Tuesday, February 19, 2008

FBA (Fulfillment by Amazon) Q&A

Since my most recent posts, on Amazon's FBA and WebStore programs, I've received lots of questions about both services. There is a great deal of interest in what these programs can offer the online merchant, so I thought I would create a Q&A post where I could gather all of the questions and answers in one place. If for some unkown reason I can't answer your question, I know people who can.

Please feel free to ask your questions using the comments link and I will do my best to provide the most complete answer. For this post please keep your questions about FBA (Fulfillment by Amazon). I will create additional Q&A posts on WebStore, Seller Central, and other Amazon programs as I move forward.

Here is the most common FBA question:

Q. How much does FBA cost?

A. The simplest way to answer this question, is link you to their website, so open up that page in a different window, as you read my explanation. Here is how it works:
  • Inventory Storage is .45 cents per cubic foot, per month (January to Sept.). So, if your item is 1 cubic foot in size and stays in the warehouse for an entire month, you would be charged $0.45 for warehousing it. This fee is actually charged by the day (1/30th of the monthly fee) so if the item only stays in the warehouse for 10 days, your warehouse fee would be 1/3 of the .45 cents or .15 cents. A 1 cubic foot item that stayed in the warehouse for 6 months before it sold, would cost $2.70 in inventory storage fees. Amazon only charges you for the space you use and the time it is in the warehouse, so in my case the average DVD would cost me about 2 cents per month in inventory storage, if it took 6 months to sell, my total inventory cost for that item would be $0.12 cents.

    To put this into perspective: I sell media items and roughly 75% of the items I warehouse at FBA sell during a 30 day period. At any one point during a month I may have 800 items sitting in the warehouse. My total warehouse fee for the month of January was under $3.00.

    Not: The inventory fee does rise to $0.6o per cubic foot, during the 4th quarter because of the increased demand during that period.
  • Shipping - Your shipping charges are broken down into two categories. Amazon Fulfilled (Amazon.com or WebStore orders) and Basic Fulfillment (all other orders)

    Amazon Fulfilled orders have an order handling fee, a pick and pack fee and a weight fee.

    Let's take an example from one of my orders for a CD under $25: Since I sell media items I am not charged an order handling fee (see pricing schedule), my pick and pack fee is $0.50 and my weight fee is around 7 cents (they only charge you for the raw weight of your item, not the whole pound rate, which is $0.40 per pound) My total FBA charge to ship that item is $0.57 cents. When I shipped items myself with Glacier Bay, an avg. CD would have cost me about $1.56 including packaging, delivery confirmation, direct labor and postage.

    Basic Fulfillment shipments are orders that are created outside of Amazon's system and fulfilled by Amazon from your inventory ie. eBay and Website orders. Basic Fullfilment orders have a pick and pack fee, a shipping method fee and a weight fee.

    Let's take an example of shipping a CD under $25 to an eBay customer: my pick and pack fee is $0.60 (for media) and I'm shipping it "standard" so my shipping method fee is $1.90 my weight fee is around 8 cents (they only charge you for the weight of your item, not the whole pound rate, which is $0.45 per pound) My total FBA charge to ship that item is $2.58 cents.

    Basic Fulfillment is certainly more expensive than Amazon Fulfillment, so do the numbers to determine if it is worth it for you. IMO, it certainly is worth using FBA for all of your Amazon orders and if you sell multi-channel and can control your S&H prices to the customer it may be worthwhile to use Amazon to fulfill all of your orders.
  • In-Bound Freight Charges - Since you have to ship your inventory to Amazon's warehouses, make sure to calculate the fees in your cost structure. Amazon does give you the ability to use their UPS rates, which can save you a ton of money. My avg cost per item to ship to Amazon's Reno warehouse is around 10 cents each, using Amazon's UPS rates.

What else would you like to know? Just use the comments section to ask me any question related to FBA and I'll try and get you the answer as fast as possible.

25 comments:

Randy Smythe said...

