Tuesday, January 08, 2008

My Experience with Amazon FBA (Fulfillment by Amazon)

As you may know, from one of my previous posts, I began buying back product (media items) from consumers back in October. What I may not have mentioned is that I also began using Amazon fulfillment services (FBA) to ship that product to my customers.

After nearly 4 months using their service, here's what I've found:
  • The process is simple. I receive my product from the consumer, inspect it, clean it, label it for FBA, etc. and then package it up in one box to send to Amazon's Reno warehouse. I can do this from my home.
  • Amazon provides UPS labels allowing me to use their superior shipping rates to ship the package to the Amazon warehouse.
  • Once Amazon receives the package they make the inventory live on the site and my product is available for sale. I've shipped them over 2000 items and have never had a problem and if I did they have an 800 number to handle any issues.
  • I just repeat the process as I receive new product.
The benefits:
  • An item that is listed as fulfilled by Amazon exposes my product to an entirely new Amazon customer. Because the item is being fulfilled by Amazon, my customers can utilize Super Saver shipping and Amazon Gift Wrapping. Also, FBA is the only way for a 3P seller to get access to Amazon's Prime customers a growing segment on the site. Prime customers pay an annual fee for free 2-day shipping.
  • Over the last 4 months I've sold 10% of my items to Amazon Prime customers, 20% to regular marketplace customers who pay the S&H and 70% to Amazon customers who use Super Saver shipping.

    If I was listing the product on Amazon and fulfilling myself, my items would not be eligible for Super Saver shipping or Prime customers. So I immediately have very little competition for those customers. Pretty much just me and Amazon.
  • I only sell on Amazon, so I can't address how Amazon handles outside fulfillment for off-site sales, but that service is also available.
  • As an FBA fulfilled item, my inventory also shows up at the top of search. Regular marketplace items are listed by total price (Price + S&H) but my items are listed by price only so I can price my items close to the lowest total price and be the first item in the list.
  • When I was selling with Glacier Bay DVD I had a full-time staff of 6 and 4 part-timers and paid $4500 a month for my warehouse. With Amazon FBA, its just little ole me out of my house. In fact I don't even need to handle Customer Service. Amazon handles all of that for me; including returns, refunds, mis-shipped items etc.
  • I sell 70% of my items within a month so my monthly warehouse fees are minimal. An avg. DVD costs 2 cents a month to store at Amazon's warehouse.
  • S&H costs are reduced. When I sold full-time with Glacier Bay DVD, it would cost me roughly $1.40 to ship a DVD (including direct labor, packaging and postage) Amazon FBA costs me on average $0.57 cents to ship a DVD.
  • My average Gross Profit margin is 25% and most of that is Net profit, after I subtract my Advertising costs to acquire new product. When I was selling on eBay under Glacier Bay my Gross profit was 10% and net in the 2-3% range (when I actually made a profit)

Potential Drawbacks:

  • If your product does not sell quickly you will incur monthly warehouse fees (minimal charges if small items) and if you choose to remove the product from Amazon's warehouse there will be a fee to remove each item.
  • Items are out of your control but Amazon has a world class operation so this is a minor concern.

Other thoughts:

  • If you are a large seller and sell on multiple marketplaces you might be concerned about using FBA. I would suggest that you segment your inventory and let Amazon handle your Amazon.com orders. You can continue to ship your eBay, Half.com and other site orders.
  • I deal in media items, but Amazon FBA can ship anything that they sell on the site so if you have Golf Clubs, Consumer Electronics etc. you can still use Amazon's FBA program.

I share this with you because it has been a great program for me and though I'm in essence inviting more competition for my items, I don't see that as a terrible thing (I'm not building another Glacier Bay here). I do believe it would be well worth investigating if Amazon FBA would work for you.

27 comments:

Tyler said...

If you're considering FBA, you should check out:

http://fba-problems.blogspot.com

It looks like they have a lot more experience with this. Plus, they have documented many details of working with FBA on a daily basis ... much of which sounds like a nightmare to me.

Randy Smythe said...

Tyler,

If they have that many problems with FBA, they should stop selling using FBA.

I've been selling using FBA for close to a year and not had any problems.

Anonymous said...

Hmmm, it seems that your advice, Mr. Smythe is the same as Amazon...."if you don't like it, too bad"

I have read that blog and I definitely want to know if some of the issues are indeed as described.

One kicker....Amazon will not remove negative feedback even if FBA is the cause of the negative feedback

THAT IS SIMPLY FLABBERGASTING

Randy Smythe said...

Anonymous,

Its the same thing I tell eBay sellers. If the changes don't work for you leave.

If I had bad experiences with FBA I would write about them.

I agree with you about the Feedback, I have received negative feedback for something Amazon did and early on I was concerned that it would put my account in jeopardy but it didn't and it won't, so I don't stress out about it anymore.

I'm sure the other blog makes some valid points, I just write about my experience.

Anonymous said...

Right.

The point I was trying to make was that users should scream foul when policy is absurd (in this case, it is almost criminal).

Users need to be united in the face of a hegemony such as Amazon has on this kind of service.

If you don't like it, leave is not helpful to anyone and most definitely will not encourage improvement.

Anonymous said...

Randy,

Any way to place item cost per SKU for FBA merchandise would be nice to know current inventory value.

Thanks

Anonymous said...

You stated: If you are a large seller and sell on multiple marketplaces you might be concerned about using FBA. I would suggest that you segment your inventory and let Amazon handle your Amazon.com orders.

What is concerning if your a large seller about FBA?

Randy Smythe said...

Anonymous,

I probably should have just said if you are a multi-channel seller and your inventory is all in FBA.

Small or large the same issues would apply. Basic fulfillment (outside Amazon orders) is not very competitively priced.

