Fulfillment By Amazon

July 19th, 2011

Fulfillment By Amazon (FBA) is a bigger program than I ever expected. In this program, a seller ships his or her inventory to Amazon.com’s warehouse. You pay a UPS shipping fee, and a storage fee. But when you sell something, you notify Amazon, and they do the shipping for you. You don’t have to box, label, or haul to the post office. And shipping takes place 24/7. These are not the best things about the program. The biggest benefits are:

1. Items stored in the FBA program are eligible for Free Super Saver Shipping, Amazon Prime, or other discounted shipping rates. Thus, people are more likely to choose them. And, items with discounted shipping go to the top in search results when they are tied with competing products that aren’t FBA.

2. Because of the free shipping, you can raise your price to match your competition. Even if you have the same price as someone who is not using FBA, you get at the top of the search results. And when you sell, your profit is dramatically higher.

3. You can use FBA with marketplaces other than Amazon.com. It’s a multi-channel selling tool.

E-commerce is about margin, not volume. If you make $3 on 10 sales you’re doing better than someone who makes $1 margin on 25 sales. FBA not only has a big convenience factor but it raises sellers’ margin considerably.

I just wrote an article for ECommerceBytes about FBA and talked to Chris Green about FBAPower, his FBA software site. The next few posts will be about this subject.

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