How Does Amazon FBA Work?
You’ve had a genius idea of a product to sell on Amazon, contacted suppliers, negotiated a great deal and have your first shipment coming your way. You are ready to start selling on Amazon. But what’s the best way to do so?
Are you looking to handle your fulfillment in house or have you looked into Fulfillment by Amazon (FBA)? FBA is a fantastic way to cut down on extra time and money processing your orders giving you more time to focus on what matters the most to you and your entrepreneurial endeavors. So how does Amazon FBA work?
Let’s start with the basics. What is Fulfillment by Amazon (FBA)?
If you choose to use FBA, instead of storing all of your products in house (or paying for a service to do so) you will send your products directly to Amazon’s warehouses. Amazon will unpack and store your inventory for you. Your products will then show live on Amazon.com and will be featured as a “Prime Eligible” purchase.
When a consumer purchases your product, Amazon warehouse workers will find and ship your product to your customer (with two-day shipping) and take care of all customer service related inquiries and returns.
This sounds too good to be true right? Well, Amazon does charge a fee for this service. Check out Amazon’s fulfillment pricing and how it works.
So what are the benefits of using FBA over doing the work yourself without the Amazon fee?
1. Prime Eligibility and Two-Day Shipping
When a seller decides to use FBA their products then becomes Prime Eligible.
Amazon Prime is a paid membership program that gives customers access to music, streaming video, e-books, free two-day shipping and more.
There are around 54 million Amazon Prime members in the United States alone who make purchasing decisions more frequently than traditional Amazon shoppers. Choosing FBA and being Prime eligible means providing free two-day shipping of your product to this many buyer-mentality consumers. This is huge!
“In a 2014 survey, 71% of FBA respondents reported that their unit sales increased on Amazon.com more than 20% since joining FBA”, according to Amazon.
This statistic does not come to much surprise when you think of the mindset of a buyer on Amazon.
What is one of the biggest downfalls of buying items online? You lack the instant gratification of walking out with your purchase right then and there.
Although two-day shipping is not exactly instant gratification, it most definitely beats waiting a week or more for your purchase to arrive. And when you pair that with free shipping, it’s no wonder why consumers are looking for products that are specifically classified as Prime to make a purchasing decision.
2. 24/7 Customer Service
Are you a customer service specialist ready to take questions from your consumers at all hours of the day and night? Well, you don’t have to be.
When you use FBA, Amazon handles all customer inquiries, refunds and returns for your orders. And even better, they are available to your customers 24/7.
This service is provided at no additional charge to you and can save you countless hours that could be better spent growing your business.
From its start as an online bookstore over 20 years ago, growing to its over 480 million listed products and over 244 million customers, Amazon has created a strong reputation for itself.
With this reputation comes trust from its users. If something goes wrong, people know that Amazon will work diligently to rectify it.
Because of this, there is a strong consensus that customers are more likely to buy a product when it has the Amazon Prime check of approval because to a consumer this means there is less risk associated with the purchase.
4. Improve Your Product Rankings Under Important Keywords
As you most likely know, Amazon has its own type of algorithm when ranking certain product listings over others. This product search algorithm is called A9. The official statement for A9 explains what goes into product ranking factors.
There are many factors that go into ranking your product over your competitor’s products. One of the largest factors is sales.
The more sales you make, the better and more relevant Amazon sees your product, therefore ranking it higher for important keywords. For more information on how to get your products to rank over your competitors’ on Amazon check out 5 Winning Strategies To Use For Amazon SEO.
Although it does not appear that using FBA for your products alone will rank them higher under the A9 algorithm, it does seem that conversion rates and sales tend to increase with products sold with FBA. This, in turn, shows Amazon that your product is relevant and important to rank well for your keywords, showing your listing to more searchers.
Notice that many highly ranking products on Amazon are FBA, like these top ranking Bluetooth mouses.
In conclusion, FBA is an amazing resource available for use in the Amazon marketplace. In addition to raising your conversion rates, sales and keyword rankings, it can also cut out the time you would spend packing, shipping, driving to the post office and providing customer service.
After all, time really is money.