Featuring the New FBA Fee Structure for 2015
THE 2015 GUIDE TO FULFILLMENT BY AMAZON How Professional Sellers Can Strategically Implement FBA
Table of Contents Introduction Fulfillment By Amazon: The Basics How FBA Affects Product Discoverability & Buyability FBA Fees The Pros & Cons Of FBA Conducting A Catalog Analysis For FBA Inventory Selection Final Thoughts Appendix
3 5 9 20 28 35 39 43
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Introduction “Amazon Optimization” is not a term seen very often, but it’s a very real concept that professional and sophisticated Amazon sellers are reaping the benefits of. Just as an ecommerce store would invest time and resources into optimizing campaigns for Google Shopping, PPC text ads, affiliate marketing, social advertising, or retargeting, Amazon is a sales channel that should receive a well-thought-out, comprehensive strategy focused on growth—and deservedly so. For a brand or reseller, Amazon—along with Google—is the top online destination where highintent retail queries are occurring, so it’s vital that a seller’s offers are front-and-center when a shopper indicates a high likelihood of converting. This white paper dives into arguably the single most influential “lever” third-party sellers can pull to optimize their Amazon strategy: the Fulfillment by Amazon program, or FBA for short. Knowing which segments of inventory to deploy for FBA is a huge advantage in both driving sessions to listings and owning a higher share of detail page conversions.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
The Amazon Plateau A discussion of Fulfillment by Amazon should begin with a discussion of a concept that many Marketplace sellers encounter before ever even considering FBA. This concept is called The Amazon Plateau. The Amazon Plateau is a late-stage phase that most Amazon sellers languish in. The narrative has been retold many times before: A seller has either a great, unique product or a wide assortment of wholesale inventory, and so they decide to sell on the Amazon Marketplace – the largest online marketplace in the
Confused
world. The products are simply “thrown up there” and the seller sees what sticks, checking in
Uncertain
on performance every now and then. Sales start to come in consistently. That’s it.
Frustrated Inefficient Stagnant
Without further optimization, the seller will hit the proverbial wall. The Amazon Plateau is a long-term period of stagnant sales growth due to the seller spending the majority of their time “in the weeds,” focusing primarily on operations and not on strategic insights. The result? Customer service overburdens the seller’s already limited resources. The competition consistently dominates Buy Box share. Top selling products aren’t receiving
Sales
enough visibility on the Amazon SERP (Search Engine Results Page). Sales become flat-lined. This is why a powerful, controllable lever like FBA is such a significant piece in a seller’s overall Amazon Marketplace strategy.
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Fullfilment by Amazon:
The Basics
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fulfillment by Amazon: The Basics Adding a strategic layer that sits on top of Amazon operations is the solution to surpassing the Amazon Plateau. While there are many aspects of Marketplace management that can be evaluated and improved, one of the most immediate and significant changes a seller can make is utilizing Fulfillment by Amazon for key catalog segments.
What is FBA? Fulfillment by Amazon is a program where third-party Marketplace sellers can leverage Amazon’s expansive and efficient fulfillment infrastructure to:
Warehouse units Pack and ship orders to customers Provide customer service for those orders
FBA services cost an extra percentage of the order – on top of the existing Marketplace referral and variable charges (see page 21). FBA can actually be used for fulfillment on channels outside of the Amazon Marketplace (ex. the seller’s site, eBay, etc.), but this white paper will focus on FBA’s role in the Amazon Marketplace only.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
How Does It Work? With FBA, the seller is essentially only required to label and ship units to an Amazon warehouse. This is done through Seller Central, where FBA inventory can also be tracked and replenished by the seller. Once Amazon receives and scans-in the units, those products are immediately available for sale. From there, Amazon handles storage (beware of long-term storage fees), packaging, shipping, and customer service on behalf of the merchant. The video below explains this concept: Initially, many sellers may find FBA to be an intimidating program simply because of confusion around creating inbound shipments. When creating an inbound shipment in Seller Central, Amazon will often automatically implement split shipments, ie. 33% of FBA units go to Fulfillment Center (FC) A, 33% to Fulfillment Center B, and 33% to Fulfillment Center C. This is a standard practice because FC’s have different capacity limits and capabilities (ie. refrigerator units). In this scenario, the seller would be required to split up their units and ship them to 3 different Fulfillment Centers. If a seller opts-out of split shipments, which is typically not recommended, they will have to pay around 30 cents/unit to be able to send to just a single FC.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Why is FBA a Big Deal? Perhaps the most obvious beneficiaries of FBA are small business owners, who likely don’t have efficient fulfillment systems in place and don’t want to risk the potential negative effects that a poor customer experience could instigate. For this reason, Amazon is a very favorable business partner. Yet professional Amazon sellers see the bigger picture, namely:
• FBA inventory’s eligibility for Amazon Prime • Its hugely influential role on Buy Box ownership • The added safeguard for other significant Buy Box factors like Fulfillment Latency and Seller Rating • The benefit that FBA represents a seller’s brand in a more positive light. There is a very strong correlation between FBA utilization and higher sales performance.
