Weekly Column: 2017-08-04

As you shop on Amazon, you may come across the “Prime” sign. Products that are registered here are available for fast delivery, and if you join as a Prime member ($99.00 per year), you are also eligible for free shipping and returns. These products are systematically differentiated from other products, so when you search for products, you will see these first, and because of that, they sell more and generally have more reviews. Not only that but when you become an Amazon Prime member, you will be able to access over 800,000 Kindle e-books on Amazon for free, store unlimited photos on the Amazon drive, listen to over one million songs from Amazon Prime Music on your smart device. There many other benefits, so consumers who purchase anything from Amazon cannot afford to pass on the benefits of a Prime membership. There are over 80 million Prime members in the US alone, which is applicable to approximately 64% of US households.

Amazon Prime does not benefit only consumers, it has become a system that is a must-have for sellers on Amazon. This provides more attractive benefits to customers and fast delivery free of charge, which is the most important aspect. This is called FBA which stands for Fulfillment by Amazon, which is a system where Amazon sells the products and you place in a designated warehouse when orders come in.

“You sell it, we ship it” is the FBA creed.

To put it simply, FBA is where an Amazon seller stores their products in an Amazon warehouse for a fixed fee. When the product is sold, the Amazon warehouse is responsible for its packing and shipping, the Amazon seller only has to ensure that the inventory is stocked for the Amazon FBA.

Therefore, if you sell your products through Amazon FBA, because Amazon offers fast, free shipping and free returns, customers will be able to purchase without any problems and your sales will increase. If many products are sold, it is also useful for making the product popular as it rises in rank. The more products that are sold, there will be more customers coming in.

However, selling through FBA is not always a good thing. There are three reasons why you should proceed with caution.

First of all, if a product at an Amazon warehouse is not sold, it will take up space, and the warehousing costs are not small. If the product does not sell within a year, you may have to pay quite a bit for the warehousing fees and may even have to pay for the cost of product disposal.

Second, the FBA fee in itself is quite high. You must ensure that you can generate enough profits to cover the FBA fee as well as the Amazon sales fee.

Finally, there is a high return rate. Because Prime allows free returns to members for FBA products. Customers who are not satisfied with their purchase may return it within 30 days, regardless of whether the products are used or not. However, this free return is covered by the sellers, not Amazon.

As a seller who has earned more than 50% of my sales through Amazon, I see that Amazon is getting more and more competitive, but it is still an attractive marketplace. Although there are many advantages to FBA, I am only making about 30% of sales that go through FBA and will soon leave FBA to absorb all the benefits of this sales strategy and compensate for any disadvantages. Some of my products are sold directly on Amazon, and some are FBA-compliant products that require intelligence and insight to sell through FBA.

In the long run, looking beyond the pros and cons of FBA, consumers are given the perception that all products sold on Amazon are validated products, and particularly with the differentiation of fast delivery, the benefits of FBA are indisputable. If sellers, currently selling on Amazons or sellers who are thinking of selling their products on Amazon, are well aware and prepared in these areas, they will see positive results. Everyone is given the same opportunity, but only exceptional people can capitalize on this opportunity.