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The Good and the Bad of Fulfillment by Amazon

Warehousing inventory is one of the greatest challenges for an Amazon seller. Many online sellers started their business by storing merchandise in their garages, only to quickly outgrow the space. More inventory engenders greater expenses and tricky warehouse logistics.

Fortunately, there is a viable alternative to warehousing your own inventory known as Fulfillment by Amazon or FBA.  FBA is an advanced fulfillment network created by Amazon for its millions of vendors.

With FBA, Amazon sellers store their products in Amazon fulfillment centers.  FBA will handle the rest – including packing, shipping, and providing customer service. In effect, Amazon will act as your storage space, inventory manager, and shipper all rolled up in one. In return, you will have to pay FBA a small fee, but it is usually less than you would pay to warehouse and ship your own goods.

Here’s a quick look at the perks of FBA:

  • Easy shipping and returns – Packing and shipping an order entail a lot of work. If you receive about 50 orders in one day, you will spend most of your waking hours packing and shipping merchandise. FBA will perform these tasks for you so you can concentrate on promoting your products.
  • Cheap shipping – FBA handles shipping and invariably saves you money in the process.  It is virtually always cheaper to ship with FBA.
  • Amazon Prime shipping – When you fulfill your orders with FBA, your items automatically qualify for Amazon Prime shipping.  The promise of 2-day shipping allows you to attract more buyers.
  • Buy Box opportunities – If you use FBA, you may have a better chance at winning the Buy Box. Your products will have the label “Fulfilled by Amazon,” which theoretically improves your rankings.

Nothing great is without its disadvantages.  Along with the pros, FBA does come with a few cons:

  • Stale inventory – When you store thousands of products through FBA, you face the likelihood that some of those products won’t move for several months. You will be responsible to pay for the inventory space as long as your old merchandise stays there.
  • Pooled inventory – Because of the sheer volume of merchandise, FBA allows the pooling of similar products owned by different sellers.  This creates margin for error and raises the possibility that your customer could be receiving a product from another seller, or vice versa.
  • Shipping challenges – Amazon is very strict when it comes to its ASIN/UPC system. Every product must be labeled individually and packed for shipment to different warehouses. This labeling requirement will increase your expenses.

For most people, FBA advantages outweigh the drawbacks.  Though FBA may not be right Amazon inventory management solution for everyone, it is an appealing option for countless Amazon sellers.

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