New Amazon seller series

If you’re a seller who’s been avoiding Amazon’s FBA (Fulfillment by Amazon) program because it seems too daunting, or if you’re wondering how the system works, perhaps it’s time to begin the journey of discovery.

In a series of articles, we’ll look at how FBA works and point out some of its potential pros and cons.

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Chris Green, director at ScanPower, believes there are many good reasons for sellers to consider using FBA. One of the major benefits he cites in his book, “Arbitrage,” is the fact that FBA frees up a seller’s space and time.

“We can only store so many products in a limited amount of space, and we can only manage so much of the business (including packing and shipping orders) with a limited amount of time in each day,” he says.

Plus, he adds, you don’t have to worry about shutting down your business when you want to go on vacation.

Other benefits include ready-made product pages from Amazon, no listing fees, and access to loyal Amazon customers who will often pay more money for the company’s services.

These customers tend to know exactly what they’re looking for, and they’re not interested in haggling over price, Green explains. They value simplicity, and they receive free or low-cost shipping when they purchase from FBA sellers.

“Amazon customers are willing to pay more for the exact same item if it comes from Amazon or an FBA seller,” Green says. “They do this because they know they will get their item fast, and that customer service will be top notch.”

So how does FBA work?

The short answer is that Amazon stores, sells, packs and ships your products for you. As an FBA seller, Amazon will also take care of your customer service, provide free or low-cost shipping options to your buyers, and even do most of the marketing.

To begin selling through Amazon’s fulfillment center, you must upload your listings and send your labeled products to designated warehouses. Once your inventory is received, the rest is up to Amazon.

Sellers pay fees to Amazon for storage, packing, shipping and sales. These will be examined further in part two of this series.

Who should use FBA?

Generally, FBA works best for sellers who have multiples of the same item, or large quantities of products to move. However, it may take a little research and calculation on your part to determine your costs for going that route.

Marketplace fees, of course, should be added into your calculations, but you also have to consider the cost of shipping your inventory to Amazon’s warehouses, and any potential loss you could encounter if your products don’t sell.

Weigh in the monetary as well as psychological costs of storing and shipping inventory yourself. Another consideration to factor in is the loss of brand marketing, which I’ll explain in part two.

If you highly value marketing your brand to the world, Amazon may not be the best option for you, and for now you may want to consider sticking to your own Web store or other marketplaces like eBay. Sellers who have antiques, collectibles, and hard-to-find or one-of-a-kind items may be better served through platforms like eBay, as well.

In part two of this series, we’ll look at some possible disadvantages to using FBA and how the fee structure works.

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