processes. However, for you, they will use barcodes. They use those barcodes to associate
Continue reading on Amazon.Kindle.com // Full book available on Amazon