While there are a good amount of professional Amazon sellers who FBA 100% of their inventory, this isn’t to say that every third-party seller should do this. One of the goals of this white paper is to paint FBA as a very immediate, strategic tool sellers should deploy only for the listings it makes sense for. A common misconception is that sellers should either be 100% FBM or 100% FBA, yet most professional Amazon sellers are an FBA/FBM hybrid. Not every product a seller offers will be a good candidate for FBA for a variety of reasons, mainly size, sales performance, and margin. Knowing which listings it makes sense for is called FBA inventory selection, and this will be covered in the last section of the guide.
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How FBA Affects Product Discoverability & Buyability
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
How FBA Affects Product Discoverability & Buyability Product Discoverability. Product Buyability. Get to know these 2 terms well. Amazon actually uses “discoverability” and “buyability” internally and for good reason—they encompass and dictate almost every strategic lever that impacts sales performance on the Amazon Marketplace. Let’s apply some definitions first:
Discoverability The ability for a product listing to be found on Amazon. From a consumer’s point of view, Amazon is essentially seller agnostic, focusing search results on products rather than the sellers of those products. For a third-party seller of a given product, there is an incentive to increase the overall number of visits to a product detail page provided that the seller is in a good position to win the sale for that product. To relate it to more traditional product ad channels, think driving traffic.
Buyability Buyability is focused on converting that traffic into orders, but it essentially refers to two highly overlapping factors:
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Factors That Influence Detail Page Conversion To relate it to more traditional product ad channels, think converting traffic. A shopper will look at factors such as feedback score when deciding whether or not to buy an item from a particular seller. The seller, therefore, needs to account for and optimize for these factors.
Detail page factors that affect conversion rate, including product title, product description, feature bullets, and product images.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Factors That Influence a Seller’s Buy Box Percentage Because there can be multiple sellers for an ASIN, a seller also needs to attain as large a percentage of the Buy Box as possible.
The Buy Box is a coveted space which can be “won” by any seller with an active offer against an ASIN. A shopper of this product may see one such seller in the Buy Box, while another shopper may see the same product with a different seller a few minutes later. The seller “Block Party Bricks” is the current Buy Box owner for this ASIN.
Why is the Buy Box so important? The Buy Box is the single most essential piece of “property” on the Amazon marketplace. In 2013 alone, $61 billion out of the $74.5 billion of revenue on Amazon went through the Buy Box, with $30 billion going directly to third-party merchants.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
With 82% of Amazon website sales going through the Buy Box, and an even larger figure in Amazon mobile sales, the Buy Box is seen as the key opportunity for online marketplace sellers today to increase their selling potential. It is crucial for sellers to learn about how the Buy Box works and how Amazon determines who “wins” this coveted spot. So what motivates Amazon when it comes to choosing who wins the Buy Box? Simply put, Amazon will always favor offers that are most customer-friendly and consequentially, the most likely to be purchased.
Amazon’s Raison D’etre Amazon prides itself on the company’s extremely high levels of customer service. In fact, Amazon’s whole essence focuses around offering the best possible experience to their customers. As Amazon CEO, Jeff Bezos, himself says:
“We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.” - Jeff Bezos
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
It is for this reason that the Buy Box was created with the objective of comparing multiple offerings of the same product in order to determine which will provide the customer with the highest levels of satisfaction. To Amazon, this means the offers with the best price, fulfillment method, seller rating, etc. The Amazon Buy Box winner is determined by an algorithm that aims to give the customer the best possible value. It does this by first determining which product offering meets all the necessary minimum requirements. It then breaks down each eligible offering into many different variables and uses them to find the seller who offers the best balance between high seller performance and low cost price. Returning to the topic of Buyability, let’s look at an example.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Say there were 100 overall orders for this portable battery charger in the last 30 days. AnkerDirect, the current Buy Box owner, may have 50% Buy Box ownership share during 50
that time period and thus won 50 of those 100 orders. With the goal of maximizing product
50
= 100 orders
buyability, a third-party Marketplace seller would want to increase 2 variables. A) The overall number of page conversions occurring on the product detail page (e.g. increasing from 100 to 150 total orders) It’s very possible that plenty of shoppers are landing on this product detail page but don’t end up purchasing the product for a number of seller related or product-page related reasons, including a short product description, undescriptive feature bullets, or a lack of product reviews.
