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Running a business on Amazon has been proven to be one of the most effective strategies for entrepreneurs in selling their goods online. Many people have successfully gotten rid of their items and acquired profit using the platform. This article will give you an overview and tips on starting your e-commerce business on Amazon.
Whether you are a new seller or run a big business, you always want to increase your product’s conversion rate. With SageMailer you can get way more product reviews from your current sales on the marketplace and highly raise the conversion of potential buyers. Moreover, the setup takes just 5 minutes.
Setting up your Amazon Business
It is highly recommended that people use the Amazon business model to offer their goods on the internet. All you need to do is register on amazon.com as a seller and set up your profile. You will have two main options when starting your account: the FBA strategy and the FBM model. The third and final alternative is to opt for both as your company strategy.
In addition, if you operate a manufacturing or distributing company, it is better to set up an Amazon Vendor Central account. It will give you more marketing opportunities. However, you will need to face poor client service and logistical challenges.
The FBA stands for “Fulfillment by Amazon,” when the marketplace motivates online sellers to use its fulfillment centers to carry out the entire selling process. This process includes storing, handling, and delivering the goods to the client. An FBA seller practically avoids the headache of running an actual online store and just relies on the Amazon fulfillment methods in running the business. In turn, the FBM strategy, which means “Fulfillment by Merchant,” gives you better control of your operational process. The FBM strategy will allow you to be in charge of packing, storing, and delivering your items to clients.
Choosing the right Amazon fulfillment strategy largely depends on the actual size of your company, including your goods, its size, and volume of turnover. The FBA vs. FBM business strategy will be thoroughly discussed along with this article.
What Does FBA Stand for?
Many people planning to do Amazon business ask what FBA stands for and how it works. Fulfillment by Amazon or FBA is all about availing Amazon in the general process of the business. This strategy is best suited if the seller has small, lightweight, high volume, and fast-turnover products. An Amazon FBA seller will let his products be kept in the warehouses until such time that they will be sold. The FBA will also handle the delivery and the fulfillment process, including related services such as after-sales and client service.
There are also other points to consider when choosing the FBA program. First, please check the advantages and disadvantages of using Amazon FBA as your business model.
Pros
- All the product listings in the FBA will be enrolled in the Amazon Prime program, which will be beneficial to the merchant. In fact, an estimate of 60 to 80 million prime members is waiting and can even eventually purchase your items. There is no need for an Amazon search to see your items, as this will be automatically shown to all prime members.
- FBA sellers’ product listings on Amazon will also have a greater chance to win the Buy Box option. It is a white box on the product page, allowing clients to add items for additional transactions in their shopping cart. The platform’s buy box was made with the customers in mind for them to benefit and have the best value for their money as they go shopping on Amazon.
- Availing of FBA services will also lessen the workload of an online seller. It means that you will have extra time to concentrate on other things that will help grow your business. These include advertising and discovering more goods to sell to make the business thrive.
- The product will be exposed to potential shoppers who loved and trusted Amazon’s authority as an e-commerce company. The chance of higher conversion is high as many people believe in Amazon as a brand and the quality of provided services.
- Lastly, it’s easy to learn as there is a lot of support from Amazon and free training available online. As it is, there are a lot of tutorials that can be found on the internet to practice and learn the trade procedure on Amazon. Such a model is so widespread that other merchants teach the process of the business approach for free.
Cons
- Amazon charges several payments that might affect your profit margin. The fees include order fulfillment fees, storage fees, pick pack and ship handling fees, and other related payments. It is a costly business strategy that is not advisable for those still starting in the business, which does not have the financial capability and resources.
- FBA also levies long-term storage payments for goods not sold from 6 to 12 months. Therefore, you need to be aware of your current inventory and the aging of your products.
- Having your products stored on the Amazon warehouses means that you have limited access to your items and in checking their quality. When there is a problem with delivery, the Amazon seller cannot check the product physically as it is being stored in the Amazon facility. The seller will have to coordinate with the team in solving product and client service issues.
If you are now familiar with the FBA meaning and its pros and cons, be sure to examine your capabilities as a business owner and find out whether this strategy is made for you. The next section will discuss the other Amazon business strategy, the Amazon FBM, and how it works.
What is Amazon FBM and How Does It Work?
The FBM meaning is “Fulfillment by Merchant,” which means the online sellers are the ones who do shipping, handling and keeping their products. It means that all FBM Amazon sellers will be taking charge of the business’s overall processes, including logistics, fulfillment service, and hold. An FBM merchant will need to wait for the order before dispatching the item to clients.
