Strictly business.
It seems like almost every blog or book I've read that offers advice on how to make money selling items on Amazon cannot stop saying great things about Amazon's FBA (Fulfilled By Amazon) service. They freaking love it and they are sure that you will too.
If somehow you haven't already been innundated with emails promoting FBA, let me give you a quick overview:
As a regular Amazon merchant, you basically list your products on Amazon's site and Amazon handles the transaction for you (for a fee, of course). You then pack and ship the product to the buyer, handle any returns or problems, and Amazon pays you out (minus their fee, of course) every two weeks. You also get a predetermined amount for shipping costs that the buyer pays. Basically, Amazon's Marketplace acts as the forum for you to display your products (for a fee). All clever comments in parenthesis aside, I personally think that their fees are reasonable considering they provide my items access to millions of potential customers that I never would have had otherwise.
But with FBA, you pay to ship your products to an Amazon fulfillment center, where they then handle the storage, packing, and shipping of the items to the customer. The idea is that you no longer have to deal with customers or shipping hassles. Another promoted bonus is that your sales are expected to rise both by your association with Amazon's brand, as well as the fact that your items now qualify for the free shipping offered to Amazon Prime customers and all that.
So basically, with FBA, all you do is Find Product, Send to Amazon, Get Paid, and Repeat... What could possibly go wrong?
Apparently, plenty. In fact, there is an entire blog devoted to the how FBA will destroy your business.
The main liabilities with FBA are also presented as its main assets... you no longer are dealing with your own inventory and shipping. While this is could be great in terms of your storage, organization, and time constraints, this also takes a lot of control out of your hands.
- What happens if a seller has a question about the condition of a specific item? Once your inventory is in Amazon's warehouses, you cannot actually look at them again.
- What happens if Amazon screws up and order? Here is the biggest problem. If Amazon damages an item or mispacks an order or otherwise screws up, you are still on the hook. Your merchant account will be the one getting the bad feedback. You will be the one paying for any refunds. Amazon controls your products and your service, but the customers will be contacting you about problems. Even though Amazon claims that they will rectify any problems like this, there are reports to the contrary.
- Do I still collect the shipping costs that customers are charged? Nope. If you are a merchant who enjoys the extra change leftover from the difference between what the customers are paying for a book (usually $3.99) and the actual costs of shipping (averages about $3.09), then you are out that money with FBA.
- What at are hidden costs? And now things get hazy. The many proponents of FBA rarely discuss fees. Amazon's information pages about FBA do contain fee information, but it is pretty much buried in promotional rhetoric and positive testimonials. Apparently there are other passive fees (such as restocking, oversized items, and variable storage fees) that aren't very clearly explained at all. Clearly, a seller needs to be very aware of their inventory, its weight, its "shelf space", and the average turnaround time in order to get a clear picture of the risks of FBA fees.
The question isn't whether FBA is good or bad; The question is whether the FBA system works for you.
For me, it does not. While FBA might slightly increase my sales, the likely increase in fees would not make it worthwhile. My Part Time Picking operation is a pretty small one. My storage and shipping situations are pretty streamlined, and my inventory is manageable. Plus, I like being in control. I get very stressed and frustrated when I'm not able to directly handle problems with customers.
So when would FBA be the right choice? My feeling on this is that you should seriously consider switching to FBA when you are seriously considering hiring someone to help you with your Picking business. If your operation is large enough that you are renting storage space and hiring someone to help with the packing of your orders, you should give FBA some consideration. It is likely that having Amazon act as your storage and fulfillment center actually is more economical (and simpler) than expanding your business the old fashioned way. But if you, like me, are a pretty smooth one-person operation with no needs for extensive storage or shipping help, Fulfilled By Amazon likely isn't for you.
So what do you think? Have you switched to FBA? Get in on the conversation by leaving a comment.
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ReplyDeleteThanks for commenting. It is definitely great to hear the opinions and rebuttals from folks who have had good experience with FBA.
DeleteHowever, I'm having difficulty understanding exactly what you are saying here.
FBA poses a state sales tax burden (your warehoused items constitute presence in the state and require you to collect taxes on sales sold within the state). A HUGE disadvantage that nobody seems to be factoring in.
ReplyDeleteI've heard all the hype from Facebook about the joys of FBA. Sounds like just as much work and hassle to me as what I am doing on my own now. Only with less money in my hand. I hear people talk about buying labels,poly bags and paying to ship to Amazon and on top of all that paying even more in fees for the "convenience" of FBA. I personally think all the retail arbitrage people are nuts and that is going to dry up eventually once stores figure out what is happening. Especially grocers, with people buying stuff with coupons for free or very little money then reselling for profit. Maybe I'm wrong but I can't see this being a lasting thing.
ReplyDeleteI've sold on eBay and Amazon for years, and I was slowly getting suckered into the idea that FBA was the ideal solution for all sellers. But I'm not one to do things on impulse, and checking out blogs such as this has reinforced my suspicion - which is, I should just continue doing what I'm doing, and avoid FBA.
ReplyDeleteFirstly, the hidden costs and possible pitfalls: restocking/storage costs/taxes/loss/damage/complaints/bad feedback/shipping etc., etc., are too fuzzy for me. I put an item on eBay, I know exactly what the commissions will be, plus Paypal's fee. If something gets lost or broken, my customer service skills are good enough to deal with this (very rare) situation.
Secondly, I've noticed that many people who have blogs raving about the benefits of FBA always have something for sale, like $47 eBooks telling you the "secrets" of selling whatever on Amazon, despite the fact that AZ has precise, comprehensive instructions, and videos, explainting how to sell anything on their site with FBA. And why the heck would I pay $297 for a "coaching" course, offered by another FBA "guru"... $297, really? I can see where the bulk of her income comes from!
Okay I'm lucky enough to have an enormous storage area in my house, so hundreds of books and small items don't make a dent, plus I'm very organized. Storage costs me nothing, whereas if I sent everything to FBA I would be incurring yet more intangible fees, if the item(s) remain unsold for months.
Putting a few items in boxes/envelopes, and printing out postage from AZ or eBay sites takes me but a few minutes a day. Packing up an unknown number of boxes, printing up bar code labels and dragging heavy boxes to UPS to me is a much bigger chore. Not all your stuff goes to one warehouse, so more hassle, hard labor, more labels, more expense, a bigger and better scale, and more boxes.
Lastly, if I sell an item on eBay, the money is usually in my Paypal account within 24 hours and often instantly. Even if I sell an item for slightly less than Amazon, that quick money turnaround is very valuable. So if I sell something for $100 on EBay, I can go out and buy more stuff the next day, then rinse and repeat. With Amazon I have to wait for 2 weeks, tying up capital that could be increasing my income.
Oh, and I forgot to mention retail arbitrage. I wasted an entire day in big box stores looking for items for resale. I found half a dozen things, but the profits certainly didn't cover the hours I spent. My time is valuable too! And boy did I feel like an idiot wandering around scanning item after item. At one point a store manager came over and asked me what I was doing!
So, do your homework. FBA may be great for the bloggers who can invest thousands of dollars (and eat all those hidden fees), but it ain't for me. Some even admit they pay for outside services to scan receipts, do accounting, AND pay big monthly fees for fancy phone apps, AND pay extra for UPS to pick up boxes from their homes! That's also profit disappearing.
Everything I sell is "as described", well photographed, and with any imperfections noted. I'm sure that isn't the case with many new (and some old) FBA sellers, who between them will send in thousands of boxes of incomplete/damaged and unsaleable items, that will accumulate to the point that Amazon warehouses look like the back ends of Goodwill stores.
Maybe I'm wrong, but I'm sure in the not too distant future Amazon will be rethinking its FBA experiment. They'll keep the big guys with loads of money to invest in new stuff, and nix the small guys.
I don't want my belongings - my business - my invested money, scattered all over the country, in the control of people who can change the rules whenever they feel like it - even though I think Amazon is an amazing company.
Great comment, Karen!
DeleteYou touched on many points that I also feel passionately about, and a few that I plan to write blog posts about in the future. I think the FBA might work well for some, but not most, Amazon merchants. It certainly doesn't make sense for part-timers like you and I.
I also am glad to hear you mention how many Amazon merchant blogs are thinly veiled advertisements for extremely overpriced eBooks. While I think it is fine to charge for your expertise (and opinions), NO eBook should cost more than $10, tops! The 'information gap' between the 'expert' and the rest of us is just not that huge... and hopefully blogs like mine and comments like yours will make that gap even smaller.
I really like your work.You are posting very informative articles.Keep it up.
ReplyDeleteSharkBite