As online sales soared this summer, Amazon was swamped with shipments. And FBA sellers reported serious disruptions and lost sales. But if you’re wondering “is FBA worth it?”, the answer isn’t straightforward. Let’s weigh the pros and cons of FBA and see what’s what.
The rise of online shopping during the lockdown has ramped up sales on Amazon.
But this much business can be a double-edged sword, as many FBA sellers found out.
By its own admission, Amazon is running out of space. And there are reports of 2-month old inbound shipments that are only now being processed.
So, FBA sellers who ran out of stock can’t send their best-sellers to Amazon anymore.
As IPI scores dropped and new per-ASIN inventory restrictions came into effect, any existing inventory may not be listed again for months. Meanwhile, sales ranks are rising. Worse still, search rankings are dropping.
For sellers who can’t toggle from FBA to FBM, these inbound delays are a major setback. Even if they regroup and switch to fulfilling their own orders, their profits are tied up in large shipments stuck in Amazon’s fulfillment centers. This begs the question: is FBA worth it anymore?
The Pros and Cons of FBA
By its very nature, Fulfillment by Amazon is very convenient. It enables FBA sellers to outsource their picking, packing, shipping, and customer service to Amazon, for a fee.
In exchange, FBA sellers hand over their inventory and relinquish control over it. But there’s much more to it than that.
7 Pros of Amazon FBA
1. Prime Badge
The coveted ‘Fulfilled by Amazon’ badge will bring more business your way because Amazon is a brand people trust. And like all other FBA sellers, you’ll qualify for Amazon Prime automatically. So, your offers will be more attractive to buyers. But not just any buyers…
Full Prime members, Prime students, Amazon Household members, and people who sign up for the 1-month free trial version buy more and spend more on Amazon than regular folk.
Also, the Prime badge gives you the power to compete not just with seasoned sellers, but also with Amazon.
2. Buy Box Priority
Most sales on Amazon go through the Buy BoxThis refers to the situation where a sel… More (the featured offer section), whether the products are new or used.
Being featured comes down to price, sales volume, delivery speed, and various other factors, including fulfillment.
Other things being equal, FBA sellers are always featured before third-party sellers.
3. Multi-Channel Fulfilment
FBA sellers have the added advantage of being able to outsource fulfillment to Amazon. MCF works with items sold on Shopify, Magento, or even your own website.
And you can enable Amazon to store and ship your inventory from one or several fulfillment centers across the globe.
4. Multilingual Customer Service
International sellers and those who don’t have the capacity to tend to customers can rely on Amazon to take CS off their hands.
Amazon’s customer obsession translates into 24/7 access to people who speak the local language. That’s over phone, email, chat, or social media. Sellers simply can’t compete.
5. Proximity to Buyers
Amazon’s infrastructure is vast and this makes for fast deliveries, as TaxJar explains below. You’ll notice the video is a bit dated. Luckily, Mark Faggiano has since updated his list of FBA fulfillment centers. And it complements Jennifer Dunn’s handy list of sort centers.
Put simply, Amazon deliveries are so fast because orders are shipped from the fulfillment center or sort center nearest to the recipient. Transfers across transport hubs are streamlined. Last-mile deliveries are usually same-day. And they come with accurate time slots and real-time tracking.
6. Drive to Deliver
There’s always a risk that a buyer may not be at home. This could lower your On-Time Delivery score. Unlike the post office and most couriers, Amazon Logistics will automatically try again 2 more times on consecutive days for US buyers and up to 4 more times for UK buyers, even on weekends.
7. Range of Delivery Options
When they order FBA items, buyers can also choose a safe place, share an access code, or use one-time password verification. They can even let drivers in with an Amazon Key. Alternatively, they can send packages to a local Amazon Hub locker, Pick Up Point or Counter.
Also, Amazon’s buyers can even divert packages mid-transit with Redirect to Locker for same-day collection.
Knowing this, Prime members with tight schedules are more likely to buy from FBA sellers than other merchants.
5 Cons of Amazon FBA
A year ago, if you’d asked “Is FBA worth it?”, we’d have replied with a resounding yes. We might have even mentioned unlimited storage and hassle-free returns as major perks of using Amazon. But several months down the line, it seems that some of these perks have morphed into deal-breakers for FBA sellers.
1. Storage Snags
Amazon can unilaterally decide what, where, when, and how much inventory to accept. And it’s running out of space. It suspended inbound shipments of non-essential items in March and introduced ASIN quantity limits in July, even as FBA sellers reported inbound delays and Buy Box glitches.
2. Return Trouble
Between automatic authorizations and ‘no-questions-asked’ refunds for buyers with a clean record, Amazon can end up granting returns when it shouldn’t. And it’s not unheard of for FBA sellers to be saddled with fake or damaged returns. That’s because fraudsters can bypass Amazon’s inventory checks.
3. Brand Bother
When you hand fulfillment over to FBA, your products ship in boxes with Amazon’s logo. You can’t insert any packing slips. And unless you’re the brand owner, a glimpse at your Amazon store name during checkout is the only contact the buyer has with your business. Brand awareness and FBA don’t click.
4. Prep Problems
Amazon’s planned and unplanned prep services will cost you time and money. So, when you prepare your products for FBA shipping, you first need to know the fulfillment center each unit is going to, and the box. Then, you need to apply labeling, wrapping, packing, over boxing, and taping rules with caution.
Amazon’s ‘Problem Solvers’ don’t always get it right, especially if you use the Stickerless (commingled inventory). They can saddle you with stranded or unsellable inventory. This lowers your IPI score, lowers your storage limits, and raises your overage costs. SellerEngine Plus can help with the prep.
5. Covert Costs
FBA doesn’t come cheap. For one thing, FBA fees rise every year, and 2020 was no exception, as seen below. So, even though you’ll save a pretty penny shipping your units over to Amazon, you could end up losing money in the long run, if you don’t keep a watchful eye on your inventory.
Amazon’s Fee Preview report and the Revenue Calculator (shown here) can help you view your up-front fees (fulfillment and monthly storage). They don’t include long-term storage, removal, prepping, manual processing, labelling, repackaging, MCF branding, returns, chargebacks, refunds, or overage.
But if profit is the be-all and end-all, then you’ll also want to factor in other aspects, such as the item’s weight, size, source, and venue. Sellery’s shipping cost estimate takes all that into account and updates the data in the backend, giving you a more realistic profit estimate for both FBA and FBM items.
Clearly, the benefits of FBA outweigh the risks, as long as you manage your inventory effectively.
But if you’d like to try fulfilling some of your orders yourself, just follow the steps in our How to Switch from FBA to FBM post, and then create a removal order for any units still stored by Amazon.
Having scoured through our brief list of the major pros and cons of FBA, you might still be asking yourself ‘is FBA worth it, though?’
If that is the case, then we recommend that you browse our blog for posts on this topic, leave a comment below, or get in touch with a member of our Business Coaching team. We’re happy to help!
Melanie takes an active interest in all things Amazon. She keeps an eye on the latest developments and keeps Amazon sellers up to speed.
