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.