Way far from the book-selling website we all know years back, Amazon is now considered a worldwide e-Commerce giant. Amazon not only makes it easy for people to buy literally anything they need with just a few clicks (or taps), but also continuously helps entrepreneurs and businesses by developing infrastructure that enables them to grow and be successful in the online selling world. The Fulfillment by Amazon (FBA) program is the perfect example of this.
But what is Fulfillment by Amazon (FBA)?
By definition, the Fulfillment by Amazon or FBA is a paid eCommerce service that allows third-party sellers to make use of Amazon’s warehouses or fulfillment centers as well as its customer service and returns department.
To put it simply, think of your company partnering with Amazon. While you provide the products (and of course get them sold), the warehousing, packing, shipping, returns, and customer service is left in the hands of none other than the world’s largest online retailer. With this set of benefits alone, it is no wonder that the FBA model is rising in popularity in the same way that FBA small businesses continue to grow in numbers through the years. In fact, according to feedbackexpress.com, Amazon has 1,029,5528 new sellers this year, and, 66% of the overall Top 10,000 sellers participate in the FBA program.
But if you want to clearly understand how the FBA really works, here’s an infographic for your reference:
The KEY FACTOR: FBA has nearly a thousand (and continuously growing) different kinds of fulfillment and distribution centers strategically located all over the world. Amazon’s wide, massive, and robust fulfillment network provides businesses with immediate access to millions of customers worldwide, without having to worry aboutown fulfillment operations. For many physical products businesses, Amazon’s FBA network is a turnkey solution to scaling sales.
Now to find out whether the FBA model can really provide you the game-changing advantage your brand needs, let’s dig more into how the benefits of the Fulfillment by Amazon business model are advantageous for brand owners aiming to reach massive scale.
Will Amazon’s FBA really help your brand grow and scale faster? Here’s how:
1: FBA makes your product eligible for Amazon Prime shipping.
FBA Sellers have a clear advantage over non-FBA sellers. Amazon Prime is a premium subscription service that provides its members a multitude of perks - from discounts to access to Amazon’s online movie and music libraries, and most of all, the number 1 reason why customers choose to become Prime members: the free ‘express’ shipping that allows them to receive their items within 0-2 days regardless of where they are in the US. As a matter of fact 78% of them subscribe to Prime simply because of this. Consequently, the reason why Amazon can afford to provide their Prime members this free 2-day shipping is its multitude of fulfillment centers all over the country and around the world, just like what we’ve mentioned earlier.
Furthermore, according to a study done by Business Insider, there are over 100 million Amazon Prime members and that number continues to increase daily in a remarkable rate. These Prime members are actually Amazon’s “big spenders”. The CIRP (Consumer Intelligence Research Partners) found out that in 2016, Prime members spent twice as much as the non-Prime Amazon buyers.
Now whether the reason for those figures are their purchasing power (why they can basically afford the premium subscription) or simply because the product they’re eyeing has the Prime badge on it (ensuring the item’s fast arrival), you simply have to set your sights on Prime eligibility if you want to have a fair share of the big chunk of sales coming from these customers. Besides, it just makes sense that Prime members would choose FBA-fulfilled over merchant-fulfilled products - why would they pay for shipping if they can have it for free, after paying for their Prime membership, right? So with this advantage as an FBA seller, it’s plain and simple. More Prime-labeled items = more willing buyers = more sales!
2: FBA completely eliminates the stresses of fulfilment operations.
The typical bottleneck for an e-Commerce or online retailing company is fulfilment. That’s where most ecommerce businesses struggle with when it comes to scaling. Logistics is basically everything for online retailers; add to that returns and customer support. So let’s face it: if you want to scale, you need to do your mainstream processes cost-effectively. The more units you want to sell, the more warehouse workers you need to hire, a bigger operations base is needed, and so on. In this traditional scenario, it takes more working capital and a longer time for you to able to scale your business and reach your goals.
On the other hand, Amazon’s FBA completely handles the picking, packing, inventory monitoring, and shipping for your company, allowing business owners to redirect their focus on revenue generating activities like sourcing more products to sell, positioning the brand, staying on top of competition, recruiting, and more. In addition to saving thousands of dollars on operational and overhead expenses, FBA frees up time, allowing you to focus on every other important aspect of your business without losing sight of your goals.
3: FBA automatically gives you access to millions of customers worldwide.
FBA doesn’t have almost a thousand of distribution centers all over the world for nothing. It is simply to cater to the 300+ million active accounts on Amazon. At the very least, by choosing to be an Amazon and FBA seller, you get to share this hefty number of potential buyers in addition to your already existing clientele.
In order to generate sales, brand owners of traditional online retail stores have to worry about generating their own traffic. Once you become an FBA seller, you won’t have to worry about this because Amazon spends millions of dollars every year to draw in more customers to their site. One way they do this is through their internal marketing systems - using sponsored ads to retarget customers within the platform - making it so much easier than having to create your own strategies in order to bring in more audience to your own eCommerce website.
The access to the hundreds of millions of Amazon customers not only gives your company the ultimate income generating potential but also the best opportunity to start exploring global market needs, develop new products that feed your passion and personal interests, and basically scale your business in all levels.
4: FBA makes it more possible for you to make the sale.
In a survey conducted by nchannel.com last year, 50% of the web shoppers they surveyed make their first product search on Amazon. And here’s another way to see it-- if if Amazon is their top-of-mind online store, it means there are literally millions of people who are willing to make Amazon purchases in every category you can imagine; so basically, regardless of the kind of product, for sure there’ll be an Amazon customer willing to buy it.
Furthermore, it’s been found out that Amazon customers just love FBA-fulfilled products. And that doesn’t only apply to Prime members who are eligible for the free 2-day shipping, but to all Amazon shoppers. Online buyers today actually value speedy delivery over the free shipping. With the vast fulfillment network Amazon has, FBA can simply make that happen. And just in case they have no other option but to pay for the shipping costs, they are smart enough to know that sellers who use FBA can afford to charge lower shipping fees than those who fulfill deliveries on their own.
In a study conducted by Fortune, in 2016, FBA has doubled (compared to previous year) the total number of items it has delivered for third-party sellers to about 2 million. In addition, studies show that by simply selling Prime, listings experience about a 30% lift in sales. And that’s just about enough proof that a greater revenue boost is waiting for you if you utilize the FBA to your advantage, making it easier for you to start scaling your brand.
After discussing all these benefits and privileges that come with signing up for Fulfillment by Amazon, let us summarize your key takeaways to help you make an informed decision. With the complete elimination of fulfillment operations costs, multi channel fulfillment opportunity, Prime shipping eligibility, and access to hundreds of millions of customers, what’s really in it for you and your business?
Boost in sales and revenue
Introduction to other income sources
Wider customer base
Opportunity to explore new product categories and new target markets
More time and funds to build and maintain your own eCommerce site
Increased number of delighted and loyal clientele
Become less stressed in handling your business
Now If you think taking on online selling or running an FBA business for the first time is too much for you to handle on your own, MarketplaceOps is here for you. We are a team of online marketplaces and e-Commerce experts who have been in the industry for many years and we are willing to help you every step of the way. If you have more questions about our article or if you simply need help in starting or handling your Amazon business, just reach out to us by sending us an email, or simply by clicking the link below: