As an Amazon seller, you might be asking yourself “should I be using FBA”?
Amazon is expecting to reach the milestone of 80% of their sellers using FBA by 2021. Amazon has the best fulfillment network to date and they keep on innovating different ways to enhance the fulfillment experience by ensuring quick and safe delivery to doorsteps of their customers. With the record of an estimated 3.5 billion delivered packages, there is no other marketplace in the world that is in the position to compete with Amazon.
Coming back to the question should you be using Amazon FBA?
Unfortunately, sellers don’t have much room to make mistakes; according to the survey, 85 percent of the consumers say that they won’t return to the brand after just one poor delivery experience.
Amazon FBA is of no use for you if you are a logistics expert, if not you would for sure turn to Amazon fulfillment services where you could lower your costs and meet the consumers’ expectations simultaneously.
By using Amazon FBA you can gain customer trust, you can lower your shipping costs (make more profits), customer service facility and you can also use FBA if you have your own e-commerce site.
Seeing an “FBA prime” logo in front of your listing can for sure increase your sales.
Understand the costs of using Amazon FBA
While keeping in mind the benefits of using Amazon FBA you must consider costs charged by Amazon for using its services and then decide if this is the right choice for you or not?
How to calculate FBA fees for Amazon orders?
Following steps need to be taken while determining the cost for using FBA.
- Your product is apparel or non-apparel.
- In which size tier does your product lie. (standard or oversize)
- Calculate its shipping weight.
- Your product lies in the category of dangerous goods or not?
Here’s how you could calculate the fees for your product (Amazon FBA fees 2020 for Europe).
How to calculate FBA fees for multi-channel orders?
As mentioned above FBA can be used for your own sales channel. But the cost will be different than the products sold on Amazon.co.uk. Your cost will be doubled if you are using Amazon services for your own channel and in the case of next-day delivery, your cost can go up to three times as compared to the products that are selling on Amazon.
Additional FBA costs to consider
Other than the main costs of fulfillment and storage there are other scenarios that can cost you more.
- Labeling – Barcode labels application fee
- Preparation services – Preparation of inventory for storage fee
- Repackaging – Repackaging of returned items to be resold fee.
- Long-term inventory storage – Fee for storage of items for more than a year.
- Unplanned services – Fee for the arrival of inventory to the warehouse without proper labeling.
- Returns processing – Processing fee in case customer returns your product.
- Removal order – Fee in case Amazon disposes of or returns inventory on seller request.
- Over-size items – Special handling fee per shipment.
Estimating your Amazon FBA fees
Due to complexities, Amazon offers their sellers tools for a better understanding of their fee structures.
- Fulfillment fees for FBA orders
- Fulfillment fees for Multi-channel orders
- Monthly Inventory storage fees
- Complete list of fees
You can also use Amazon’s own revenue calculator. Keep in mind Amazon reviews its fees on yearly basis.
So you need to be up to date while calculating the cost.
Disadvantages of using Amazon FBA services
Up to this date, Amazon has the most advanced and reliable fulfillment network. But this service still has few unrealized disadvantages which you as a seller keep in mind before signing up for the services.
Commingling Merchandise
By default, your seller account is set to use a manufacturer barcode to track your inventory. So, your items will be commingled with the items of the same product from other sellers who also using manufacturer barcodes. You simply change your barcode preference if you don’t want to commingle your products.
Product QC consequently becomes very difficult for sellers. Sometimes sellers are forced to close shops, receive negative reviews, or even face legal actions when counterfeited or damaged items are received by customers. It wasn’t the seller’s fault, but they still faced the harsh consequences
Sales tax Compliance
Another issue which Amazon sellers constantly keep on facing is sales tax compliance.
You must need to make sure that you are sales tax compliant in the region where Amazon does not collect sales tax on sellers’ behalf. Previously, Amazon was not transparent about the inventory location of the products but now you can track them under Reports > Fulfillment > Inventory Event Detail.
Other disadvantages include
Even though Amazon is an incredible selling machine, there are a few drawbacks you need to be aware of.
- FBA costs money.
Amazon charges both storage fees and fulfillment fees. And you’ll want to make sure your products are still profitable after paying Amazon’s fulfillment fees.
- Long-term storage fees.
Storage fees aren’t too bad unless your items sit for over six months. If you let your inventory sit too long, you could be faced with sky-high storage fees.
- You may see more returns.
The flip side of having an easy returns process is that customers are more likely to make returns.
- Product prep can be difficult.
Amazon has strict guidelines on how to prepare and ship your items to them. It takes time to get the hang of all the details when you’re first starting out.
- Tracking inventory can be difficult.
It can be challenging to stay on top of what products you have available, what you need to order, and what’s not selling when everything is out of view. It’s especially difficult to keep inventory changes in sync if you sell on multiple channels.
Is FBA worth the Cost for your Business?
Just because FBA is used by a large number of third-party sellers and has advantages like 2-day shipping, easy returns, and widely trusted customer services it doesn’t mean you don’t need to factor in issues like sales tax compliance and commingling of products.
For some sellers, it must be a tough choice whether to go for FBA or not? If you are going for it, you just need to know more about the integration of FBA with your other retail systems like ERP, POS, and web stores.