New Amazon seller series – part II

In part one of this series that explores Fulfillment by Amazon (FBA), we looked at an overview of the service and its benefits. Part two will review disadvantages you may encounter as an FBA seller, and fees the ecommerce giant charges.

While it’s true that FBA can significantly free up your time and storage space, sellers still need to consider whether it’s worth the effort and cost to jump on board.

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For example, you still have to invest your time by labeling each product individually with a UPC code. This special barcode identifies the inventory as yours, and you need to be sure it covers over any existing barcodes.
This means you may also have to purchase a label printer and keep a stock of label stickers.

After your products are labeled, you can ship your inventory to warehouses designated by Amazon. As an FBA seller, you are entitled to UPS shipping discounts, so that will help your profit margins a little. As you weigh the pros and cons of FBA, consider the risk you take when your inventory leaves your hands. Can you trust that delivery to the warehouse, storage of your inventory, and then shipment to the buyer will be a damage-free experience?

Amazon is a trusted source for buyers’ needs, and Chris Green, author of “Arbitrage,” says the company prides itself on having excellent customer service. However, even with a top notch support system helping Amazon FBA sellers, he believes the customers tend to be frugal with their feedback ratings.

“If you sell enough volume on Amazon, you will have this happen to your account,” Green says. “Take it all in stride, and remember that it is all just par for the course when you sell on”

If you believe you received an unfair rating, you can always try to work it out professionally with the customer, who has the ability to change his or her feedback at any time in the future. Most of the feedback is about the product itself, not the customer service, which brings up a side note: Amazon considers all buyers their customers, not yours.

That being the case, sellers cannot market themselves to these customers because, as Green puts it, those customers belong to Amazon.

“Whether you ship yourself or use FBA, you are not allowed to market to that customer by email, phone, or even direct mail,” he says. “This means no company link in your email signature, no packing slip in your outbound shipments, and nothing related to you personally can be packaged with your FBA inventory.”

For the seller who is trying to build up brand recognition, you will miss out on this opportunity and may want to consider another platform. Some sellers get around this problem by using a multi-channel strategy. I once purchased a hair dryer on eBay and it was shipped to me via Amazon. While the seller’s mark was nowhere on the package, I had more direct contact with them through eBay.

One final factor to look at when considering FBA as a selling strategy is competition. Green does not suggest viewing non-FBA sellers as competition because the customers he wants you to target are those who are looking for the shipping discounts, those who seek out FBA sellers.

Your competition, therefore, are other FBA sellers and Amazon itself. Instead of lowering your prices to compete with them, which can be a downward spiral for all involved, just be aware of how much competition there is and how this can affect your sales.

In the next part of this series, we’ll look at FBA fees and see what Chris Green has to say about pricing strategies. Did you miss part 1 of our series?

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