75
75
= 150 orders
By improving the factors that influence conversions on the product detail page, a seller can effectively convert a higher percentage of the overall number of sessions to a product detail page.
B) Their percentage of the Buy Box (e.g. increasing it to 75%.) Since the Buy Box winner stands a higher chance of making sales than any other seller, the higher the seller’s share of the Buy Box, the higher the number of orders they will make. This is most effectively accomplished by increasing Buy Box ownership share.
75
25
= 100 orders
Fulfillment by Amazon influences both product discoverability and buyability, but increasing product buyability is where FBA will have its most significant impact. The following page breaks down how FBA specifically influences both concepts.
AnkerDirect All Other Sellers
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Discoverability Factors
Impacted by FBA
Buyability Factors
Sales Performance History
Fullfilment Method
Relevance (Product Content)
Fullfilment Latency
Search Keywords
Landed Price
Product Images
Seller Rating
Product Reviews
Seller Feedback
Sponsored Products
Product Content
Fulfillment Method
Product Reviews
Landed Price
Inventory Quantity
Impacted by FBA
Inventory Quantity
FBA and Discoverability When it comes to driving visits to Amazon listings, products that are FBA are more discoverable through 2 main routes:
• Search Filters • Sales Performance History
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Search Filters There are over 25 million Amazon Prime users. These customers spend more and shop more often on Amazon than the standard consumer. Most importantly, they intuitively shop for Prime eligible products and will filter search results to show only Prime offers, effectively eliminating all non-FBA offers.
Sales Performance History This is an indirect correlation, but the idea here is that ASINs which feature an offer that shows “Fulfilled by Amazon” are more desirable to Amazon customers – both Prime and normal – than ASINs which don’t feature this. This is because the shopper can expect an efficient, trackable delivery and exceptional customer service from an FBA product. In turn, a historically highperforming ASIN indicates to Amazon that consumers like this product, and so it ultimately receives better visibility in search results.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
FBA and Buyability When it comes to increasing Buy Box percentage and conversion rate on detail pages, products that are FBA are more buyable through 4 main routes:
Fulfillment Method: There are 2 main options for this, FBM (Fulfillment by Merchant) or FBA. An offer which is fulfilled by Amazon automatically gives it a much higher likelihood to “win the Buy Box.” All things equal, an offer that is FBA will likely have a higher Buy Box ownership share than one that is FBM. A high Buy Box ownership share puts your offer in the best position to receive the majority of conversions occurring for a given ASIN.
Fulfillment Latency Fulfillment latency can be seen on the Other Sellers page. The shorter the fulfillment latency, the larger the positive influence on Buy Box ownership. Fulfillment by Amazon automatically defaults to this shortest window while FBM offers are subject to longer windows (ex. in 24 hours, 1-2 business days, 3-4 business days).
Seller Rating Because all aspects of fulfillment are handled by Amazon, the seller is not subject to negative ratings for metrics like On-Time Delivery Rate (ODR) and Late Shipment Rate. These directly affect a seller’s seller rating (seen in Seller Central), which is a heavy Buy Box factor.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Seller Feedback Most negative customer feedback has to do with late shipments or damaged products during shipment. Both of these are aspects of fulfillment. So because the customer service for FBA products are handled by Amazon, the seller is not subject to negative feedback that relates directly to aspects of fulfillment. This is a huge advantage in maintaining a high seller rating because well-fulfilled orders— which are the majority of FBA orders— will also reflect positively on the seller if the customer chooses to leave feedback. Since Amazon considers its own fulfillment service to have perfect scores across many variables, an FBA seller is far more likely to win the Buy Box over an FBM seller, who would have to have very high relative scores in all areas and a competitive price to do so. FBA is also more likely to increase general conversion of the product because potential customers would be impressed by the service FBA offers.
