Have you got started with private labeling and selling products online?
It’s not easy to achieve success selling online. Generally speaking, it takes commitment, a lot of hustle and putting some good systems in place so that you’re able to scale and grow your business.
That last point is why we like Amazon FBA (“fulfillment by Amazon”). Many businesses start out taking care of the entire fulfillment side themselves, but find that it takes up a lot of valuable time, time which could be used to better promote and grow the business or develop relationships with new suppliers.
Here’s how you can really power your private label business with Amazon FBA:
What Is Amazon FBA?
By now you know that becoming a third party seller on Amazon can be a lucrative way to make extra cash on a side-hustle, or even build up to being a full-time replacement income.
When you sell on Amazon, you have two choices when it comes to organizing your fulfillment:
- Be an FBM (fulfillment by merchant) seller, meaning you take care of all fulfillment.
- Be an FBA (fulfillment by Amazon) seller — Amazon takes care of fulfillment for you.
How does FBA work?
If you choose to be an FBM seller (as many do to begin with), you take care of an entire list of tasks from choosing and sourcing a product to sell, picking, packing and shipping orders and taking care of any returns.
Amazon FBA looks more like this, from start to finish for any product:
- Merchant chooses and sources product.
- Merchant lists the product on Amazon (though it is not yet “live”).
- Merchant has products shipped to an Amazon warehouse.
- Amazon stores your product.
- Your product listing goes live.
- Buyer purchases your product.
- Amazon picks, packs and ships the order.
- Customer may receive within two days (if they are a Prime member).
- Should the buyer wish to return the product, Amazon handles the whole thing.
While you’re a small operation, taking care of all of these things may not seem like a big deal to you, but pause for a second to consider what happens if and when you grow. You’re already dealing with any customer service requests, which inevitably increase with growth, as well as marketing and any new product sourcing decisions.
FBA is set up to help Amazon sellers grow by taking care of the minutiae which comes up from order to shipment to the customer. Now you’ve got more time on your hands for doing those other tasks well! There are many FBA sellers who swear by it now because they’ve been freed up to create an income stream which is largely passive.
Pros and Cons of FBA
As with any service, there are going to be pros and cons and you really need to take a balanced look before deciding whether FBA is for you.
We’ve listed a few of the pros and cons we’ve discovered:
We’ve already given a huge pro of FBA in that overall, it frees up more time for Amazon sellers by taking care of the entire fulfillment process. Here are some others:
- Prime eligibility. This is one of the major pros of going with FBA. Your products become eligible for Prime shipping to members which can help your listings stand out above the pack. There are many Prime shoppers who will filter by Prime eligibility when searching for a product because that free 2 day shipping is a huge incentive.
- Cheap shipping! Your shipping fees are included in the fees Amazon charges you for the FBA service (which are charged per order). You’ll have to work it out based on your product, but most of the time shipping works out significantly cheaper than it would if you did it yourself. Amazon has access to much better deals on shipping due to their massive scale. (Check out their current fees on this page).
- You can use them to fulfill orders you receive on other channels you sell on. This creates efficiency for you by centralizing your fulfillment and gives your customers a reliable shipping experience.
- FBA helps you to win the buy box. Sellers tend to be higher up where Prime eligibility is involved, which can be a big deal in categories where there are multiple sellers.
- Shipping your product to Amazon. You need to follow a strict set of rules for labeling and shipping your products, usually to multiple Amazon warehouses. This can be complicated to get the hang of and involves cost for shipping out the products.
- Some sellers struggle with inventory management when it’s not under their own watchful eye. This especially becomes difficult when you have multiple products to keep track of. You don’t want to find yourself with either stale inventory or stock-outs.
- You don’t have absolute control over the process (which may or may not be important to some sellers). For example, if you are a seller who would like to provide an “unboxing experience” where everything is just so, FBA may not be your thing.
How Can FBA Power Your Business?
One of the key ways FBA helps boost your business is through what you can choose to do instead of all those tasks which would otherwise be involved with fulfilling orders.
You can spend more time on activities which help to improve your visibility and grow your business. For example, you might:
- Spend more time doing keyword research and improving product listings.
- Drum up more product reviews.
- Find and source new products to private label.
- Improve your product descriptions.
- Commit more to marketing activities.
Potentially, you could do all of these things and still take more of a break than you would if you were taking care of fulfillment yourself too. One of the great goals of most online sellers is to be able to earn an income which is largely passive. When you have a good system going, Amazon FBA allows you to do that as you don’t have to put as much time into running your business once it is ticking over well.
Ability to scale without having to manage a large workforce or warehousing operation is another advantage to going with FBA. Having a team will always include built-in inefficiencies because you have to manage that people aspect.
Will Tjernlund who, along with his brother Andrew is a multi-million dollar private label FBA seller put it like this in an interview with Web Retailer:
“I think the main reason I use the FBA exclusively is because it allows me to create a much bigger business than I could on my own. If I shipped out every item myself, if I marketed everything myself and I sourced everything myself, I would be busy all day trying to send out individual packages and tracking people down. But instead using FBA, we were able to run a seven million dollar company with just two people. FBA took care of all of the busy work and we got to spend our time making sure the business grew.”
One of the other powerful ways FBA can help your business is by helping you to gain trust and exposure more quickly than you may otherwise. There’s a certain level of trustworthiness associated with having that Prime eligible system which shouldn’t be overlooked.
Don’t underestimate the sway that a quicker delivery can have over customer perception and perceived trustworthiness. When customers buy something online, there’s often a slight anxiety over whether or not the item will actually be delivered. When they see that something is fulfilled by Amazon, they know they can expect a timely delivery.
In survey research presented by ClickZ, 91% of customers value time slot delivery as an overall factor. Customer expectations are higher than what they were even just a couple of years ago, so the chances are, they may go for the Prime eligible option, even if that same product is sold cheaper by a non-Prime seller.
Amazon FBA can be a great solution to help private label sellers power up and boost their businesses.
FBA takes care of everything from when a customer places an order, meaning that sellers don’t have to do all the “busy work” involved with online selling. Going with FBA also means that you’re eligible for Prime shipping status, a powerful attraction to the growing number of Prime members.
This is not a solution for those who are trying to operate with very minimal costs or test the waters; you need to be able to commit to having inventory for FBA or it won’t be worth your time. For those who can make the commitment, FBA can provide you with the means to grow your business without needing to add infrastructure, or even choose it as a more passive source of income.