eRetailers of all stripes have used the Amazon platform to launch their business ventures.
For years, they’ve been able to generate revenue through a variety of Amazon platforms, such as the Kindle Ebook publishing program, affiliate marketing of Amazon’s main platform (and its subsidiaries), Amazon’s traditional book publishing arm, Amazon Kindle Shorts, and more.
But Amazon’s latest division that’s capturing the attention of eRetailers lately is their Fulfillment By Amazon (FBA) program. Not only can’t small retailers stop talking about it, but FBA is being mentioned at all of the large eCommerce conferences, as well.
Business Insider wrote a piece on FBA after one of its journalist attended one such conference last year. Regarding the attention and the success that the new division is enjoying, they write:
FBA is generally a hot topic in part because Amazon is investing in it heavily of late as it becomes a bigger part of its business. In its fourth-quarter earnings last year, Amazon said goods sold through FBA made up more than 40% of its third-party sales.
The company also announced last summer that it would add six new fulfillment centers and more than 15 “sortation” centers in the coming year to help it improve shipping efficiency for both its own inventory and FBA goods.
According to the article, another huge reason why Amazon is keen to invest in the FBA program comes down to one of its hottest properties-the Prime subscription membership program.
Specifically, FBA works to spur (or maintain) Prime memberships, perfectly:
By using FBA to let Amazon handle shipping logistics, sellers can cut their inventory and shipping costs (though Amazon does charge fees for the service) and make their goods eligible for Amazon Prime.
(Prime is) the company’s $99-per-year membership program, which offers free two-day shipping on more than 20 million items. The Prime aspect is a big part of what makes FBA so valuable for Amazon.
In other words, when FBA sellers select to have their products available for delivery via the Prime membership program, then Prime members not only have access to more items to purchase, but they’ll also feel motivated to spend more money on products.
The Prime membership is based upon the offer of free two-day shipping on all items eligible for Prime purchase. Entrepreneur Magazine notes that many online shoppers show a preference for free shipping over discounted product price points.
So not only will Prime-eligible FBA products spur more spending, but FBA will also spur consumers who haven’t signed up for Prime to become members, especially in light of Amazon’s new fee structure that allows for monthly and annual membership payments.
There are an abundance of benefits that retailers have realized after signing up for Amazon product fulfillment and shipping:
FBA is currently being used by retailers who work from home, selling products part-time, up to medium/large retailers who are looking for another revenue generation channel.
However, the leeway given by Amazon vastly benefits the work-from-home retailer who could never afford a fulfillment center, otherwise. These are the people who are able to start their business for less than $1k and realize profit margins, even from the first time they provide inventory to Amazon’s warehouses.
Some sellers choose to sell one product in one niche, but many can expand into a variety of products within a niche, and many expand into a variety of niches. The variety of products that the seller provides is only limited by their financial and human resources.
FBA allows sellers (for a fee) to store their inventory inside of Amazon’s warehouses. And as Amazon increases its fulfillment center locations, opportunities will only increase for sellers to consider products to store.
This is excellent news for the home seller and the larger company owner who needs to find additional storage solutions at an affordable price.
Unlike other Amazon businesses opportunities that require sellers to be the original manufacturers, the FBA program allows sellers to store and ship pre-manufactured products that are procured through specialty wholesalers and distributors.
This is probably one of the greatest advantages for small business owners who are eager to begin earning money, quickly.
They are able to set up a listing of their product, set the price, add the necessary descriptive information, and wait for Amazon customers to purchase their products. They’ll never have to worry about setting up or managing websites (or the associated products and fees).
But with all of this said, there are some disadvantages, too.
For example, Amazon recently announced that they’ll be raising the price of product storage fees during the holiday season. This was done in part to motivate sellers to strongly consider their inventory control during this season.
Specifically, Amazon wants to motivate sellers to conserve on storage space so that the warehouses will have enough room for the huge influx of Amazon products during the busiest sales season of the year.
However, the seasonal storage fee increase won’t affect most from continuing to use the service. They see far too many benefits, and the service is predicted by industry leaders to expand into the upcoming years.