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FBA Fees
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
FBA Fees On top of the existing Marketplace referral and variable charges, Amazon charges multiple fees to sellers who wish to use the Fulfillment by Amazon service. FBA fees are added in addition to the typical Marketplace fees for a seller’s product category. However, sellers should not view the fees as an incremental, extra cost for selling on the Marketplace. FBA fees are in place of a seller’s normal operational costs (outbound shipments, packaging, customer service, etc.). This is a huge consideration that many sellers often overlook. The following is a complete breakdown of all the obligatory fees, as well as the fees that cover the additional optional services. * Due to Amazon’s recent changes to its fee structure, the below information is effective as of February 18, 2015. See page 43 for the Amazon Marketplace fee structure prior to February 18, 2015. Note: For product size tiers, see chart at the end of this section.
Fee This fee is charged for all units stored in an Amazon fulfillment center and is based on calendar month and daily average volume. This is calculated in cubic feet when the unit is properly packaged and ready for shipment to the customer.
Monthly Storage
* From January to September, the fee is $0.48 per cubic foot per month. ** From October to December, the fee is $0.64 per cubic foot per month. * From March 1, 2015, this fee will change to $0.51 for standard-size units and $0.40 for oversized units. **From March 1, 2015, this fee will change to $0.68 for standard-size units and $0.53 for oversized units
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fee A fee of $22.50 per cubic foot is charged semi-annually (August 15 and February 15) for
Long Term Storage
units that have been stored in Amazon’s fulfillment centers for 365 days or more. * From August 15, 2015, a fee of $11.25 per cubic foot will be charged for units that have been in Amazon fulfillment centers between 6 and 12 months
For standard-size media items, there is no fee.
Order Handling
For standard-size non-media items, there is a $1 fee per order, unless the order cost $300 or more, in which case there is no fee. For oversized items, there is no fee.
There is a $1.04 fee per unit of standard-size items, unless the unit cost $300 or more, in which case there is no fee. For small oversized items there is a fee of $4.05.
Pick & Pack
For medium oversized items there is a fee of $5.12. For large oversized items there is a fee of $8.21. For special oversized items there is a fee of $10.34. (For certain clothing products, there is an addition $0.40 per unit.)
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fee This is based on the Outbound Shipping Rate (Unit Weight + Packaging Weight). The total for
Weight Handling
each unit is then rounded up to the nearest pound. For all small standard-size items that weigh 1lb. or less, there is a fee of $0.50. For all large standard-size items that weigh 1lb. or less, there is a fee of $0.63. For large standard-size media items that weigh 1lb. to 2lb., there is a fee of $0.88. For large standard-size non-media items that weigh 1lb. to 2lb., there is a fee of $1.59.* For large standard-size media items that weigh over 2lb., there is a fee of $0.88 + $0.41/lb. over the first 2lb. * For large standard-size non-media items that weigh over 2lb., there is a fee of $1.59 + $0.39/lb. over the first 2lb. Note: In the above cases, if the orders are worth $300 there is no fee for weight handling. * For small oversized items, there is a fee of $1.59 + $0.41/lb. over the first 2lb. * For medium oversized items, there is a fee of $2.23 + $0.41/lb. over the first 2lb. For large oversized items, there is a fee of $63.09 + $0.41/lb. over the first 90lb. For special oversized items, there is a fee of $124.58 + $0.41/lb. over the first 90lb. * For large standard-size non-media units weighing more than 1lb and all oversized units, Dimensional Weight (Unit Volume divided by 166) will be used to calculate Outbound Shipping Rate, if it is greater than the Unit Weight.
Special Handling
A $40 fee applies to plasma and projection large-screen television units with screens of 42” or larger.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fee If a customer returns an item for which Amazon offers free return shipping (such as apparel,
Returns Processing
watches, jewelry, shoes, handbags, sunglasses and luggage), the seller will be charged a fee for each returned unit. This is calculated as the total fulfillment fee (Order Handling + Pick & Pack + Weight Handling) for a given product.
If a seller wants their inventory to be returned or disposed of, they need to pay a fee. To
Inventory Removal
return a standard-size item costs $0.50 per unit. To return an oversized item costs $0.60 per unit. To dispose of a standard-size item costs $0.15 per unit. To dispose of an oversized-size item costs $0.30 per unit.