I have one additional observation about FBA. It is not an all-or-nothing decision. It may be that segmenting your inventory for Amazon sales makes since using FBA but you feel better fulfilling your off Amazon orders. The beauty of Amazon's FBA is you can test it to see if it is right for you.

Just take 10-20 items you regularly sell on Amazon and ship them to FBA and then test the effectiveness of the service. If you use Seller Central you can convert them directly from your current listings and just print out the labels. FBA is already a part of Seller Central.

Anonymous said...

If you have 3 things in different conditions listed how do they know what book to pull?
Thanks

Randy Smythe said...

Anonymous,

You are required to add stickers to your items. The stickers are generated by Amazon and add a value to the sku to identify condition.

The sticker would have a barcode with the ISBN or UPC followed by a number between 1 - 4 (one number for each quality level). So when they pick your order they scan the sticker and pick the right item.

I hope that made sense

Anonymous said...

Hey Randy,
Have you shipped any international orders through Basic (non-Amazon) fulfillment? I'm trying to get an idea if they would be able to ship a DVD or CD internationally cheaper than I am able to through USPS. I noticed that they will not ship DVDs or CDs to Canada but thought it might work to other locations.
Thanks.

Randy Smythe said...

Since they ship my Amazon.com FBA orders Internationally, they must ship Basic Fulfillment that way but the rates aren't spelled out on the website for International orders.

Let me see if I can get some info.

Anonymous said...

Hi Randy,

Thanks so much for taking questions about FBA. Mine is about the labels. If I ship Amazon 100 new copies of a single piece of merchandise, will each copy get the same label?

I'm thinking of distributing a book this way (a book I've written), and I would like to have the printer ship right to Amazon, with the labels printed on the book's back cover. This is easy if only a single label is needed, and impossible if each copy of the book would need a different label.

Thanks,
John

Randy Smythe said...

John, if all you have is new items with a UPC code then you can send them without labels.

Or, If they are all the same title and in the same condition then you can print the same label for any quantity.

Randy Smythe said...

Anonymous, in regards to International shipping for Basic Fulfillment:

They do not support International shipping for Basic Fulfillment only for Amazon Fulfillment.

Anonymous said...

Randy,
I have to say that your articles on FBA have made me think more deeply about our business process than I have in a long time. I was wondering if in your GlacierBay days you ever considered outsourcing to a fulfillment house. Although it looks like FBA would be a slightly more expensive route for us at this point, I've found several small companies claiming that they can ship media products at a lower cost than we are currently paying.

Randy Smythe said...

Anonymous,

In the beginning, my GlacierBay model was too complicated because we combined orders from 5 different vendors and shipped in one box (we used virtual inventory which takes some explanation, too much for this post)

Later on when we no longer combined S&H only 2 of our vendors fulfilled items so we would still have to ship items received from the other 3.

In my case it was mostly timing and availability of options that kept us from doing it.

I honestly don't know how any other fulfillment house could ever touch Amazon's system. They are a World Class operation.

Had FBA been around when I was selling, I certainly would have looked at it long and hard, but my model would have needed to change. I certainly would have considered it when my lease was up.

FBA is more cost effective on Amazon.com orders than shipping myself. If you have any volume, Basic fulfillment may be too expensive, but for small volume sellers it may be just right.

I preferred to control the process of shipping to improve the customer experience but you can't beat Amazon's ability to deliver.

Anonymous said...

Hey Randy,
So you were using distributors at GlacierBay? I was under the impression that you were buying at least some product direct from studio. You're right about Basic Fulfillment, it's just a bit too expensive to work for us right now and the thought of Amazon branding on non-Amazon orders is a bit of a turnoff.

Randy Smythe said...

I could fill a book with the problems with my model, once eBay opened the door to more competition (closing and then reopening half.com) But that may be for an actual book one day. I created a very efficient model that actually tied my hands.

I have no inside knowledge, but my guess is that Amazon may address your issues before too long. If they can work out volume pricing for Basic Fulfillment and plain boxes for packaging they would get a lot more traction for the program from the medium to big sellers.