Such an approach is suitable for companies with heavy or big goods or even SKUs with a slow-turnover volume. FBM is also better for businesses that are exclusive and has a private label item, which you can offer to your clients.
Furthermore, the pros and cons of Amazon FBM are listed below:
Pros
- The FBM strategy gives more control to the business owner concerning the operational process of the business. It means that you will be hands-on in the overall process of your business, including handling and dispatching the goods, which gives you a lot of control.
- Doing the FBM strategy allows the business owner to build an independent product with a high-profit margin. If you can find a unique product in the market, it can allow you to make it your own and label it as an independent product that usually comes with a bigger selling opportunity.
- With fewer fees and platform charges, the FBM strategy gives a greater margin to your Amazon business. The seller will have a lower cost in its overall business process, which means higher profit and returns.
- FBM also allows all business owners to have more freedom in product handling and inventory. The more freedom you have, the more ways you can strategize your business regarding product handling and fulfillment.
- There are no added costs in the operation as you will not be paying the normal Amazon charges and other fees required in the FBA strategy.
Cons
- The FBM strategy needs the business owner to be disciplined in handling the overall process of their business operations. The Amazon marketplace is meticulous when it comes to customer service, and failure to comply will result in a penalty to the seller. These errors that a seller will commit will affect his chances of winning the Buy Box and his health rating.
- Winning the Buy Box will be difficult as you need to keep the price low in competing with other sellers, which will affect your profit margin.
Understanding the Amazon Buy Box
Amazon created the Amazon Buy Box to give all of its loyal clients the best value for their money. The Buy Box location can be found on the right side of the details page of an Amazon product. In addition, Buy Box helps users add multiple items to their cart, thus having a greater chance to sell more items through the Amazon Buy Box. This is the reason why winning and being eligible for the Amazon Buy Box is necessary to an Amazon seller as it brings a lot of advantages and privileges that will help in beating out the competition.
Winning the Amazon Buy Box is as complicated as its algorithm. Amazon has fixed minimum conditions for all merchants to pass the Buy Box eligibility. Once passed through these requirements, the Buy Box will break down the merchants further in terms of different factors and variables. Amazon will then let the merchants compete using the same products while determining how they will hold up against each other. The seller who is stronger than his competitors will have a bigger chance of winning the Buy Box option.
Winning the Buy Box is crucial for any Amazon seller business as around 82% of the sales coming from Amazon are coming from the Buy Box itself. However, not all Amazon sellers are entitled to getting the platform’s Buy Box. Due to the stiff competition on Amazon, where all sellers sometimes have the same products, those businesses that have the best seller metrics will have a greater chance of winning the in-demand Amazon Buy Box. The seller needs to be aware of the feature and the algorithm of the Buy Box to be able to find ways to increase store performance and eventually get a higher chance of winning the prestigious Buy Box.
Which is the Best Business Model for You?
By now, you probably have an idea of the difference between Amazon FBA and the FBM model. The most crucial stage is choosing which business model is most suited for you. It is important to think of the size and the financial capabilities of your company, including its possible growth in choosing the approach to your business on Amazon. You must identify the goods, their types, and other aspects of the business before choosing the right business model suited for you.
In terms of popularity, FBA sellers will have a distinct advantage compared to others thanks to their privilege to choose Amazon Prime as a shipping option and the access to the platform’s fulfillment networks and distribution centers across the globe. Nonetheless, it is still an expensive program that comes with a lot of charges and storage fees that can affect the cash flow of the business owner. It is the biggest reason why you must determine first the overall size of your company and your financial capability before choosing the Amazon FBA as your business strategy.
Otherwise, the Amazon FBM is highly recommended for all users just starting to get their feet wet in the e-commerce business on Amazon. The sense of control in the overall operations will help you learn the peculiarities of the business operation, including storing and delivering your goods. In addition, the business owner will gain a lot of experience with such a strategy that will enable him to strategize further on how to grow his Amazon business.
Final Thoughts
You must carefully consider several factors in determining the best strategy for your business on Amazon. Whether it’s the size of your company, the items, the financial aspect, or some other factors, you must be aware of the pros and cons of its option. After all, it will be you who will be responsible for your entity’s success or failure.
Now that you’ve chosen between the FBA and FBM models take some time to create your first campaign in SageMailer. It’ll help you get more product reviews from Amazon sales and enhance feedback management on total autopilot.
