Know some basic secrets of Amazon FBA and increase your profit margin
More sales and business mean more workload and a bigger warehouse. More workload means more employees to manage the warehouse. With this comes other responsibilities and associated anomalies.
When Amazon Fulfillment services came into the picture, it followed a simple tag:
“You ship your product in bulk to Amazon. Amazon will pick, pack and ship your products individually to the customers”
Does Amazon FBA simply remove the headache of shipping? Won’t you get that services from other shipping carriers? So, what is the big deal about Amazon FBA offerings?
The big deal is sales jump pretty awesome. But it doesn’t work in the same way for everyone. For some sellers, it’s a game changer that increases their profit margins while for others it’s a lost battle.
Since 2016, almost 70% of active sellers used Amazon for Fulfillment Services. It’s a big number and a huge FBA seller crowd. The number of FBA sellers increases during seasons, which may have the chances of causing late deliveries of products, right? Now you might be thinking that, should I be using Amazon fulfillment services?
So, let me provide you with some detailed facts about how things work out with Amazon FBA.
What is Amazon FBA business all about?
In simple words, you only sell the product and Amazon will ship it. The fulfillment process includes:
- You send your products in bulk to Amazon fulfillment center and it stores it.
- Amazon would provide you with the tracking system, where you can monitor the inventory.
- The Customer orders the product from other eCommerce or Amazon Platform.
- Then Amazon would pick, pack and ship the product to the customer.
- After shipping the product, Amazon provides the tracking information to the customer.
- The product is delivered on the scheduled date.
How is the pricing decided?
The pricing is decided on the below services by Amazon FBA:
- Handling the products
- Picking and Packing orders
- Shipping the products
- Customer service
- Product returns
- Storage per cubic per month
There are various other factors where an additional fee is applied by Amazon. These instances can also cause a change in your pricing:
- Oversized items have additional handling fees.
- If the inventory stored for more than six months in an Amazon warehouse, an additional fee is charged.
- Storage and fulfillment fees increase from October to December.
- Processing customer returns is also chargeable for specific categories.
- Clothing items incur extra fees.
While using Amazon fulfillment services, if you fulfill certain conditions you may qualify for Amazon’s free super saver shipping. You may also be eligible for 2-day free shipping if you are Amazon’s Prime member.
Many of the sellers lose potential customers if the deliveries are after long estimated periods or the shipping wasn’t free.
How Amazon fulfillment services remove this hurdle?
The right priced product
If your products are highly priced suppose more than $25 then Amazon FBA is highly beneficial for you. FBA sellers automatically qualify for free shipping, if the products are highly priced. Even the non-Amazon prime members get the free shipping option. The shipping may not be fast in this case, but it becomes free definitely.
If your product is lower in price, then selecting Amazon FBA would not be beneficial for you as you would be at the losing end. Many sellers don’t realize that FBA has certain fees. Fulfillment comes at a certain cost like 15% commission depending upon the product category and shipping costs.
It’s better to ship only those with Amazon FBA that is highly priced or set the right price by increasing the amount and sell through FBA.
Make Amazon fee Calculator as your selling tool
The fees of Amazon FBA are low, and so if you are a start-up then you can definitely opt for the service. But as you know there is a cost and it should not eat up your profit margins. For this, you have to price your products accordingly.
The best way to know about your fees is to use the FBA Profitability calculator. If you are already an Amazon seller, simply click on one of your orders in your seller account and then click the order total. You can view the break down of the Amazon fulfillment fees and commission for your product.
Obviously, don’t expect the sales to increase here, but you can make adjustments to increase your profit margins.
Bundling and Multi packing your products for FBA
Bundling means creating a package of two or more different products. For example, if you are selling an eyeliner, you can bundle it up with lipstick and eyeshadow.
While multi packing means selling a pack with the same multiple products. For example, a pack of 3 Jasmine soap.
This method would help to distribute the fulfillment over multiple products thus impacting on your overall selling price point.
The best strategy to use
Work strategically while selling products online on eCommerce platforms using Amazon fulfillment services. One aspect as an FBA seller you should avoid is selling a product that is already sold by 100 of sellers. Even if you have the same product, think how strategically you sell the product by presenting in a different way or offering something that is already not provided by other sellers.
Listing a product that no one else is selling will help you to sell without worrying about the competition. Look for what is desirable and looks unique to your potential customers, which will eventually earn you huge benefit on FBA.
Make Amazon FBA your tool
Let your business work for you, instead of you working for your business all the time. Free up your time and work strategically by giving all your fulfillment burden to Amazon FBA.