Saturday, February 23, 2008

Why Wouldn't You Test Amazon's FBA?

Well, it appears that I've become the un-official FBA cheerleader; maybe one day I will become the official cheerleader, kind of like Jared did with SubWay :). FBA has been a fantastic service for me and I recommend it highly, but I've been hearing from many sellers, mostly media guys, who aren't sold on the idea. I thought I would help them out: (My experience is with Media, so issues with other product types will be different).

Here are some of the friction points I'm hearing about:
  • I'm not sure that Amazon is committed to the service. Well, from everything I can see, FBA is the future for Amazon.com placed orders. It is part of their long-term business plan, so they are going to make it work. Better to get onboard now then be the last one to the station.
  • I sell on multiple marketplaces and I can ship them for less. Amazon's Basic Fulfillment rates can be more costly then shipping items yourself, so don't use FBA to ship your non-Amazon orders. With FBA, you can put your Amazon business on cruise control and concentrate on sourcing product, merchandising and expanding it. Just keep shipping your orders from the other marketplaces yourself.
  • I have virtual inventory. Well, if that is the case FBA is not for you. That is how I ran Glacier Bay DVD, but I still had returns, miss-ships etc build up in my warehouse. If FBA was around when I was selling, I would just package those all up and ship them off to FBA.
  • I have to convert my current Pro-merchant account to Seller Central. I did that without a hitch and if I chose to, I could manage my FBA, Self Fulfilled and Webstore inventory from one place. BTW, my guess is everybody will eventually be in Seller Central so you might as well move now.
  • I don't want to give up the shipping reimbursement. You don't have to, just add it to your price. I add $2.97 cents to each of my items and still show up as number one in the item sort. I only re-price 2 times a week so occasionally my items move down the list but that doesn't stop customers from buying them for Super Saver or Prime shipping.
  • I don't want my product to just sit there and force me to pay warehouse fees. I sell 25% of my FBA orders in the first 2 days after a shipment is received by Amazon. I sell 75% of my items within 30 days and 90% of my items within 90 days. 10% of my items may take a year to sell but that would only cost me .12 cents a year (per item) for the avg. size CD. You control what you put up on FBA, so pick some of your best sellers and test it out.

Those are some of the most common friction points for sellers, especially media sellers.

I know that change is painful, but this FBA thing is really a piece of cake. I spend 6 - 7 hours a week on my Amazon business which is 100% FBA. About half of that time is spent receiving and processing orders from my BuyBack site and the other half is prepping and shipping about 300 items to Amazon each week (I usually do this while I'm watching TV, BTW). This allows me to do my blogging during the week, without having to even think about my Amazon business, except to download my money or reprice items (Yes, I do this manually).

I process my Buyback orders on the weekend and ship to Amazon on Mondays, The shipment arrives in 2 days and is usually received within 24 hours. If you sell full-time you are much more efficient then I am and you probably have employees to do all of this.

Over that last 30 days, I've sold $21,475.15 worth of product, which is 1,421 items in 1,369 orders. I may have received 25 total emails over the whole 30 days. I haven't had to process one return since I started using FBA back in Oct.

I think it is worth a test. It is not an all-or-nothing decision. Just think about how your business would change if your Amazon business was on cruise control. How would that effect the rest of your business. Just select 100 sku's that sell well on Amazon already and ship them to FBA, compare the numbers, customer types and velocity and see if it works for you.

A little bird told me Amazon is running an FBA promotion until Feb 29th, so if you were planning on testing it out, now might be the time. Mention the promo in your email and tell them you heard about it at MY Blog Utopia.

3 comments:

Anonymous said...

Ok, just cut throught the details and tell us exactly how much you made after all expenses including product acquisition.

We need to know.

Randy Smythe said...

Anonymous,

I'm not going to give you guys everything. Product costs are a completely different discussion. Just plug you product costs into these numbers to see if it's worthwhile for you.

I have plenty of margin in my product.

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