Selling on Amazon: the pros and cons of FBA
E-commerce, Advertising & Other
Running an e-commerce business means being in charge of plenty of moving parts. Between brand building, outreach, production, packaging, and shipping; there are so many factors to consider. On top of the aforementioned, choosing the right platform for your e-commerce business is also a big decision. At this point, Amazon has become a household name, with many businesses choosing to use this e-commerce platform. However, does it live up to its potential?
When it comes to running your business on the Amazon e-commerce platform, what are the pros and what are the cons? Well, luckily, we’ve done the research for you and we will make the path to your final decision just a little bit easier.
Selling on Amazon: what are the pros and cons?
Amazon FBA: what is it and how does it work?
FBA is Amazon’s e-commerce platform and the subject of this entire article. The acronym itself stands for Fulfilled By Amazon. As mentioned, when running an e-commerce site, you’re usually in charge of all aspects of services, and this includes production, packaging, delivery, refunds, returns and so on.
When it comes to working with Amazon, things run differently. Essentially, the FBA model takes over these aspects of e-commerce. You’ll need to ship your products to an Amazon warehouse, but once there, the company is in charge of and responsible for your inventory. Amazon stores your products, decides on the packaging, and ships it. On top of this, they deal with the customer end of things including point of sales, responding to customer emails, refunds and returns.
Although this may initially feel like quite the relief when you consider how much work this takes off your plate, it also relinquishes a lot of control. For those who like to micro-manage every aspect of their business, giving the power over to Amazon could feel like a loss. So, before moving forward with this huge decision, it’s important to look over the pros and the cons of this system.
Let’s take a moment to discuss Merchant Fulfilled
Also known as MFN, Merchant Fulfilled is where you use the Amazon e-commerce platform alone and take care of all the other aspects on your own. You’d act as a separate entity, using Amazon as a sales channel for a way to advertise and promote what you’re selling. But in this case, you’ll be the one in charge of order fulfillment as well as customer care and other logistics that come with shipping.
It’s important that we note that if you chose to use Amazon as an MFN customer, you must stay on top of everything. Providing a poor customer experience is frowned upon by Amazon and the company actually punishes sellers who do not stay vigilant.
Pros of Amazon FBA
The Customer base for Amazon is huge, with millions visiting the platform to buy every single month. On top of the visibility this will offer your business, Amazon Prime is a huge selling avenue to explore. Customers adore Amazon Prime for its quick delivery times and low cost. Reaching the database of Prime customers is a big bonus, but there are still a number of customers on Amazon that you’ll be able to access. For the amount of reach alone, this is an excellent reason to consider using Amazon FBA.
Shipping and wait times
When it comes to waiting for products to be delivered, most customers are quite impatient. Shipping times and prices are often the driving force behind why a customer buys online, and if you’re working with both the best pricing and wait times, it’s much more likely for the customer to follow through with the sale. Not all e-commerce platforms offer quick shipping options, but Amazon is known for its ability to get products to clients fast.
In some cases, Amazon offers products with free shipping, while also getting these to the customer in as quickly as two days. When shopping online, it’s much more likely for a customer to choose free, two-day shipping as compared with a platform offering two-week shipping that they’ll need to pay for. So, when you think about it, working with Amazon could be the driving force behind getting the sales numbers you’re looking for.
As mentioned, Amazon offers the option to store inventory, choose packaging and ship products. For some, this is a definite reason to choose the platform. The extra money, time and energy that’s required to carry out these aspects of running an e-commerce business are taken care of, making it easier to focus on other aspects of your business. Do bear in mind that they also deal with the customer care end of things, so if this has been one of your weak points, it may be the reason you choose them.
As stated in the point above, Amazon FBA offers an in house customer support system. Many e-commerce business owners don’t enjoy dealing with customers upfront, and this includes customer questions, complaints, returns and so forth. If you find these tasks particularly challenging, then choosing Amazon FBA may be very appealing, as these aspects are dealt with in a professional and timely manner.
Cons of Amazon FBA
High shipping fees
When working on the Amazon FBA platform, you don’t get a say in which shipper you’re working with since Amazon is in charge of this aspect. Thus, you’ll pay Amazon a standard rate for them to look after your shipping, For some, other platforms may offer better deals on shipping costs for the specific products or services you’re offering. For this reason, we’d recommend doing a bit of research in relation to this aspect of various e-commerce platforms.
High storage fees
Again, although storing your products is taken care of by Amazon FBA, what you’re paying may be higher than you’d find at other storage facilities. Amazon’s prices fluctuate depending on the time of year you’re storing product, and you can anticipate paying a higher rate between October and December. Not to mention, if you have products sitting in their facilities for a while, you’re going to have to pay long-term storage fees.
If you’re selling on Amazon, it can be a difficult process to differentiate your brand from that of your competition. Selling on Amazon will make your products homogenous with the next. Therefore, if your goal is to create a name for your brand, this is not the way to do it and it’s important to think about this before shipping all your products out to the Amazon warehouse.
Returns and inventory mismanagement
Since Amazon offers a return guarantee, this can often translate into products being returned at a higher rate in contrast with those who don’t offer this. Thus, although you may sell more upfront, there’s a chance that not all sales will stick and you’ll be paying for it.
Not only this, since Amazon is storing your inventory in their warehouses, it can be difficult for you to keep track of what’s been sold, what’s been returned and what is still in the warehouse. Not physically seeing your stock can lead to confusion as well as the potential for mishandling what you do have. This can be mitigated with inventory management software, but some e-commerce owners may find it easier to physically deal with the products themselves.