IT’S NO LONGER ABOUT WHETHERYOU CAN AFFORD TO USE FBA

IT’S ABOUT WHETHER YOU CANAFFORD NOT TO USE FBA

This double-edged sword still represents the biggest growth opportunity for marketplace sellers, while turning over operational control of inventory to Amazon. Yes, Amazon is playing hardball with FBA – it’s about creating aconsistent, high-quality experience for Amazon customers. Amazon rewards sellers for using FBA, and handcuffs sellers that don’t. There are few examples left of large, successful sellers that don’t use FBA – they likely have access to key brands customers dearly want, or are able to sell products at much lower costs that everyone else, but time is running out on even these types of sellers.

Fulfillment by Amazon (FBA):

OPERATIONS1

For the first few years after Amazon launched FBA in 2006, the value proposition communicated to sellers was about improving operations. A seller would get Amazon’s help with order fulfillment (especially helpful for new Amazon sellers experiencing unexpectedly high customer demand), often at shipping costs lower than what a small or medium seller can negotiate itself with the shipping carriers. Sellers would be able to scale inventory storage1 and order fulfillment almost indefinitely – profoundly helpful during seasonality critical periods. Amazon would handle customer service on all FBA orders, including in-language service in countries where the FBA seller didn’t have its own in-language capabilities. And Amazon even started doing multi-channel fulfillment from FBA inventory, allowing a multi-channel seller to get all of its order fulfillment done by Amazon. These benefits would allow the seller to reduce time spent on warehouse-related and tactical fulfillment issues. But for many sellers, they hesitated because they already had their own warehouses and order fulfillment processes.

1For goodness sake, if you do decide to use FBA, make sure to sticker all of your items so nothing gets commingled with other sellers’ FBA product – comingled product is one of the biggest risks that can cause permanent damage to a seller’s account.

PERFORMANCE METRICS2

Then it became clear that FBA was about getting sellers up to the performance levels needed to stay in good standings on Amazon. Too many new sellers were failing operationally, and FBA helped them stop problems with late shipment, cancelled orders, and on-time delivery. As FBA sellers grew and their catalogs got more complex, no longer did they have to worry about these performance issues.

BUYBOX ADVANTAGE3

Amazon gave FBA sellers a significant advantage in the buybox algorithm, allowing them to capture sales far more often, winning out over otherwise-comparable offers from sellers not using FBA. Brand new sellers would immediately find their products eligible for the buybox if the products were in FBA. And the buybox algorithm even allowed those FBA offers to be priced slightly higher than non-FBA offers and still win the buybox. And because more than 90% of all sales in non-media categories go to the buybox winner, thriving on Amazon is primarily about winning the buybox.

SALES INCREASES4

With a buybox advantage for being in FBA, sellers saw their sales grow. But sales also grew as Amazon customers preferred products with offers eligible for PRIME and Super Saver Shipping – customer conversion was higher for FBA products. Today, on products where there is no Amazon Retail offer or FBA offer, we still see sellers regularlyexperience more than 50% sales increases by being the first FBA seller on a product.

SEARCH/DISCOVERABILITY5

If all of these prior reasons aren’t enough, the mostcommonly overlooked feature of FBA is discoverability of products. As more customers learn habitually to click on the “Free Shipping by Amazon” button in Search, every single non-FBA product disappears immediately, no matter how perfect the product might otherwise be for the customer. With that single click, all drop-ship and merchant-fulfilled offers disappear. With PRIME customers growing significantly each year, and representing hugely disproportionately higher amount of spend per year on Amazon, sellers have to use FBA to make sure their offers are being considered by big Amazon customers.

Though FBA isn’t an effective tool for winning sales from Amazon Retail, its wide range of benefits has allowed hundreds of thousands of sellers to simplify and grow quickly, without having to make extensive capital equipment investments. Without the need to handle orders and most customer services, sellers have much more time to focus on profitable sourcing.

HERE IS THEBOTTOM LINE

If you plan on becoming a successful seller on Amazon, the role of FBA should be central to your growth plans. There still is no bigger growth driver for Amazon sellers.

If you seek immediate consulting help growing your Seller business

contact Joseph Hansen at www.buyboxexperts.com

Joseph will also be giving a seminar at the prospershow.com February 8-9, 2016 in Salt Lake City. Enroll now to learn from this and other workshops led by experts on Amazon.

FBA