Is Amazon FBA Worth It?
Even though Amazon has many of its own products, over half of sales on the e-commerce platform come from third-party sellers. These items are often kept in Amazon warehouses and shipped by Amazon employees. Many would say Amazon FBA is still a viable business going into the future. But let’s take an indepth look at the answer.
Firat what is Amazon FBA? FBA stands for Fulfillment by Amazon, a service that lets you utilize Amazon’s vast warehouses and shipping facilities so that your products can be shipped to your customers.
Is Amazon FBA still Worth it? For Sellers
Amazon does not share how many of its own products are sold to third-party. It does reveal the breakdown between consumer and third-party sellers. While consumers accounted for 49.1 percent of its annual online sales in Q3 2016. Sellers represented 47 percent of its Amazon Marketplace revenue. The retailer also noted that 47 percent of its annual Marketplace revenue comes from sellers. Making 70 percent of their income from selling on the marketplace.
With a majority of its revenue being generated by people selling goods in its marketplace. Amazon is clearly trying to position itself as the place to buy third-party products. Amazon, which has been investing heavily in its infrastructure and has more than 1 million employees. Also aiming to position itself as the marketplace where people want to buy products.
The company’s goal in the last few years has been a large number of sellers and buyers. It aims to consolidate the industry into a more powerful platform. With the current rate of growth, it is possible that Amazon will have more than 5 million sellers by next year. By comparison, eBay currently has around 2.1 million sellers.
While there are definitely plenty of reasons to start a business selling on Amazon. It can be difficult to get an Amazon merchant approval. While Amazon does allow third-party payment processors to be accepted, the rates are higher. So this poses a challenge to those who want to sell and are not Amazon members.
In a survey done by Ecommerce Wire, 89 percent of merchants are planning on using a third-party payment processor in the next 12 months. That makes Amazon a tempting option for those who want a merchant account that is not Amazon. And this is what makes Amazon Marketplace so appealing.
Amazon Merchant Account
To be able to gain access to Amazon’s new information, a merchant would have to pay $49 per month. However, this payment processor should be able to handle any type of payment that a merchant desires. This includes mobile payments, debit cards, gift cards, and bank transfer. Amazon’s own merchant account would also offer the ability to accept payments from all parts of the globe, though the company has not specified whether they would be able to offer a global payment option currently.
It is unclear whether Amazon Marketplace will be coming to an Android platform, but the company is expected to announce such a thing at their F8 conference next month. And it will have an option to link your account to a mobile payment app. So if you are planning on releasing an app for your business, you would be able to benefit from this and even get an opportunity to be listed in the Google Play Store.
Most first-time sellers will choose to open a personal account since there is no registration fee. Startups might be able to afford to pay for the higher sales fee instead of paying for the professional account subscription fee.
Affiliate Marketing and Things You Need to Know
Affiliate Marketing is a great way for Everyday people to make extra money online. Amazon has created a powerful business model. But there are things everyone should know thats looking to start with Amazon affiliate program.
What is Affiliate marketing?
Affiliate marketing gives you the opportunity to earn commissions by promoting other people’s (or companies’) products. You find a product that appeals to you, promote it to others, and earn commissions for each sale you bring in. Affiliate acts as a bridge for customers and companies.
Companies or product creators uses affiliates and a mens to increase sales without increasing ad budgets. By given affiliates a percentage of product sales it encourages third-party sellers. This is the core of Amazon and how it grow to be top e-comm retailer.
As an affiliate you have the choice of signing up for as many programs as you want. However, there are generally listed in the affiliate programs which will help you to be a part of the program. When you sign up for a program, you will be given an ID. You will use this ID in all your marketing materials.
For example, instead of referring customers to a product by name, you will use the ID so that when customers click on the product, you will be redirected to another page. The second page will contain more information about the product and more info on the company that you are promoting. This second page will include testimonials (written by you) and product reviews (written by the company). When customers buy something from that site, you will get your commission.
The more that you promote the product, the more commissions that you will earn.
Affiliate Marketing Business
Affiliate marketing is a great online business opportunity. It allows you to do anything from write articles for money to write reviews and sell them to friends for each friend, to creating a website and then promoting it for cash.
The great thing about affiliate marketing is that there are hundreds of programs out there to promote products. However, there are also thousands of companies to promote.
So what you do is find programs that you want to promote. Then you look out for companies that offer programs that are similar to those that you want to promote. For example, if it has a certain subject, you see that there are companies that sells golf products which are also selling products relating to pet food. As long as there are companies that sell products in the same field, then you just create a website or a blog, and then you advertise their products using their materials.
Then when the customer clicks on the product link you redirect them to the website or blog. You will be redirecting them only after you have seen the company’s website take them to their site, and then you will send them to the company’s website by using the company’s material. So you will be advertising products to customers by using company’s websites by using company’s materials.
Amazon Merchant Accounts Options
There are three different fulfillment options available to a company if it decides to sell on Amazon:
- Fulfilled By Amazon (FBA): The seller’s inventory is shipped directly to Amazon, and Amazon processes and fulfills orders on behalf of the seller.
- Amazon Fulfilled by Merchant (FBM): program allows sellers to handle shipping to their own customers directly after receiving their orders from the Amazon Marketplace.
