Complete Selling Guide for Amazon FBA 2022: You have probably just discovered this term and need to know all about what Amazon FBA is and how it works in real practice. From the perspective of an FBA Seller.
Amazon is in fashion and more and more people are deciding to bet on selling on the Marketplace to generate online income complementary to their work. At MarktMaat we have been doing it for more than 7 years.
Complete Selling Guide for Amazon FBA
In this article we want to show you what Amazon FBA is, how it really works; commissions, the time required, necessary investment…etc as well as our own example selling FBA.
What is Amazon FBA?
Let’s start from the beginning, the famous acronym FBA stands for Fulfillment By Amazon. And they refer to the comprehensive sales system that the American company offers its sellers.
And why do you say integral?
✔️ Good, because contrary to what many people believe, Amazon not only offers its website so that you advertise on it and people buy your products, but it also offers the possibility that the company is in charge of everything logistics.
👉 The operation of Amazon FBA is simple, sellers send their products to a large warehouse of the company. There they are classified and prepared for shipment, which is immediately executed when the sale of that item occurs on the portal.
This is the reason why shipping times are so short. With Amazon FBA the product is ALREADY in the hands of Amazon when you have bought it.
Therefore, to provide a more precise definition to the question of what is Amazon FBA:
📝 FBA is a storage and distribution service that Amazon offers to sellers on its platform in exchange for payment of a fee and sales commission for each product.
What is the Selling Process on Amazon FBA? – That’s How it Works
Amazon’s FBA system has made it so much easier for thousands of small sellers to trade since they are in charge of putting all the technological and logistics infrastructure in place to provide unbeatable customer service.
In the face of FBA sellers, this is exactly the operation that sellers need to perform on the portal. Totally from the start.
- Create a user account. Obviously, the first thing you should do is register as an Amazon Seller. But there are two modes of sale Amazon Seller vs Amazon Vendor.
- Register your products in the portal. Once you have entered all your tax data, bank account, etc., you can start selling.
To do this, you must upload your products to your control panel, providing all the specifications related to them: measurements, weight, purchase price, final sale price, and create the product sheets.
- Send products to Amazon. In Europe, there are hundreds of warehouses to which you can send your products. This decision will be based on the location where you sell. If you only do it in Spain, they will assign you the closest logistics center.
- Storage and classification of your products. Once Amazon receives your products, they take care of ordering them, labeling them correctly, and adding them to the “Available Inventory” of your sales control panel.
Sometimes they lose or damage products, but there are tools like the MarktMaat Money Retriever that help you check this automatically and generate claim reports with the company.
Normally they return the entire amount of the product, but you have to claim it.
- Customers buy your products. Amazon takes care of all the management and collection of the money. They verify payment and update your inventory automatically.
- Amazon ships your product. When the sale of one of your items has been detected, Amazon robots grab your package from the warehouse shelf and prepare it to be sent to the final customer. You will not have to do anything at all.
- Amazon handles customer service. Amazon tracks the shipment and checks that everything has been done correctly. They also offer a return period and ask for feedback or review (which plays a determining role) on the product in question.
- Receive the money. Exactly every two weeks Amazon makes a total count of your sales. To this figure, subtract the corresponding commissions and reserve a small safety margin for returns. Automatically makes the payment of the money to your bank account.
Pros and Cons of Amazon FBA
Well, as we have mentioned before, for this work the Amazon FBA system charges a series of commissions that will make your sales costs higher than through other alternative channels.
For this reason, Amazon FBA is not for all types of businesses. Pay attention to the following FBA advantages and disadvantages to make a better decision.
⫸ Advantages of Amazon FBA
The most notable pros of selling in FBA are the following:
- Comfort. And it is placed in the first position since it is not a minor factor. Amazon allows businesses to sell to the whole world without any kind of logistics system of their own. This allows you to internationalize your sales with a click or even be able to sell without having logistics personnel on the payroll.
- Multichannel system. FBA puts all this logistics infrastructure at your disposal to make sales outside the Amazon marketplace. That is, you can sell on your own website and Amazon continues to take care of all the tasks mentioned above.
- Reputation. Selling your products on the Amazon portal under the “Prime” label will greatly increase consumer confidence in you and your company. In addition, with all the shipping and return guarantees, you will sell more easily.
- Shipping time. The Amazon FBA system includes the prime service for products stored in its logistics centers, so your customers will enjoy shipping in one business day. A real madness.
- Greater Web Visibility. Amazon dominates the majority of search results pages in Google, appearing in the first position for the majority of shopping keywords.
Furthermore, within Amazon’s own website, FBA sellers have more visibility than those who opt for an independent logistics system [Amazon FBM].
⫸ Negative Aspects of Amazon FBA
But this excellent service also has its drawbacks, of course:
- High commissions. Amazon charges €39 per month as a standard rate if you sign up as a business. It also charges 15% of the final sale price and logistics and storage fees based on the weights and measurements of your product.
In total, you can calculate that more than 30% of the total sale will go to the coffers of the company.
- Preparation Requirements. The products you send to the warehouses must comply with packaging standards, if not, you will incur extra costs.
- Brand positioning. When using FBA, all outer packaging goes under the Amazon name. Therefore, the level of “engagement” with your final client is lower. So if you want to position your brand in the mind of the consumer, FBA may not be for you.
- You do not manage databases. In Ecommerce, customer databases are gold. You can generate E-Mail Marketing strategies to carry out Cross-Selling or publicize your new launches. But Amazon FBA does not allow you to create an email list of previous customers to maintain a relationship with them.
⫸ Is Amazon FBA Recommended For My Business?
First of all, you will have to analyze everything from a financial point of view.
Calculate very well the margins at which you are selling your products and all the costs you have when selling on Amazon. You would be surprised to discover the number of FBA sellers who lose money on the platform despite the fact that they “invoice a lot”.
On the other hand, if you invest in Amazon Ads, an excellent tool to increase your sales, you must also subtract the cost of PPC from them.
In our experience, Amazon adapts very well to companies that:
- They do not have a large investment capital or a consolidated logistics network.
- Small businesses that do not have their own E-commerce, or money to work on their web positioning in Google.
- Companies that want to sell their products also on other portals such as eBay, Wish, Etsy, or Aliexpress using the company’s multi-channel network.
- Companies that do not bet on an outstanding brand positioning. And do not require that “relevance” for the final consumer.
The keys to Success in Amazon FBA
Well, it’s time to take action. How you can start earning money with the FBA system from home and without hiring staff.
To do this, you must master the following areas.
- Products. You can sell practically anything you want on the portal, but the secret is to sell products that ALREADY have a lot of real demand and can generate sales in a short time. In this way, you will also save on storage costs.
- Inventory in stock. It is another key leg, every time you run out of inventory, your competitors are gaining customers, taking away sales. Make sure you are never caught off guard. Anticipate sales by analyzing metrics and trends.
- Advertise your products. Advertising on Amazon is the third fundamental piece. Especially for businesses that are just starting out and do not have valuations. You must master the art of PPC and create 100% optimized campaigns to get your business off the ground faster.
⫸ Case Study of an Amazon FBA seller
To get started in the FBA world, there are numerous options available in the market. Most promise incredible results and short-term benefits.
Our experience is totally different. As real FBA Sellers, we can guarantee you that even if selling on Amazon is simpler than on other independent platforms, it does not mean that it is easy.
FBA success will come from a correct understanding of the niche in which you are moving and what is the demand for specific products. If you identify a hot product and are able to sell it with good margins, you will make money.