Alex said...

Hi,

Creating an Amazon FBA forum for Amazon.co.uk merchants as most of the on line comment seems to relate to .com.

A good opportunity to start something new and interesting and share good and bad experiences! Go to www.fba-forum.co.uk for further information!

(I hope you don't mind me posting here)

Randy Smythe said...

Alex,

Don't mind you posting this info at all. Hopefully it will be helpful.

Thanks
Randy

Anonymous said...

I just created a Amazon Account.
I want to sell new clothing, but I cant find the exact items on Amazon. How can I sell it if they don't have the exact item. Plus, I'm not sure about creating a bigger account until I see how sales will go.
I do find some skirts under the other category, but not like what I sell.

Any advise.

Anonymous said...

To me, this guy on the picture with the grey beard and the brown hair is either: a)kissing up to Amazon b)living in his own very private Idaho or c)promoting the cause for Amazon, maybe even be rewarded in some way by them.
To close your eyes and say: "too bad, leave, if you don't like it" is just asinine.
...and furthermore, the fees are horrendous, besides all the other problems and horrific tactics Amazon applies. In my opinion, sooner or later there will be a class action suit on the horizon..and honestly, I am lookingn forward to it.
I do absolutely agree with all the other more realistic posts from various Anonymous here..

Randy Smythe said...

Anonymous,

The guy with the Gray beard and brown hair is me. The author of the blog.

I wrote the post because it was my experience. You obviously had a different experience and are unhappy with Amazon's FBA program.

By the way, I now work for Buy.com, a competitor of Amazon and stand by my post from 2 years ago about FBA.

FBA is certainly not for every seller or right for every product, but what is.

Buy toys directly from the toy retailer said...

I understand you find FBA to be a good solution for you, but we've seen it as only benefiting one outfit, and that's Amazon. Depending on the margins, shipping by FBA can be a terrible idea. If you have cush margins (we don't in the toy industry), then maybe it works. By and large, the 600 pound gorilla is crushing every retailer online, one FBA customer at a time.

Larry said...

I also had a great experience with FBA, until I discovered that Amazon.com has complete control over the returns process.

I had a customer buy a laptop through FBA, open the package, use the computer, then decide it was too slow. According to Amazon.com's policies, returning the item should have incurred a 15% restocking fee. This is important for my business because open box items have less value, and the restocking fee compensates me for the loss in value.

However, Amazon.com generously refunded the customer in full for the returned item, charging my account for the full amount. That left me with a computer that I could no longer sell as new.

I thought Amazon.com would be acting in my best interests as one of their sellers. However, I now know that this is absolutely not the case. They acted in the best interest of Amazon.com, benefiting one of their customers at my expense.

And according to Amazon.com, there is nothing I can do about it, because those are the terms you agree to when you use FBA. They have complete control over the returns process, along with access to my bank account to give customers whatever they want, with no recourse.

There are definitely benefits to using FBA, as you mention in this post. But by using them for big ticket items, you take on a substantial risk of lost value, should they arbitrarily decide to refund a customer money that they shouldn't have.

PavelYord said...

This hasn't been my experience with FBA at all. I detail numerous problems on my blog.

abinkleysf said...

Randy,

Thanks for the info. I am planning to use FBA for used DVDs, but for the life of me I cannot figure out how I am supposed to prep a simple DVD before sending it. Their handbook seems conflicting...they say package the item the way it will be shipped (which implies I should put each DVD into a bubble mailer), but then they say they will sticker them for me for 20 cents per item (which they could not do if I sent items in bubble mailers). Are they saying that they will just throw the item into a box and send it -- so it might get bumped around? If that is the case, is it safe to let them sticker it -- if then they might put it into a box with air space and no protection against bumping around?

Also, how do you send them multiple DVD sets that are individual DVD cases inside a cardboard slide-out sleeve -- where if picked up the wrong way could dump the individual DVDs onto the floor?

I was thinking that, for simplicity, I would just put everything into a 7.5x10.5 WHITE POLY MAILER BAG -- so that when I apply the stickers, it won't damage cardboard sleeves on individual DVD cases, and it would also fix the issue with the multi DVD sets. I can't get Amazon to clarify.

Can you advise me? I'd really appreciate it.

Anonymous said...

With shipping so many items to amazon FBA I really started getting lost as to what was sold and what was damaged until I found http://www.fbamanager.com ,they help you track inventory shipments orders and much more and automated the case management with amazon

Cygan Saber said...

Nếu bạn đang định mua hàng ở amazon và có thắc mắc mua hàng trên amazon có tính thuế không hay cần tư vấn hướng dẫn cách mua thì hãy liên hệ chúng tôi. Chúng tôi nhận ship hàng từ amazon, nếu bạn sử dụng dịch vụ của chúng tôi bạn sẽ không cần lo lắng hay tìm hiểu nhiều nữa.
Ngoài ra chúng tôi còn nhận vận chuyển hàng đi campuchia, chuyển hàng từ Pháp về Việt Nam, ship hàng từ đức về việt nam, chuyển hàng sang lào hay chuyển hàng từ anh về việt nam. Hãy để chúng tôi lo cho bạn nỗi lo về vận chuyển ship hàng.

Unknown said...

Hi,


I am interested in selling though FBA, but it is a little complicated as I am not from USA. If anyone can help with some more informations that would be great. I promise not to ask too many questions. Thanks

Jonathan said...

FBA will charge you for product refund 5 years after the original sale. Customer uses the product for 5 years. Then returns it to Amazon. Amazon charges the seller. Terrible.

Olivia Greene said...

I just wanted to add a comment to mention thanks for your post. This post is really interesting and quite helpful for us. Keep sharing.
Fulfillment by Amazon

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