Inventory Shipping (Optional)
This would include the cost for shipping the items to an Amazon fulfillment center. A seller can choose to utilize Amazon Partnered Carriers or the Inventory Placement Service for this.
This is the cost involved to prepare the item for FBA. Preparing the item includes labeling it
Product Preparation (Optional)
and properly packaging it, according to Amazon’s particular requirements. Amazon offers an FBA Label Service and an FBA Prep Service to sellers.
Amazon offers an FBA revenue calculator for sellers to calculate how much profit a seller would make using FBA.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Product Size Tier Chart
Chart taken from Amazon.com.
Examples So how much would it cost to fulfill the following products using FBA?
1. Large Standard-Size Non-Media
Fee
Prior to After Feb. 18, 2015 Feb. 18, 2015
Order Handling
$1.00
$1.00
Pick & Pack
$1.02
$1.04
Weight Handling
$0.55
$0.63
Inventory Storage (3/1-3/31)
$0.04*
$0.04*
Total
$2.61
$2.71
* Fee amount has been rounded. This fee will change from $0.042 to $0.0446 for a single unit.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
2. Large Standard-Size Media
Fee
Prior to After Feb. 18, 2015 Feb. 18, 2015
Order Handling
$0.00
$0.00
Pick & Pack
$1.02
$1.04
Weight Handling
$0.55
$0.63
Inventory Storage (3/1-3/31)
$0.11
$0.12
Total
$2.77
$2.86
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
3. Small Oversize
Fee
Prior to After Feb. 18, 2015 Feb. 18, 2015
Order Handling
$0.00
$0.00
Pick & Pack
$4.03
$4.05
Weight Handling
$25.13
$26.60
Inventory Storage (3/1-3/31)
$2.73
$2.27
Special Handling
$71.89
$72.38
Total
$71.89
$72.38
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The Pros & Cons of FBA
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
The Pros and Cons of FBA The decision of whether or not to fulfill through Amazon should not be made on a whim. Sellers must evaluate many different factors in their decision making process, since what may be right for one seller may not be the correct way to go for another. Sellers may also decide that some of their products may be suitable for FBA but others are more appropriate to fulfill themselves. The selling points to FBA are many:
The Pros Convenience FBA relieves the seller of a potentially large headache. Amazon’s fulfillment centers store the seller’s products and do all the legwork for them. When an order is received, Amazon’s employees pick, pack and ship the products, plus they’ll deal with all the customer service queries and returns.
Eligibility With FBA, a seller’s products are eligible for Super Saver Shipping, Amazon Prime and Buy Box Eligible status, which all lead to a higher conversion rate.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
The Amazon Reputation Many believe that customers are more likely to buy from a seller who has the Amazon name attached to them. This is due to the strong level of trust that the company inspires in them. If something goes wrong, people know that Amazon will take care of it. They also know Amazon has mastered the distribution process and will send the item quickly.
Sales Performance There’s also the argument that FBA sellers can sell more because they have the Amazon name attached to them. For example, let’s say a seller has 10 boxes of coffee and is selling them from home at $42 + $8 for shipping. They would have to go to the post office and pay to ship each sale individually, including the materials to put the coffee in. On the other hand, if they were selling FBA, they could ship all the boxes to Amazon in one go and then list them at $50 each with free shipping. So the cost to the customer would be the same, but as an FBA seller, they would be making more profit.
The Cons Fees Using FBA can be extremely costly, particularly for large products. See page 21 for details on Amazon FBA fees. Oftentimes a seller may have the manpower and willpower to be taking care of certain elements themselves, so switching to FBA could hike their costs up. However, as noted earlier, using FBA doesn’t necessarily mean that a seller will be expensing more to be able to sell a product on the Amazon Marketplace. FBA fees are in place of a seller’s normal operational and fulfillment costs. Copyright © 2015 CPC Strategy & FeedVisor
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Commingling When using FBA, Amazon’s fulfillment centers will ask that the seller identifies their products using unique product identifiers, which include a:
UPC or EAN barcode FBA label (this can be printed from your Seller Central Account)
Amazon’s default FBA label setting is Labeled Inventory. Labeled Inventory requires a FBA label for each product you send (print from Seller Central) and identifies products you send as attributed to your seller account. However, many sellers choose not do this labeling process mainly because it’s a time-costly process. So the alternative is to send units to Amazon as stickerless, commingled inventory. Commingling inventory is essentially the process of pooling Seller A’s units with Seller B’s units of the same UPC at an Amazon fulfillment center.
