How You Can Share in Amazon’s Global Success and Make Money From Fulfillment by Amazon
Amazon is the sales marketplace that originally started out as a place to sell books. But in the last decade it’s graduated to selling anything and everything… and become one of the biggest brands in the world. Not only that but it’s a famous brand that allows – in fact encourages – entrepreneurs to share in their success by selling products right there on Amazon itself.
Over the last couple of years Amazon have been working on another way you can make money in partnership with them. It’s called Fulfillment by Amazon.
How You Can Share in Amazon’s Global Success and Make Money from Fulfillment by Amazon
Now to me Fulfillment by Amazon sounds like a really exciting way of making money in the 21st century Internet age. Because it is a business model whereby you can just focus on marketing and making sales. Then have Amazon do all the “hard” physical work of stocking, storing and shipping your products to your customers for you.
You know, Amazon are always something of a puzzle to me! They come out with the latest, cutting-edge business models and invest millions in making them successful. There’s no doubt Amazon’s brand image, ordering and distribution systems are absolutely without equal.
Then they let any Tom, Dick or Harriet share them for free. Just why they would let ordinary people take advantage of all this for no up-front cost whatsoever, I don’t know! It seems crazy, it doesn’t seem to make sense at all, but they do it… and it’s almost always a big success.
So I thought it’s high time we came back to Amazon and looked at exactly how Fulfillment by Amazon works, whether it is as good as it sounds… and whether it can make some money for you.
Amazon… did you know?
* Amazon attracts 50 million consumers a month worldwide.
* Amazon has been voted the third favourite UK retailer (after John Lewis and IKEA).
* 1.3 million businesses are selling on Amazon.
* Amazon’s business grew 18% last year… when most businesses were shrinking.
So, what is Fulfillment by Amazon exactly?
The basic concept of Fulfillment by Amazon, like all Amazon’s concepts, is simple… although there are a lot of ins-and-outs which I’ll look at later. With this service you send whatever products you want to sell (your inventory as Amazon like to call it) directly to Amazon. Whether it be books, CDs, clothing, computer accessories, toys, or whatever. They store it in their warehouse for you. Then when orders are received Amazon will pick, pack and ship the product directly to your customers for you.
You can use Fulfillment by Amazon whether you just want to sell a few things on Amazon as a sideline or want to sell thousands of products. You can use it if you are starting a new business or have an existing one that you want to change over to Fulfillment by Amazon.
You can use Fulfillment by Amazon to send out things you are selling on Amazon itself or things you are selling elsewhere. This is what Amazon called Multi Channel Fulfillment. One more thing: if you start using Fulfillment by Amazon you don’t have to have everything fulfilled by Amazon. You can use it for some products and not others.
Pros and cons
So then, let’s have a look at the pros and cons of Fulfillment by Amazon:
Pro. You get to benefit from Amazon’s reputation. Amazon is a brand that’s trusted by customers worldwide. When they order something that is shipped by Amazon they know they will get it. And fast. And they know they can return it if they want to. This can make a massive difference when they are deciding whether to buy from you.
Pro. You can offer faster service. Amazon has state-of-the-art online order processing and fulfillment operations. Chances are they can get your products to your buyers faster than you can.
Pro. Your products can be ranked higher on Amazon. With an Fulfillment by Amazon item your item shows up at the top of the search more often than not. Products from non- Fulfillment by Amazon sellers are listed by total cost (product price plus shipping) but your items are listed by price only. So often you can price your items close to the lowest total price, maybe be the first item in the list and attract more buyers.
Pro. Your customers can get free delivery. Using Fulfillment by Amazon will mean your customers get free delivery on your products… using Super Saver Delivery or Amazon Prime. That can give you a big advantage over sellers who don’t use Fulfillment by Amazon.
Pro. Lower overheads. You’ll need to do the figures but, in most cases, there can be good cost savings. With FBA you won’t need premises for storage, staff to do picking/shipping and associated admin. It might even mean you can drop your prices, sell more goods and yet still make more profit.
Pro. You can be MUCH more productive. I think this is the biggest potential benefit. When you use FBA you won’t need to spend time sorting, warehousing, picking and packing goods. Amazon do it for you. They can also handle customer services, returns, etc.
This means you can spend almost all your time actually marketing and selling – things that make you money. And because you can spend more time doing that you should, at least in theory, be able to make more money.
Now, although Amazon will tell you there aren’t any disadvantages to FBA I think there are a few you need to bear in mind:
Con. It’s not so good for products that take a long time to sell or which are unproven sellers. Because you have to pay a monthly storage fee for as long as Amazon have your products.
Con. Using FBA might make it difficult to compete with other sellers, especially those also using FBA.
Because how are you going to differentiate your product and your service from theirs?
Con. This is what I think is the main drawback of Fulfillment by Amazon. Your business is almost totally reliant on Amazon.
What if something goes wrong… for example their systems fail and they don’t fulfill your orders or lose your stock? Or if they put up their prices?
And what if, after getting your product in an Amazon box, the buyer just decides to go back and buy from Amazon next time?
Getting started with Fulfillment by Amazon
So let’s have a look at how you can get started using Fulfillment by Amazon.
At this point I should say that there’s tons of detailed information on how it all works at the Amazon website. But that’s really hard going and a lot of it is difficult to follow. So here I’m going to try to give you a simple, user-friendly summary of Fulfillment by Amazon.
First of all Fulfillment by Amazon is not separate to the other methods of using Amazon. It is fully integrated with them. You just set up to sell on Amazon Marketplace in the usual way then choose to FBA the products you want to.
It’s very easy to get started with Amazon Marketplace. You don’t need to register in advance. You can open a seller account when you list your first product. To register as a seller you will need a business name, an address, a display name (which can be your business name or something else), a credit card and a telephone contact number. That’s all you need to get started. Go to http://www.amazon.co.uk, scroll down the page to ‘Make Money With Us’ and then ‘Sell On Amazon’ to get started.
Amazon offers two ways of selling – informally called ‘selling a little’ or ‘selling a lot’.
Basically ‘a little’ is for occasional and hobby sellers who expect to sell less than 35 items a month. It costs 86p plus a referral fee for each sale and you can’t sell in all the Amazon categories. Selling ‘a lot’ is for businesses who expect to sell more than 35 items a month. You pay a £28.75 monthly fixed fee and a referral fee. You can sell in all the Amazon product categories. The ‘selling a little’ option isn’t really for use with Fulfillment by Amazon.
To use Fulfillment by Amazon fully you will also really need to become what Amazon call a Pro Merchant Seller. Pro Merchants have access to volume selling and bulk listing tools. There is a web interface that allows you to more easily manage your product descriptions, inventory and orders. You will also be able to export and import information to and from your account. Normally the Pro Merchant option will work out much cheaper and therefore will allow you to work on tighter margins and make money from products and sales those who sell just “a little” can’t.
If you are already selling on Amazon all you need to do is convert to a business account and ask them to enrol you in Fulfillment by Amazon. It doesn’t cost anything to sign up so you can just try it and see how you get on.