Amazon FBA Experience

[Ozzy]

Does anyone have any experience to share with using Amazon's FBA service?

My wife is just trying to weigh up the options between handling the sales herself or shipping her products to Amazon and just let them handle it, but she is a very small retailer so wondering if she's too small for such a service.

 

[Solve My Problem]

Yes a ton of experience with them, both supplying customers who FBA and retailing directly.

There are always hidden costs, and if the goods are not unique then you are open to other sellers also using FBA which then means your goods are stuck with them, you can have them shipped back but they charge per unit and it takes weeks.

Different items need different barcodes, they provide the code and the items need to be barcoded (if they don't have existing codes or of the products have already been listed there)

They give you an address, you ship the goods, it can then take anything from 2-21 days to get them loaded into stock.

Sales are typically easier to obtain with FBA, but it is a matter of watching costs so margin is important.

If you can afford to send some stock and not worry about fast sales then it's worth doing, we tended to ship our own products and then sales increased then FBA.

The other downside is you can't then promote the business via FBA sales, whereas it's easy with a packing note etc.. when sending directly

Darren

 

[Ozzy]

That's some great insight thank you.

The other downside is you can't then promote the business via FBA sales, whereas it's easy with a packing note etc.. when sending directly

That is one thing we will miss, as she does include a personalised thank you note and offers in her packing.

 

[Solve My Problem]

We got round it by sending (against Amazon TOS) a thank you card to them anyway. Obviously that adds to the cost, but using https://www.stannp.com/ meant it was easy enough at around 55p per customer. It worked well and was easy enough to implement.

Sending hand written cards would have a stronger impact I am sure.

 

[Mister B]

As Darren says, FBA can be very useful as a business tool.

We use FBA for around 90% of our sales on Amazon. This not only saves us time processing orders, but also the hassle of customer service and dealing with returns. Using FBA also offers a modicum of protection against negative feedback-when negative feedback is received for a FBA order, it's quite easy to get them to remove it. With the savings in our time, we then focus on growing other parts of the business.

On the downside though, there are ever increasing fees to deal with, lost stock in fulfilment centres, refunds given carte blanche for goods that are perfectly saleable, restrictions on storage limits.

So, all in all I think that it does offer a hassle free way to market but as with every business, FBA should not be solely relied on.

 

[kulture]

I have not used FBA and thus have no direct experience. The reason why I don’t use it is because we sell items that some people collect. Thus their condition is important. When you use FBA and multiple sellers sell the same thing as you then all the stock goes into a single bin. Thus when you sell a unit it may not necessarily be one you actually supplied. Thus you are relying on the quality control of your competitors.

This is particularly important if you are selling branded goods. If somehow a competitor slipped in fakes and they end up in the same bin as your stock, when you sell a unit and a fake is sent out, you are liable. Thus you are relying on the quality control of Amazon goods in.

There is a case where a genuine retailer got prosecuted for selling pirate DVDs when the pirate stock got mixed in with the genuine stock. Unfortunately in law the retailer is liable.

Many small retailers use FBA successfully. As has been mentioned, additional charges apply and cost control is essential. Some retailers go the whole automated route and use price control software to keep adjusting their prices to keep winning the buy now box. So they send the stock in, switch on the software and sit back as the money “rolls in”. Some have been burnt by selling below actual cost. Some have been put out of business when one celebrated bug with a major price control software supplier missed the minimum price parameters. All the stock went down to £0.01. All the orders placed via FBA were sent out as there were no checks put in place. If you were doing your own picking and packing then a £0.01 order would have been spotted and stopped.

 

[AlanJ1]

I have not used FBA and thus have no direct experience. The reason why I don’t use it is because we sell items that some people collect. Thus their condition is important. When you use FBA and multiple sellers sell the same thing as you then all the stock goes into a single bin. Thus when you sell a unit it may not necessarily be one you actually supplied. Thus you are relying on the quality control of your competitors.

This may of been the case in the past but I am almost certain this isn't the case anymore.

 

[kulture]

This may of been the case in the past but I am almost certain this isn't the case anymore.

Thats great to hear, do you have a reference on Amazon that confirms this as it makes a huge difference.

 

[japancool]

@Ozzy why not find a smaller, more flexible (and probably cheaper) independent fulfilment company? Lots of them around?

 

[Ozzy]

It's not solely about the fulfilment really, it's about the benefit of the "Prime" badge with the Buy Now with free delivery. Does it add value with increased orders, and if it does will it still remain viable/profitable. The fulfilment aspect does appear to make things easy.

 

[AlanJ1]

Thats great to hear, do you have a reference on Amazon that confirms this as it makes a huge difference.

I don't but I know products you sell have there own FNSKU which generates its own bin in there warehouse.
Legally Amazon wouldn't have a leg to stand on. Could you imagine you requested your stock back, and it's not yours?
I have also sold lines before that is across the marketplace and never had anything that wasn't ours back (we all package differently to go into Amazon).