“When you choose to commingle inventory, your products become interchangeable with the same products from other sellers for both order fulfillment and removals.” – Amazon
If a seller chooses not to label their inventory, commingling is a potential con for FBA because fake products from other sellers can enter the mix. Copyright © 2015 CPC Strategy & FeedVisor
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
This opens the door to the possibility that a customer purchases a product from you and receives the fake version from another seller—a high risk for products like sunglasses. Other risks include the product from another seller being damaged or faulty. However, there are some upsides to embracing commingling.
The “It Depends” While there are obviously both clear advantages and disadvantages to FBA that may sway a seller in either direction, the discussion is actually a lot less straightforward and the following must be taken into account by each seller considering FBA.
It Depends What You Sell Although some of the fees associated with FBA change according to product size and weight, the pick & pack handling fees are fixed. Therefore, if items tend to be relatively small, not too heavy, and sell at higher prices, it makes the FBA fees more manageable. For example, a $10 item that is large and heavy will represent a large percentage of your margin, whereas the fees for a small and light item that sells at $30, will represent a much smaller percentage. For this reason, high ASP (average sale price) is a big consideration for FBA inventory selection. An example of a small, light, and high ASP product category is Jewelry. Popular items that sell quickly are also great for FBA. It does not make sense to send something to Amazon that isn’t likely to sell and may languish in storage, racking up storage fees.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
While some sellers dispute this by claiming that low sales rank items are ideal to sell via FBA, since their chances of selling usually go up quite a bit due to their Amazon Prime “teaser,” it’s a high-risk move that makes a seller vulnerable to very costly storage fees. As a side note, sellers should be aware of the fact that storage fees increase during busy periods like Q4.
It Depends How Much You Sell For high-volume sellers, physical storage space could be an issue which FBA would solve. The higher the turnover rate for your inventory, the more storage space Amazon will grant you. For growing sellers, FBA could also be a useful since their workload would decrease significantly, freeing up their time to focus on growing their business.
It Depends How Much Manpower You Have FBA could prove extremely useful to a seller who lacks the manpower to cope with an overabundance of orders. Fulfilling an item oneself involves going to the post office or engaging with a shipping carrier, and with people expecting quick shipping, a seller would need to be ready to fulfill their order within a day or two. Taking on extra employees would involve managing a fleet of employees, which a seller might not want. It is also sometimes difficult to judge when there will be an influx of orders, and therefore hard to prepare the necessary manpower in advance.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
So is FBA Worth It? The answer is that a seller really needs to know their business. They need to have an in depth knowledge of their inventory and invoices and be able to strategically assess which listings it makes sense for.
Have Questions About Your FBA Strategy? Schedule time to discuss your current Marketplace strategy and review your Seller Central data with an Amazon Advisor.
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Conducting A Catalog Analysis For FBA Inventory Selection
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Conducting a Catalog Analysis for FBA Inventory Selection Most Amazon Marketplace sellers do a mix of both FBA and FBM to fulfill orders. So how does a seller determine which products in their catalog to FBA? Size and weight are the most obvious factors in determining FBA selection. This is because the FBA cost structure (referenced on Page 21) quickly scales as the product becomes bulkier and heavier. However, sophisticated Amazon sellers also analyze their catalog from a product-performance perspective. Aside from costs, there is a focused strategy behind FBA selection—a strategy that strongly emphasizes manipulating Buy Box ownership to increase revenue. This selection process depends heavily on performance metrics—not which products a seller wants to sell but rather which products will have the best chance of performing with FBA. So with the goal of increasing the overall number of orders on a detail page (via increasing Buy Box ownership %), sellers should segment their catalog based on the products that are already receiving both a high amount of sessions and generating significant revenue and orders.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
For example, the Mohu Leaf is an ASIN where the detail page is competitive and (probably) high trafficked (judging from the product review volume).
