I've been using FBA for almost a year now and have zero complaints. Amazon's service frees me up to do other things and I actually take home more money than if I shipped the items myself.
I would recommend you at least test the service this holiday season for several reasons:
- With FBA, customers get access to all of Amazon's world class services (Prime, Super-Saver Shipping, Gift Wrapping, etc.)
- You can ship all the way up to Dec 23rd for arrival on Christmas Eve. When I ran Glacier Bay, we didn't offer any expedited services, so we had to cut-off Christmas orders by the 18th of Dec. each year. With FBA, your customers can order on Dec. 23rd for delivery on Christmas Eve -- that is 5 more days of sales.
- You can charge more for the product and still get the sale.
- If you are an eBay seller you are fully aware of the customer service issues that dominate the holiday season. Well, if you use FBA, Amazon handles the customer service for you. No need to spend your days before Christmas answering emails from customers wondering where their product is.
- FBA saves you money and exposes your product to a completely different customer base on Amazon. Prime members cannot buy from marketplace sellers without having to pay extra for shipping because the seller ships the product. Only FBA items are eligible for Prime members.
Here is how everything works on a standard DVD using FBA as compared to shippig the item yourself. Your costs will vary depending on the type of product you sell.
Self-fulfilled DVD for a seller with an office/warehouse and staff:
- Sale price - $10.00
- S&H reimbursement from Amazon - $2.98
- Total revenue: $12.98
- Amazon commission 15% on the sale price only = $1.50
- Amazon variable fee per DVD $0.80
- Avg cost to ship a DVD, including DC and packaging - $1.80 estimate
- Now add up all of your monthly overhead that is directly related to fulfillment and customer service and divide it by the avg.number of items shipped per month. At Glacier Bay that per item cost for me was: $0.45 and I had to ship a lot of product to keep that number from getting to high.
- Total Net Revenue: $8.43
- Sale price - $12.97 (I beat the lowest total price by one penny so I show up at the top of the list) With FBA there is no S&H reimbursement.
- Total Revenue: $12.97
- Amazon commission 15% = $1.95
- Amazon Variable fee - $0.80
- FBA Handling fee - $0.50
- FBA weight based fee - $0.07
- FBA warehouse fee - $0.01
- Avg. cost for in-bound freight to Amazon warehouse (Including direct labor @ $8 per hour) - $0.16
- Total Net Revenue: $9.48
The savings for using FBA over self fulfillment in this example is $1.05 and I do not have to worry about customer service, returns, employees not showing up for work, warehouse space, utilities, benefits, payroll, etc.
This is of course a best case scenario with an ideal product, so I would love it if I could get some feedback from readers who sell heavier, bulkier items. I'm not promising anything but if I can get some info, I may create a Google Spreadsheet so you can determine your own costs.
Also for companies that are in the middle of a warehouse lease, or sell through multiple channels there are other issues to consider, but I can't see any reason you would not test FBA to see if it can improve your business.
So in a nutshell:
- FBA gets my product in front of buyers I wouldn't have access to any other (Prime, Super-Saver).
- Lets me ship all the way up to Christmas.
- Saves me money therefore makes me more money.
- Saves me time and hassle. No more running to the post office or answering emails.
- I can concentrate my efforts on getting product, which is what I'm best at.
Why wouldn't you at least test this? Fulfillment by Amazon
One more thing. Regular MyBlogUtopia reader and Twitter friend Cliff Aliperti has a fantastic take on Amazon FBA, warts and all. I recommend his post highly and I also recommend Scott Pooler's Trading Assistant Journal for great ecommerce info.
Just because I haven't had any issues with FBA doesn't mean it is always "peaches and cream". In fact Cliff started small using the Easy Sell program and thought the costs were high. I hope my Amazon readers pay special attention to some of his issues.
Just my 15%