 

[kulture]

See https://www.redpoints.com/blog/amazon-commingled-inventory-management/ for the full position

 

[AlanJ1]

See https://www.redpoints.com/blog/amazon-commingled-inventory-management/ for the full position

Okay yeah that's still in place for using just EANs and using "manufacturer barcoded" - If you select to barcode yourself you get your own FNSKU so it's very easy to get around (albeit you need to label each product).

 

[SeanOF]

We sell on Amazon UK, US and are about to join Pan-European and UAE. I don't like dealing with Amazon but I think in order to achieve growth, we have to do it. Without a doubt they have brought customers to us that we would never have found via SEO, PPC, social etc.

However, as alluded to in previous comments, they are a complete pain. Managing and optimising your listings takes considerable time (and I'm looking to hire a freelancer for that in case anyone reading this is interested - drop me a PM) and if anything goes wrong, you pay, not them and certainly not the customer. Indeed, they act like bullies always protecting even the most unreasonable customers which can stick in the craw sometimes. You learn to get over yourself.

The costs are also significant. If you think you will just list your product and the customers will come, you are mistaken. A product launch on Amazon is something that needs to be done correctly or it becomes very difficult to recover. Initially you will have to put a lot of money into Amazon PPC adverts to drive traffic to your listing and then you have to hope people both buy and leave a positive review as conversion rates and good reviews are two key things that drive the Amazon search algorithm. If all goes well after a few months you hope your product begins to rank in the organic search listing so you can dial down the spend on PPC and actually start to make money. If your net margins are below 20-25% then you will probably really struggle to make money on Amazon.

And even if you get to this point then you will always be vulnerable to an unreasonable bad review, a well-funded competitor throwing money at adverts or someone cloning your product. We sell our own product, have the brand registered with Amazon, price 10-15% higher on Amazon than on our own website and without all these things in our favour, I'm not sure we would ever make money on Amazon. It's a lot harder than one might think.

So I guess the answer to your question here is that it depends on how much/quickly you want to grow. Growth for growth's sake isn't always worth it.

Good luck and I hope this helps.

 

[Solve My Problem]

It's not solely about the fulfilment really, it's about the benefit of the "Prime" badge with the Buy Now with free delivery. Does it add value with increased orders, and if it does will it still remain viable/profitable. The fulfilment aspect does appear to make things easy.

If the items sell, then 100% it will make a difference. If the products are not unique it's a bit of a gamble. I had 3k's worth of stuff that wouldn't move because someone added FBA stock at a lower price. In the end I had to cut losses and reduce below cost to move it. Prior to that I was clearing over 1k a week in profit. It hurt lol

 

[Smithco]

We use some FBA. I don't like Amazon generally as they are a dishonest and unreliable partner, and FBA isn't much different.

The upside is you don't have to do anything other than send the stuff in.

For a £17.99 item they will charge you £5.25 (I just checked). You might otherwise spend £3 ish to send it so £2 ish to store, pick and pack seems reasonable on the surface.

The downsides are the hidden costs. They'll nickel and dime you for all kinds of small things. Send 200 of something and they'll say they received 198 and charge you for it. If sales aren't fast enough, they'll charge you extra storage. If a box is too big they'll charge you. Too heavy without a 'heavy' label and they'll charge you.

Expect to have your listings and/or account frozen by robots for all kinds of random reasons. They'll then want documents that often don't exist or even your supplier invoices (you may think Photoshop is your friend here, I couldn't possibly comment). They just love to freeze your cash for extended periods too. Customer service for sellers is nonexistent - it's all copy and paste nonsense.

And after all that, if someone hijacks your listing they won't care. People will claim stuff is 'fake' to get free stuff. They'll refund people gleefully with your cash at the drop of a hat. The rules are ever-changing and you'll forever be jumping through hoops. When you factor in hidden costs, advertising, returns, extra admin, hoop-jumping and fraud, the real cost will be something in the region of 45-50%. Budget for that and if it's a bit less, you're in front.

In my view, it only works with items that have a close to zero return rate, idiot-proof descriptions and that is a line exclusive to you. Preferably in your own packaging. If it's your own line and you have big margins on it, give it a shot. If your margins are tight, you'll make nothing.

 

[apricot]

Here are my suggestions Ozzy,

Don't start with FBA if you want to run an Amazon business. Most of the sellers suffer from sending items to FBA before starting selling themself.
I would highly recommend you to start with sending it yourself (MFN) then once the item starts selling min 10 items a month, then start selling via FBA. Build it up slowly, the return will be much higher.

I would highly recommend
- Create your own brand
- Whatever the item you are selling, make sure it has only your brand on it. If you don't own the brand, you won't be protected and all your hard work will go to other sellers (Chinese!)
- Start selling yourself, I mean literally pack and send it, deal with all customer service & refunds.
- When your account starts building up, move to FBA

FBA definitely will increase your sales but not when you start the business. You should prove yourself as a 'trusted seller' and your products should be 'selling' products. There are millions of products listed on Amazon and they don't even get sales once a year.

I started my business 7 years ago with £200, just before the Brexit, it was generating more than £1m (thanks to Brexit, it's halved now!). I never send items to FBA before I sell them myself and I never send items that would sell more than 60 days, highly recommend you to do the same.