For this reason, sellers should sort their catalog by ASINs with: A. The highest number of visits B. The highest number of orders C. The highest revenue volume D. Moderately high average sale price (ASP) E. The highest existing Buy Box ownership share (%) Copyright © 2015 CPC Strategy & FeedVisor
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
In general, sellers should also be mindful of their products’ competitive landscape, particularly for ASINs where Amazon.com has an active offer. This is because in this scenario, an FBA offer has a smaller chance of unseating an active Amazon.com offer (which is automatically Prime eligible), and is thus less likely to significantly improve Buy Box ownership share. There are also special considerations in the FBA inventory selection process. For example, a seller’s supplier relationships will play a role as well as if a seller’s dropshipper will ship to Amazon Fulfillment Centers. Knowing the overlap for buckets A through E (cited above) will allow a seller to prioritize their time on the products which stand to have the biggest impact on their bottom line. Once a small subset of high-session and high-value products are identified, a seller can cross-reference these products with those where Buy Box Ownership % is less than ideal. These are the segments of a Marketplace seller’s catalog where marginal increases in Buy Box Ownership % via FBA selection stand to most significantly influence revenue volume.
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Final Thoughts
Copyright © 2015 CPC Strategy & FeedVisor
The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Final Thoughts “ Amazon’s FBA program is an incredible opportunity that I believe to be misunderstood by the majority of third party sellers. Many sellers are wary of placing too much control of their business in Amazon’s hands, but the reality is that FBA should be viewed as a controllable, strategic lever that sellers can employ to leverage access to Amazon’s growing number of Prime customers, exceptional customer service, and their exclusive shipping rates—all while typically costing less than traditional FBM.
Sprigley Allan Sr. Marketplace Channel Analyst
Ultimately, Fulfillment by Amazon allows a third party seller to take advantage of what was previously thought of as Amazon’s most significant competitive advantages. I’ve consistently seen third-party Marketplace sellers implement more profitable fulfillment and customer service operations by taking advantage of FBA. I would highly recommend sellers consider integrating FBA into their Marketplace operations—even with just a small, initial subset of products —and keep a close eye on its effect on sales performance, customer service metrics, and fulfillment cost. “ -Sprigley Allan
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
“ There’s a reason why FBA has grown by 65% year over year. It offers strong value propositions and can drastically save time and money for the right merchant selling the right products. Two of the strongest pulling points are the Buy Box and Amazon Prime. With such a high majority of Amazon sales going through the Buy Box, no seller would want to miss out on winning this prized piece of real estate, and FBA can help them achieve it. In addition, with millions of customers joining the Amazon Prime every year, FBA sellers are opened up to a huge market of dedicated Amazon customers, who they wouldn’t have had access to otherwise.
Shmuli Goldberg Director of Marketing
I would strongly recommend that every Amazon seller looks into FBA and possibly even tests it out with a small number of items in order to see the effect it can have on their business. “ -Shmuli Goldberg
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Appendix
Copyright © 2015 CPC Strategy & FeedVisor
The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
APPENDIX The Amazon Fee Structure Fee
Old Fee
New Fee
Date of Change
This fee is charged for all units stored in an
This fee is charged for all units stored in an
March 1, 2015
Amazon fulfillment center and is based on
Amazon fulfillment center and is based on
calendar month and daily average volume.
calendar month and daily average volume.
This is calculated in cubic feet when the
This is calculated in cubic feet when the
unit is properly packaged and ready for
unit is properly packaged and ready for
shipment to the customer.
shipment to the customer.
From January to September, the fee is
From January to September, the fee is$0.51
$0.48 per cubic foot per month.
for standard-size units and $0.40 for
Monthly Storage
oversized units. From October to December, the fee is $0.64 per cubic foot per month.
From October to December, the fee is $0.68 for standard-size units and $0.53 for oversized units, per cubic foot per month.
Long Term Storage
A fee of $22.50 per cubic foot is charged
An additional fee of $11.25 per cubit foot
semi-annually (August 15 and February
will be charged for units that have been in
15) for units that have been stored in
Amazon fulfillment centers between 6 and
Amazon’s fulfillment centers for 365 days
12 months.
August 15, 2015
or more.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fee
Old Fee
New Fee
For standard-size media items, there is no fee.
No change
Date of Change
For standard-size non-media items, there
Order Handling
is a $1 fee per order, unless the order cost $300 or more, in which case there is no fee. For oversized items, there is no fee.
Pick & Pack
There is a $1.02 fee per unit of standard-
There is a $1.04 fee per unit of standard-
size items, unless the unit cost $300 or
size items, unless the unit cost $300 or
more, in which case there is no fee.
more, in which case there is no fee.
For small oversized items there is a fee
For small oversized items there is a fee
of $4.03.
of $4.05.
For medium oversized items there is a fee
For medium oversized items there is a fee
of $5.07.
of $5.12.
