What You Need To Know About FBA: FBA Dropshipping Explained
If you’re into drop shipping, then you’ve heard of FBA? The meaning of FBA is “fulfillment by Amazon.” Amazon’s FBA solutions have become one of the best dropshipping suppliers in recent years. We’re going to talk about what FBA is, and also how we’re going to use it. FBA is a system where people pre-purchase inventory and send it to Amazon.. we’re not going to do that though. We’re going to BUY from Amazon, not sell on Amazon. Just something to keep in mind for the article, because we’ll be bouncing back and forth a bit.
There are 2 million people worldwide who sell on Amazon. The FBA program allows you to take advantage of Amazon’s advanced shipping and fulfillment services. You can outsource product acquisition, quality control, shipping import duties and tarrifs, monthly warehousing fees, and monthly fulfillment costs to other businesses. You pick up the product once it has landed in the FBA warehouse, already barcoded and SKUs.
Around half of Amazon’s sales come from third-party sellers. If you look at the top 10000 vendors, you will see that 66% of them use Amazon’s fulfillment by amazon.
Now, DropshipUSA works with dropshippers and help them integrate FBA solutions on their website. So we took it upon ourselves to let you know all there is to know about FBA.
There are many benefits and disadvantages to FBA depending on how you use it. We’ll dive into some of the finer details about Amazon FBA, and how you can use FBA to dropship.
What Is FBA & How It Works
- FBA or fulfillment by Amazon is an e-commerce solution where Amazon works with you and helps you grow your e-commerce business. Here are some of the things you can expect from Amazon:Suppliers can send their products to Amazon.
- Amazon stores the products in their warehouses.
- Amazon picks, packs, ships, and tracks the order for the supplier.
- Amazon handles returns and refunds for the products.
- Access to Amazon’s stellar 24/7 customer service.
Amazon is one of the best order fulfillment solutions out there right now because of these reasons. The company has 300 million active users and 90 million prime customers. This results in a TON of suppliers sending their product to Amazon FBA, and outsourcing the warehousing and logistical aspect of their business to lower overhead and become more competitive on price. More products means more competition. On the retail level, that means lower prices.. lower source costs. You see it starting to come together?
Here is how fulfillment by Amazon works:
- Amazon has a plethora of warehouses, some a million square feet. Amazon will let you know where to send your products when you let Amazon what products you are sending.
- Amazon will store and sort out your inventory. The marketplace will sort out the products and add them to their website. Amazon will reimburse you if any product is damaged in the warehouse.
- Amazon takes care of the entire transaction process. It will handle everything from accepting payments to updating your inventory.
- FBA comes with the full shipping solutions that make Amazon fantastic. It will pack, ship, and track all your orders for you.
- Amazon has one of the best customer services ever seen, and businesses enrolled in the FBA program will have the full support of its customer service department.
- Amazon does everything for you. It sums up all your sales, deducts the seller’s fees, and then deposit the money directly to your bank account.
As you can see, Amazon handles most of the work. However, there are things that you, as a seller, have to do. Here they are:
- You are responsible for selecting your niche and finding which products to sell in your store.
- You are responsible for keeping your product stocked. Make sure you never run out of products to sell.
- You are responsible for all the advertising and marketing efforts. Make sure you market everything correctly if you want to succeed.
We side step these issues with out DropshipUSA websites by allowing other vendors to go through that whole process for every single product, and just intercepting them at that point in the supply chain.
With a catalog of 350 million products, fulfillment by Amazon is an e-commerce retailer’s heaven.
Now that you know how it works, you should look into FBA as a dropshipping program for your e-commerce store.
There are benefits and disadvantages to everything, and FBA isn’t any different. In the following passages, that’s what we will discuss. So let’s get into it.
Fulfillment by Amazon (FBA) Benefits
We’ve been saying that FBA or fulfillment by Amazon is a fantastic e-commerce solution for retailers. So why do we say that? Well, here are some of the benefits of FBA:
- If you ever managed your orders, you know how hard it is to fulfill an order. Amazon offers effortless logistics and shipping solutions for its partners.
- Amazon is known for providing fantastic shipping rates for its consumers, and if you’ve enrolled in the FBA program, then you get to take advantage of their excellent shipping infrastructure.
- Amazon manages a host of different things like customer inquiries, return shipping labels, and reverse logistics. Even though there is a fee you have to pay, the upside to FBA managing your returns is vast.
- Amazon provides your e-commerce shops with 24/7 support via phone, chat, and email support.
- Amazon has a bunch of warehouses, which means fast shipping times.
- Amazon is known for its fantastic order delivery services, and if you are enrolled in the FBA program, you can take advantage of it and get ultra fast deliveries on your products.
- Amazon has multi-channel support. You can use Amazon’s Multi-Channel Fulfillment (MCF) service and sell products on other channels while Amazon fulfills the orders.
So we told you all about the benefits of FBA. Now let’s talk about the disadvantages of FBA. Trust us; there are a few out there.
Fulfillment by Amazon (FBA) Disadvantages
FBA or fulfillment by Amazon is an e-commerce miracle. It sells many products. Half of their sales come from Amazon products, and half comes from third-party sales, but all goes through Amazon.
However, something as fantastic as FBA has a few disadvantages. So let’s check them out:
- FBA is a costly program. Amazon charges you for both storage fees and fulfillment fees. So you have to be very savvy to make a profit.
- The long term storage fees for FBA can become crippling. If your products don’t sell a lot, your products’ storing charge can eat into your operating expenses.
- Because Amazon makes it very easy for people to return products, you may see an increased number of returns on your orders.
- Preparing your product for shipping can become a hassle with the strict guidelines that Amazon sets. It can be especially tricky if you are starting your e-commerce business.
- Since you are not storing your products, tracking the inventory for your products can be very tough. Finding out what you need to order and what’s not selling when you don’t have easy access to the warehouse makes it a tricky option.
- Sales tax collection for you can be a hassle with Amazon. If Amazon sells your products in one state, then the entire process is simple, but you might find it a problem if you sell to more than one state.
- Amazon offers you commingling or pooling with the same products from other buyers to increase your efficiency. However, that might mean you send out counterfeit or damaged products. That can increase your chances of getting bad reviews and hurting your business.
FBA Is The Solution That Works Because We Don’t Sell On Amazon, We Buy From There.
We can build you a fully automated successful dropshipping business with FBA integration. No need to pre-purchase inventory, ever.
If you have any questions about dropshipping or FBA in general, feel free to attend our FREE webinar at learn.dropshipusa.io/webclass.
You can also send in your questions in the comments below, or you can also hit us up on our socials. With that being said, we arrive at the end. We will come back with something new for the dropship nation soon. Until then, see ya!
Originally posted in: https://dropshipusa.io/blogs/news/what-you-need-to-know-about-fba