Amazon is synonymous with eCommerce. Many small and medium-sized businesses start out as Amazon merchants. Some make the leap to DTC, but others are content with their potentially significant returns from Amazon and eventually end up being acquired by special purpose acquisition companies for a handsome buyout. What are some pros and cons of staying with the platform? Let’s find out by going through the following 4 FAQs!
Q: What’s the best thing about selling on Amazon?
A: Selling on Amazon comes with advantages like getting access to their massive traffic flow but, perhaps even more attractive to some sellers, is the availability of Amazon FBA - fulfillment by Amazon. Enrolling in Amazon FBA essentially allows sellers to worry about selling, while Amazon takes care of order fulfillment and shipping. And by shipping, we mean Amazon takes care of warehousing, picking, and packing products, as well as returns and refunds. The vendor only has to worry about sending their products to Amazon to make sure that their store stays stocked. While this sounds like an incredible deal, we should point out that FBA isn’t ideal for low-value items and extremely large items - since you do have to pay Amazon.
Q: How does Amazon FBA calculate costs?
A: Items stored with Amazon through its FBA program are charged based on size and weight - this means that your best bet is to store expensive but small items with them. Additionally, Amazon FBA increases storage fees for items that have been stored for longer than 180 days. Amazon also charges for stranded inventory i.e. products stored with Amazon that are not listed for sale. It shouldn’t be a surprise that storage fees are higher during the holiday season, so it would be a good idea to remove any listings that are not selling well before then.
Q: What other advantages are there to using Amazon FBA?
A: Main advantages of selling on Amazon include discounted shipping rates, quick delivery through Amazon prime, way more storage space, dedicated customer service management, and omnichannel fulfillment through Amazon affiliates.
Q: What are some disadvantages of using Amazon FBA?
A: The major disadvantages of using Amazon FBA include first, and foremost, cost. You can determine whether it’s right for you, however, by using the Amazon FBA calculator. Amazon FBA also leads to more returns because of Amazon’s open return policy. Product preparation requirements can also get on your nerves after a while as there are quite a few labeling requirements.
In addition to the long-term storage fees mentioned above, however, the biggest disadvantage to using Amazon FBA and selling on Amazon, in general, is that you won’t be able to remarket to people who have bought your products. Every sale is final, and you won’t have access to their information, this makes the experience very passive in some ways.
Ultimately, whether you should use Amazon and Amazon FBA to run your online business or build your own online store is your decision. The key element to success with Amazon FBA is to have pricey items that are easy to store, easy to label, and move off your shelves quickly. But this begs the question if you are sitting on products that are in demand, easily manageable, and can be sold for a significant premium, why wouldn’t you sell them yourself?