For large oversized items there is a fee
For large oversized items there is a fee
of $8.12.
of $8.21.
For special oversized items there is a fee
For special oversized items there is a fee
of $10.25.
of $10.34.
(For certain clothing products, there is an
(For certain clothing products, there is an
addition $0.40 per unit.)
addition $0.40 per unit.)
March 1, 2015
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fee
Weight Handling
Old Fee
New Fee
Date of Change
This is based on the Outbound Shipping
This is based on the Outbound Shipping
Rate (Unit Weight + Packaging Weight). The
Rate (Unit Weight + Packaging Weight). The
total for each unit is then rounded up to
total for each unit is then rounded up to
the nearest pound.
the nearest pound.
For all small standard-size items that weigh
For all small standard-size items that weigh
1lb. or less, there is a fee of $0.46.
1lb. or less, there is a fee of $0.50.
For all large standard-size items that weigh
For all large standard-size items that weigh
1lb. or less, there is a fee of $0.55.
1lb. or less, there is a fee of $0.63.
For large standard-size media items that
For large standard-size media items that
weigh 1lb. to 2lb., there is a fee of $0.82.
weigh 1lb. to 2lb., there is a fee of $0.88.
For large standard-size non-media items
For large standard-size non-media items
that weigh 1lb. to 2lb., there is a fee
that weigh 1lb. to 2lb., there is a fee
of $1.34.
of $1.59.*
For large standard-size media items that
For large standard-size media items that
weigh over 2lb., there is a fee of $0.82 +
weigh over 2lb., there is a fee of $0.88 +
$0.41/lb. over the first 2lb.
$0.41/lb.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fee
Old Fee
New Fee
Date of Change
For large standard-size non-media items
For large standard-size non-media items
that weigh over 2lb., there is a fee of $1.34
that weigh over 2lb., there is a fee of $1.59
+ $0.39/lb. over the first 2lb.
+ $0.39/lb.over the first 2lb.*
Note: In the above cases, if the orders
Note: In the above cases, if the orders are
are worth $300 there is no fee for
worth $300 there is no fee for weight handling.
Weight Handling (Continued)
weight handling. * For small oversized items, there is a fee For small oversized items, there is a fee of
of $1.59 + $0.41/lb.over the first 2lb.
$1.34 + $0.39/lb. over the first 2lb. * For medium oversized items, there is a For medium oversized items, there is a fee
fee of $2.23 + $0.41/lb. over the first 2lb.
of $1.91 + $0.39/lb. over the first 2lb. * For large oversized items, there is a fee of For large oversized items, there is a fee of
$63.09 + $0.41/lb.over the first 90lb.
$61.62 + $0.80/lb. over the first 90lb. * For special oversized items, there is a fee For special oversized items, there is a fee
of $124.58 + $0.41/lb. over the first 90lb.
of $124.08 + $0.92/lb. over the first 90lb. * Effective Feb 18, 2015, for large standardsize non-media units weighing more than 1lb and all oversized units, Dimensional Weight (Unit Volume divided by 166) will be used to calculate Outbound Shipping Rate, if it is greater than the Unit Weight.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fee
Special Handling
Old Fee
New Fee
A $40 fee applies to plasma and projection
No change
Date of Change
large-screen television units with screens of 42” or larger.
If a customer returns an item for which
No change
Amazon offer free return shipping (such as apparel, watches, jewelry, shoes, handbags,
Returns Processing
sunglasses and luggage), the seller will be charged a fee for each returned unit. This is calculated as the total fulfillment fee (Order Handling + Pick & Pack + Weight Handling) for a given product.
If a seller wants their inventory to be
No change
returned or disposed of, they need to pay a fee. To return a standard-size item costs
Inventory Removal
$0.50 per unit. To return an oversized item costs $0.60 per unit. To dispose of a standard-size item costs $0.15 per unit. To dispose of an oversized-size item costs $0.30 per unit.
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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA
Fee
Old Fee
New Fee
This would include the cost for shipping
No change
Date of Change
the items to an Amazon fulfillment center.
Inventory Shipping (Optional)
A seller can choose to utilize Amazon Partnered Carriers or the Inventory Placement Service for this.
This is the cost involved to prepare the
No change
item for FBA. Preparing the item includes
Product Preparation (Optional)
labeling it and properly packaging it, according to Amazon’s particular requirements. Amazon offer an FBA Label Service and an FBA Prep Service to sellers.
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