Pros and cons of FBA (Fulfillment by Amazon)

So you’ve started selling on Amazon. Or maybe you’re looking for a new fulfillment solution for your eCommerce store. Whatever the case may be, if you sell products online it’s worthwhile knowing the pros and cons of FBA (Fulfillment by Amazon). Trust us.

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What is FBA anyway?

In a nutshell, Fulfillment by Amazon is a paid service that allows you store your products in Amazon's fulfillment centers, where Amazon picks, packs, ships, and provides customer service for all the products you send them.

While you do need an Amazon Seller account to use FBA, once you have an account you can also use FBA for multi-channel fulfillment. That means you can use the service for products sold through other channels (such as your own eCommerce store) as well as your Amazon store.

What are the pros of Fulfillment by Amazon?

Now that we’ve covered off the basics about FBA, let’s get to the good stuff. Here are some of the major advantages of using Fulfillment by Amazon:

1. Qualify for Amazon Prime

When you use Amazon’s FBA service, your items automatically qualify for Amazon Prime shipping – which means all Prime members can get free two-day shipping for your products. The benefits of this are obvious – namely, customers will see you as a trusted seller and know they’ll receive their orders quickly and at no cost.

2. Win the Buy Box

The Buy Box is the box on a product detail page where customers can begin the purchasing process by adding items to their shopping carts. Customers selling the same or similar products will compete for this coveted space. By using FBA, you’re more likely to win the Buy Box spot over a comparable self-fulfilled seller the majority of the time – and thus increase the chances that customers will buy a product from you rather than another seller. In a marketplace where 20 or more people could be selling the same product, featuring in the Buy Box is a huge advantage.

shutterstock_10567714703. Take advantage of hassle-free logistics and shipping

Those who have managed fulfillment first-hand know all too well that’s it’s an onerous and time-consuming task with a lot of working parts. If your sales jump up by selling on Amazon, you’re looking at spending a good chunk of your day on packing and shipping alone. With FBA, you’re essentially outsourcing the entire fulfillment process, so you can be confident that your orders will reach your customers on time while you spend more time focusing on other essential business operations.

4. Utilize multi-channel fulfillment

As we mentioned above, when you use FBA you’re not limited to using the service for products sold on Amazon. You can sell your products through any channel you like and fulfill your multi-channel orders with FBA. With TradeGecko, you can also streamline the fulfillment process further by having the system automatically send orders to FBA for you.

5. Sell more

Because you’ll typically win the Buy Box by default over non FBA sellers, you can expect an increase in sales compared to managing fulfillment yourself. Plus, if you’ve added Amazon as a new channel to your existing eCommerce approach, you’re likely to see more sales purely as a result of getting in front of new customers.

What are the cons of Fulfillment by Amazon?

While the advantages above are pretty enticing, there are also a few drawbacks to FBA that you should be aware of.

1. It can be more difficult to keep track of inventory

Once you build up your product offering into the hundreds (or even thousands), it’s likely that not all of them will sell as quickly as you anticipate. With that in mind, it can be tricky to keep track of what you have, what you need, and what you should cut back on – especially when those products are stored at Amazon’s fulfillment centers. Thankfully, TradeGecko can help by automating inventory management and integrating with FBA to make sure you have an accurate record of inventory and sales at all times.

2. You might see an increase in returns

Amazon’s “easy returns process” is exactly what it sounds like – an easy returns process! As such, you can expect your fair share of impulse or test buys from customers, and consequently, an increase in returns.

shutterstock_2533869403. FBA ain’t free

It goes without saying, but Amazon’s FBA isn’t free. You have to pay based on how much inventory they store for you and how long they have to store it, which means you need to have a good understanding of your sales volumes to keep just the right amount of inventory needed to maintain a profit. Our free sales forecasting template can help you project sales over time, and don’t forget that you can use TradeGecko’s stock reorder reports to manage your stock levels efficiently.

4. Shipping prep can be complicated

You are responsible for delivering your inventory to Amazon’s warehouses, and that can be a headache – especially considering Amazon’s strict ASIN/UPC system, which means you have to pack and label your products individually. However, this process can be simplified by using TradeGecko to create a custom shipping profile for different FBA warehouses.

Before you get started with Fulfillment by Amazon, check out our guide to Amazon FBA for beginners

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