Anonymous said...

Thank you, Randy, for answering my question about labels on new items. I will give FBA a try. Regards,

John

Anonymous said...

Hello Randy,

Thanks for the heads-up about FBA. I connected to your blog through Steve Weber.

I am interested in testing out FBA and am hung up on upgrading to Seller Central. I currently use Art Of Books as an inventory management system to reprice and sell on multiple venues. All of my inventory is listed through their site and each listing generates its own SKU.

The Seller Central info page warns me not to proceed if:

* You use listing or price management software such as AMan, Monsoon, Seller Engine, FillZ, BookTrakker, etc. to manage your listings, orders and prices on Amazon.

I do not know if the Art Of Books and their Soloist repricing program falls into this category. Any info you can provide would be most appreciated.

Frank Klin
fabulous plethora

ThePurpleSeal said...

Hi there,

I thought it may be of some interest to you to know that a while back i managed to find a british labels company who sold me a batch of whisky labels for a really low price. If you are interested then take a look at their site.

Anonymous said...

Amazon Fullfilment is going to kill independent retailers who are try to operate and build legitimate businesses. In my industry manufacturers are starting to get sick of it because so many of their retailers are complaining about it. Some have said that their products can't be sold on amazon altogether.

www.amazon.com/shops/fivedollarcd said...

Hi Randy,

I actually just found your blog yesterday after typing "Fulfillment By Amazon feedback" into the Google search engine. Your blog is great btw! I bookmarked it after reading quite a few posts. I was looking into selling using FBA. My question is this, what do you do about items with higher sales rank? Do you send them into FBA and if so do you have a cut off number? I personally have hundreds of cds right now with sales rank of over 300,000+ some even approaching 700,000 sales rank. Also, I noticed you said that you don't send all of your items into FBA, what are the ones that you hold on to. I was thinking of sending all of my $5 and under items into FBA just because I hate putting time into shipping cheaper items. Also, I've noticed that most people selling using FBA are much higher than the non-fba sellers, how do they compete? Is it that the items that are reasonably priced are selling so fast that I'm not seeing them or is it that the FBA sellers just can command more money due to the benefits of having Amazon send the item out (quick shipping, less hassle etc..)??

Chris said...

Hi Randy,
i've found this all pretty informative, even though I just got done selling a test batch of 50 pairs of shoes. All of them sold within a month and a half, so thats not too bad.

my question if you'd be so kind is: Is there anyway to download Fee/Cost reports in the same way that Amazon Fulfilment allows you to download revenue reports? The revenue reports are nice, but without the cost report its meaningless to me and sours me on the whole deal. I've looked up and down my sellercentral account and found bubkus. Thanks!

Anonymous said...

Hi Randy,

I'm a new seller for the FBA program. Is it possible that I ask for your help? If so, I would like you to help to advise & make decision with my DVDs product group that are going to ship to FBA's warehouse with FBA program. My question is which groups of DVD are going to be more popular and make more profit among Childrens DVD Collections / Comedy DVD Collections / Family DVD Collections /Action-Adventure DVD's / Drama DVD Collections and also Family DVD Collections.

Thanks,
Imm

joe said...

Hello, just happened to stumple over this blog today. I'm a full time comic book dealer and have my own website site and also do a sizable business on ebay. I'm considering testing the waters with Amazon for some of my higher priced comics.(Amazon Fees are too much for the low end stuff). My biggest question is how does Amazon package the items? Having them slap a $50 comic book in a box without being secured in some manner would be a disaster. Even the slightest corner ding or crease would kill the value of the book. I would of course be sending the books to amazon bagged and boarded but they still would need to ship them in a sturdy box (no envelope) with decent protection. Does anybody have any insight into how they determine appropriate packaging?

Anonymous said...

Randy,
Does Amazon take out the merchant fees when processing the credit cards, do they pay all the taxes and what are the typical credit card processing fees as a percent?

Thanks

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.

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