- Seller Fulfilled Prime (SFP): Seller of a product who makes arrangements based on Amazon Prime shipping policies
Each of these fulfillment options come with their set of pros, cons, and pricing options. A majority of Amazon sellers use FBA. Sellers who use FBA can use Amazon fulfillment centers to store inventory and let Amazon handle the packing, shipping, and picking.
Essentially, this can make shipping easier, but it can also be difficult and expensive for a small company. We have outlined the FBA and its cost breakdown, so that you can decide if it’s the right option for your business right now.
How much does Amazon FBA Cost?
Generally speaking, Amazon FBA costs change based upon factors such as what type of merchandise is being shipped and stored, how long it takes to store it, what time of year it is, and many others.
Based on Amazon’s Seller Central as of December 26, 2018 this list represents the most common Amazon FBA fees. Seasonal rates might be higher.
However an individual seller chooses to fulfill his/her product, Amazon will charge 6% – 20% of the selling price. Depending on a particular product’s category, the commission is charged as an Amazon affiliate fee. Computer accessories pay 8% referral commission while kitchen accessories pay 15% of the total sale price minus taxes.
In addition to this seller fee, Amazon FBA will charge two main kinds of fees: inventory storage fees and fulfillment fees. Amazon’s warehouse storage fees include all storage fees and costs required to keep sellers’ products secure and in good order. FBA fulfillment fees include the entire process of order processing from beginning to end, including the packing, loading, and shipping process.
There are a lot of different storage fees charged by Amazon when it comes to their FBA service, based on the length of time the products are kept for and the size. It is typically possible to pay $0.48-2.40 in short-term storage fees depending on how large the storage space is. You will be charged $3.45 per cubic foot for storages between 181-365 days. Any items that are stored longer than one year will cost the seller $6.90 per cubic foot.
FBA Fulfillment Fees
While most fulfillment services bill for picking, packing, and shipping separately, Amazon FBA fulfillment fees are billed as a single cost for the entire fulfillment journey.
The fulfillment fees vary greatly due to the size and weight of the product being shipped. Both of these factors can affect fulfillment costs.
A comparison of Fulfillment Costs by Size and Weight.
A huge chunk of a seller’s fees will depend on what exactly they sell through Amazon FBA. Amazon can not standardized this services. Amazon’s fulfillment fees are divided into two categories: standard size and oversize.
Standard size: must not weigh more than 20 pounds or have dimensions smaller than 18x14x8 in.
Fulfillment fees for standard size products range from $2.41 for products under 1 lb. Over 2 lbs., the additional charge is $0.38/lb..
Oversized: anything that cannot be considered standard size. Oversized products (those bigger than 18x14x18in) have fees that start at $8.13 for “small oversize” (over 70 lbs. or measuring over 30 inches).
For products with a weight exceeding 150 lbs., there may be a fulfillment fee associated with them. Or exceeding 108 inches on the longest measured side) begin at $137.32, with a discounted rate of $0.91/lb. beyond the first 90 lbs. The shipping cost for products with Amazon FBA is calculated by dimensional weight, which factors in the shipment’s density when calculating the cost. Also, all apparel incurs an additional $0.40/item fee.
Often Overlooked FBA Cost & Fees
If any seller needs specific services, the use of Amazon FBA might result in additional costs.
The packaging is another factor a seller should consider. The above listed FBA fees include packaging, but Amazon only ships products in their own branded boxes. Essentially, the Amazon brand becomes the driving force behind the venture, and may overshadow any company branding that stands out from the rest.
The Amazon seller requirements are pretty stringent, and if those requirements are not followed closely, then they can impose fees to penalize their seller. Among other penalties, a seller’s inventory will be subjected to a labeling fee if they do not comply with Amazon’s barcode label requirement. A label must have sufficient white space around the Amazon barcode or FNSKU, product name, Item Condition, and ASIN or FNSKU on the sides and bottom.
If a seller prepares their products beyond the guidelines published by Amazon or is not in compliance with its policies, then an “unplanned prep fee” can be incurred. It includes charges for labeling, bagging, poly bagging, and taping in preparation for storage and shipment.
Package Prep Fees
For an additional fee, a seller can request Amazon to package for the seller and oversee the preparation of the products. While it raises the overall cost of using Amazon’s FBA services, it enables sellers to outsource the hassle of preparing and packing shipments, which is useful if their inventory is large.
A seller has to pay an additional fee to facilitate “free” returns if their products are eligible for Amazon Prime returns.
Inventory Removal Fees
A seller can withdraw from Amazon’s FBA service at any time by paying for their inventory to be removed and returned from the fulfillment centers. You can expect to pay between $0.50 and $0.60 per item, depending on its size. Amazon’s disposal service is generally more expensive if sellers want them disposed of instead of returned.
Many of the additional fees associated with Amazon FBA add up, but this service is worth it for companies that have a legitimate need to fulfill inventory and fulfill orders. Amazon has a massive hold on the digital retail space. The closest competitor being Walmart and they’ve only grab a small percentage of the marketplace. Having your product listed on Amazon site means billions of potential customers seeing your product. Is Amazon FBA worth it? Many online sellers would still agree that having Amazon as a partner still out weight the drawbacks.