Love making money from selling things through Amazon but hate the drudgery of packing and shipping them to your customers? Then Fulfilment by Amazon (FBA) could well be worth a look. Not only does it mean Amazon does all the donkey work for you, it can also make your product more attractive to potential customers and that should mean more sales. Here’s our quick and easy guide to the ins and outs of FBA.
What is Fulfilment by Amazon?
Fulfilment by Amazon is a service for Amazon sellers. The idea is simple: you send your inventory to one of Amazon’s FBA warehouses and when someone buys one of your products through Amazon, the company sends the product out on your behalf. You don’t need to do a thing other than make sure you keep Amazon stocked with your product.
Whether you’re running a part-time business from your bedroom or building one of the greatest brands of the future, Fulfilment by Amazon helps you put your logistics infrastructure, reach and service levels on a par with one of the most successful businesses on the planet – Amazon itself.
Why would I want to use FBA?
People use FBA for all kinds of reasons. Here are our top three:
1. More sales
If you use FBA, your products are eligible to be part of the Amazon Prime service. This is a badge of assurance that Prime subscribers can have your product in their hands the next day. Prime customers are very loyal – they want to get as much value out of their subscription fee as possible. They are also big spenders: it was recently estimated that Amazon Prime customers spend twice as much as other Amazon customers. These are almost certainly people you want to reach.
With FBA, Prime customers can immediately see that your product is available for fast-delivery. That makes your products more attractive than ones being sold by non-FBA sellers – and that should mean more sales.
FBA also gives you a higher chance of ‘winning the Buy Box’. If several sellers offer the exact same product, they effectively compete for the Buy Box for that product. Obviously, the winner of the Buy Box can expect a shed load more sales than their rivals get. FBA is one of the main eligibility criteria.
2. It’s more convenient
Why faff around packing up your product, sorting out postage and schlepping along to the Post Office when Amazon will do everything for you? Cutting out these things gives you more time to run the productive parts of your business. It also gives you tremendous flexibility too: your business carries on uninterrupted even while you’re lazing around on a beach for a fortnight. Amazon also handles most of the customer service for you. They even process customer returns.
3. It’s an easy way to open up Europe
Tell Amazon to sell your product across Europe for you and never worry about the complexities of international postage rates ever again. With FBA, you just send your inventory to an Amazon Fulfilment Centre in the UK and Amazon will distribute it ‘intelligently and automatically’ throughout its European Fulfilment Centres based on anticipated demand. We’ll cover Europe in a bit more detail below.
How much does Amazon FBA cost?
Although Amazon’s FBA rate card currently runs to eight pages, one of the nice things about FBA is that the fee structure is nevertheless fairly easy to get your head round. It’s essentially ‘pay as you go’ with no minimum requirements, no setup charges and no subscription fees. And it seems to get simpler as time goes by; for example, Amazon greatly simplified their Europe costs a few years back.
The fees vary according to the type of product you’re selling and the sales channel you’re selling through, but there are really only two types of charge:
- A fulfilment fee for each item that Amazon ships to a customer on your behalf.
- A storage fee for storing your inventory in the warehouse. Storage fees are more expensive in the run up to Christmas.
These fees are, of course, on top of the sales fees you pay to Amazon for selling your product for you.
The fees vary according to the nature, size and weight of the item. But here are a couple of illustrations:
- A T-shirt might attract a fulfilment fee of £1.77 and a storage fee of 4p per month
- An SD card might mean a fulfilment fee of £1.09, but as it’s so small, the storage fee is approaching zero.
How do I sign up to FBA?
If you’re completely new to selling on Amazon the first step is to register as a seller. You can then select the ‘Fulfilment by Amazon’ option when listing your products. You’ll be guided through the process of getting your products to the fulfilment centre.
What else is involved?
Not much. You’ll need to print barcode stickers and add one to each of your products before you ship them to the warehouse. That said, if you really can’t be bothered, Amazon will even do this for you (for a fee). If you’re selling the exact same product as other people are, you can opt instead for your products to go into a pool of inventory at the warehouse. Amazon calls this option ‘Stickerless, Co-mingled’ and it saves you having to bother with sticky labels.
Where are these FBA warehouses?
Amazon has 20 fulfilment centres throughout Europe, including in the UK, France, Germany, Italy and Spain. We at WorldFirst were lucky enough to be invited to take a look around at the one in Hemel Hempstead in Hertfordshire and, as you would expect, it is MASSIVE. You can read about our visit here.
Are there any disadvantages to using FBA?
For most people the benefits of FBA seem to outweigh any downsides. But if you’re selling large, slow-moving inventory, for example, the ongoing storage fees could gnaw away at your profit margins. The good news is that if you change your mind about FBA, you can withdraw from the scheme without penalty. Amazon will return your inventory to you (for a fee).
How easy is it to sell into the rest of Europe?
As we mentioned earlier, selling into Europe is one of the big advantages of FBA. But there are just a few more hoops you’ll need to jump through to sell across borders, even European ones. See our guide: Expanding your Amazon FBA Business in Europe – 5 Requirements Set by Amazon.
What will happen after Brexit? Will I still be able to sell into Europe?
Who knows what will happen after Brexit? The answer to that is: no-one. But the one thing you can bet on is that Amazon will be doing everything it can to make cross-border trade as frictionless as it can, not only for itself but for Amazon sellers like you. If anyone can take some of the sting out of post-Brexit selling, it will almost certainly be Amazon.
Cross-border payment solutions for Amazon sellers
At WorldFirst we help Amazon sellers to maximise their revenues through foreign exchange services. If you’re selling on one of Amazon’s many global platforms, we can help you open local currency accounts so that you can collect your overseas revenues quickly and effectively. Our market-leading World Account lets you can now manage all your local currency accounts from one easy-to-use platform using one single login. Learn more >