Just a quick refresher, but as I said yesterday, MFN is short for Merchant Fulfillment Network and is when you ship products that customers order on Amazon directly from your own home or warehouse. FBA stands for Fulfilled by Amazon and is when you ship your products to one (or more) of Amazon’s warehouses and then they ship your items to customers for you.
The biggest advantage of FBA is that your customers will be able to take advantage of free Super Save shipping. In addition free 2-day and $3.99 overnight service will be available to the massively increasing number of Amazon Prime subscribers. Imagine that you can ship your products UPS ground (or however you choose), densely packed to an Amazon warehouse where your customers can then have it shipped overnight to them for as little as $3.99! Some sellers report increases in sales by as much as 25%!
So what’s the catch? Well, the primary downside is that it can be expensive and it can eat into your profit margins. This is especially true for long tail items that sit on the shelves for an extended period of time before being purchased. This is because Amazon charges per cubic foot of warehouse space used each month. Additional fees apply for items that sit on shelves for extended periods.
If you’re an FBA seller, the Inventory Health Report should become your best friend. It’ll show you everything you need to know about how long inventory has been sitting on Amazon’s shelves, and can even help you to determine if you’re restocking too often or not often enough!
Other FBA charges include a fee for weight handling and a fee for picking and packing each order. Play around with this FBA Revenue Calculator to figure out how your bottom line will be impacted.
Who should sell MFN and ship orders themselves? If you already have a website or brick and mortar store and are set up to ship orders to customers daily, then you should think about fulfilling orders yourself. You’ll save on the added Amazon fulfillment fees and if you have a warehouse already, then you won’t incur any additional storage costs.
I can’t say for sure whether you’ll make more money if you use FBA or not. My recommendation, especially for a new Amazon seller would be to start out slowly with a limited inventory and to experiment with both MFN and FBA fulfillment. Over time, you’ll discover what works best for your business. Every product and every business is unique!
Later this week, I’ll try to touch on some more advanced topics for more experienced Amazon sellers.