Benefits of the Amazon FBA Business Model
Put simply, the Amazon FBA business model allows online merchants to sell their products on the Amazon marketplace, and take advantage of Amazon specific business perks like amazon's outsourced fulfillment network. Third party sellers make up over 60% of Amazon's $335+ billion revenue. 66% of the top 10,000 amazon sellers are an Amazon FBA business.
These numbers show there are significant benefits to the amazon fba business model, spanning new retailers just starting out to sellers who have been building an ecommerce presence for years. Any brand can scale quickly and experience massive growth through joining the amazon marketplace.
Amazon Is a Trusted Shopping Destination
One of the main benefits of an FBA business is that people are already widely familiar with Amazon as a buying platform. There are reportedly 300+ million worldwide customer accounts on Amazon with 126+ million U.S. unique mobile visitors to the site every month. Shopping on Amazon has become the norm for most, and the extensive customer reviews have created site credibility, which even extends to new sellers on the platform.
Through the FBA business model, Amazon takes care of every part of fulfillment: packaging, shipping, and customer service and support. Amazon also allows sellers to market throughout the platform to help their products gain higher visibility for potential buyers. By using the amazon fba program, third party sellers are afforded amazon-specific opportunities for their products, such as Amazon Prime shipping eligibility for their products.
Secured Storage Space Through Amazon Fulfillment Centers
Amazon has over 100 fulfillment centers that hold seller goods in the U.S. alone, and the storage availability keeps growing. When just starting out, using a spare room, garage, or other space attached to your home may work to store your goods, but eventually, you’ll run out of space or want that space to be used for other things. Amazon FBA offers an alternative; ship all of your FBA inventory to an Amazon warehouse, and they’ll hold your goods until they ship. Storage rates at an Amazon warehouse are incurred by cubic foot, which means if you have standard size products in high-demand, this can be a more cost-effective and efficient route than using or renting extra space in or near your home. Plus, it allows you to track inventory more easily and focus on other parts of your business to ensure growth and improvements to your brand.
Products Are Eligible for Amazon Prime Shipping
“Amazon Prime” is a phrase everyone is familiar with and many have come to rely on it to get products as fast as possible. Free two-day shipping offered through amazon prime is just one aspect that has helped create customer loyalty to the platform. This shipping convenience is afforded to customers because of amazon's FBA inventory and has helped make Amazon the ecommerce giant it is today.
By becoming an amazon fba business and creating an Amazon seller account, your products become eligible for free shipping on qualified orders. These listings will be displayed with the Prime logo to inform customers that Amazon handles all of the logistics of your product once you have shipped them to a fulfillment center.
This not only creates trust for customers, but also helps alleviate seller fatigue when it comes to fulfillment and product management.
Built-In Customer Service
One of the premium benefits of the Amazon FBA business model is that customer service inquiries are taken care of for you. It can take hours out of your day to respond to customer requests, complaints, and other issues regarding delivery, returns, and other customer feedback. With Amazon’s built-in customer service network, there’s someone available around the clock to offer support to your customers, a perk that’s free by being an Amazon FBA seller.
Programs to Grow and Scale Your Business
The Amazon FBA business model is designed with services that allow sellers to scale their business quickly, and is tailored to a seller's size and needs. For example, if your inventory includes low-cost, lightweight products, there’s the FBA Small and Light specialized service which reduces the cost of fulfillment. For sellers who want to expand internationally, the FBA Export Service allows your business to reach more than 100 countries on export-eligible products.
These are two of the many services available free of charge within the FBA business model that allows a seller to attract new audiences and meet the demand in the region or season where it's highest.
Advertising Tools Through Seller Central
Another benefit of the FBA business model is that it allows many of the daily administrative tasks to become automated or handled primarily by Amazon, which leaves more time for you to focus on advertising your business and improving your brand recognition.
To help in this endeavor, Amazon offers several opportunities for FBA product promotion. Among these are sponsored brands, sponsored products, stores, and video ads. Each of these tools helps to increase visibility, gain customer loyalty, and reach people where they are, in addition to searching for your FBA product directly on the Amazon site.
Changes to the Amazon FBA Business Model in 2021To continue reaping benefits, sellers must abide by changes that are typically driven by consumer demand. One of the key changes to the Amazon FBA business model coming in the new year is changes to the Seller Fulfilled Prime program. Updated requirements are set to go into effect February 1, 2021 to achieve faster delivery speeds, transitioning from two-day to one-day delivery for customers. Those who are already registered with the Prime program will be required to:
These changes must be made by all businesses that are part of the Amazon Prime program, otherwise, Prime eligibility may be suspended. As one of the platform’s central factors for engaging online shoppers, it’s a competitive advantage for your products to gain and maintain eligibility. Additionally, Amazon recommends using the built-in features and tools to promote faster delivery speeds and identify which products may be slowing down delivery times. Personalized metrics are available through the Performance Dashboard and Delivery Speed Report.
- Have nationwide delivery coverage for all standard-size products
- Use shipping methods that support Saturday delivery and pickups
- Meet targets for one-day and two-day delivery promises
There are constant changes to the platform with new tools and ways to promote your business and guide its profitability. Another change to expect in 2021 is the use of new features, currently in beta mode, including Audio ads, Posts, and Amazon Attribution. Audio ads target customers through Alexa-enabled devices rather than when a customer is using their laptop or smartphone. The 10- to 30-second ads play between songs and allow brands to share their story.
Posts help drive brand awareness and recognition by showing products in lifestyle imagery, which consumers are used to from scrolling through social media channels, in order to promote products through awareness. Sellers can repurpose imagery already used for social media and vice-versa with no limits on how much content can be posted. Finally, Amazon Attribution allows you to evaluate how any of your non-Amazon marketing tactics are contributing to your sales on Amazon.
Keys to Success As an Amazon FBA Business
There's strong competition with the FBA business model, thanks to the numerous benefits available. It makes being strategic and staying up-to-date with changing requirements crucial in order to succeed. Whether entering ecommerce for the first time or if you have aggressive goals for 2021 to grow your business, here are a few key ways to ensure success.
Amazon FBA is set up in a straightforward manner to help retailers make the most of their opportunities online. However, to achieve success on the platform, it requires time and dedication to achieve and sustain growth. Depending on your financial goals for the business, you may want to keep it as a part-time job as a source of extra income, turn it into a full time business, or eventually grow to a point where you can sell and start a new endeavor altogether.
- Keep organized. Prior to selling your first item, you must label each product according to Amazon’s shipping guidelines so it can be properly marked in inventory storage, and you’ll know how much of each product you have in stock.
- Anticipate inventory changes. To avoid additional storage fees, anticipate the selling cycle of your products. Which seasons are most popular? What are your best-selling products? What are your worst? Knowing your customer base and following shopping trends will help you fulfill orders without having a surplus in storage for an extended period of time, thereby increasing fees.
- Optimize product listings. Schedule a review of your product listings on a regular basis. By following the guidelines set forth by Amazon, doing product research, and reviewing customer feedback, you can get a better idea of what your audience wants, how to reach them with the right messaging, and push your product ahead of similar ones in the search.
- Review reports and make changes accordingly. The best way to get the data you need to make changes in your marketing strategy is to review your reports through your FBA seller dashboard. They’ll show you how many online visitors you have, which products are best sellers, and which ones are less popular. The reports will also give insight into problems with shipping or customer feedback that may need to be addressed with regards to your products, shipping times, and other points of customer satisfaction.