Fulfillment by Amazon, i.e., Amazon FBA shipping, gives sellers an option to let Amazon handle the storage, packaging, and shipping of goods. Amazon FBA is an in-demand service that reduces the burden of e-commerce and affords flexibility in selling practices. This is especially helpful through the growth of e-commerce. In fact, online shopping has grown significantly throughout the pandemic, and according to Tech Crunch, Amazon’s e-commerce market share in the U.S. is now 49%. Additionally, Amazon operates warehouses worldwide across many countries, allowing products to be shipped everywhere, and 73% of Amazon sellers in the United States use FBA for products.
Selling products through Amazon FBA benefits many small companies by expanding their potential customer base and simplifying the shipping process. The seller arranges only the shipping to Amazon FBA, rather than to individual buyers, which alleviates the burden of managing inventory in an expanding market.
To help shippers understand the nuances of Amazon FBA, this blog post will explore:
Defining Amazon FBA Shipping
To provide clarity, Amazon FBA enables sellers to market products through Amazon without storing them at their own warehouses. The seller handles sales and keeps Amazon stocked with the product. Working with a multichannel e-commerce operations platform and digital freight marketplace can increase profit margins for these retailers. This occurs by lowering the costs of shipping inventory to Amazon. Amazon also offers an inventory performance dashboard to monitor inventory activity and advise shippers on steps beneficial to inventory flow.
But why is Amazon FBA a valuable way to reach Amazon Prime customers?
On average, an Amazon customer spends at least $700 every year; Prime members spend about $1,300 every year. Due to the popularity of Prime, using Amazon FBA increases cost-effectiveness of fulfillment as it reduces headaches in tracking inventory visibility, which can boost sales. Let’s take a closer look at Amazon FBA and what shippers need to know when managing ocean freight into Amazon’s warehouses.
The Benefits of Amazon FBA
There are many benefits to this program that can help businesses increase profit, including:
Drawbacks of Amazon FBA
While leveraging Amazon’s services has its benefits, there may be instances where it can add to total costs and not be worth the effort for small shippers. When deciding if this process will benefit a company, it’s important to know the following cons of Amazon FBA:
With these issues in mind, it’s imperative to understand a few basic shipping and import best practices to keep ocean costs in check and maintain strong transportation strategies.
Shippers Need to Understand Basic Amazon FBA Shipping and Import Best Practices
Managing FBA freight is incredibly complex and requires a global view of your supply chain. Transportation limitations may exist, sailing schedules may change, and drayage services may have extended lead times. These risks and potential costs could make FBA less profitable. However, knowing what to expect and leveraging expert partnerships can help mitigate or avoid such issues altogether. Further, partnering with a digital freight marketplace provides supply chain optimization to help shippers:
To Start, Know the Full Schedule of Amazon FBA Shipping Fees
The cost to sell will depend on the selling plan, product category, and fulfillment strategy. For reference, Amazon offers two selling plans, individual and professional.
Individual starts at $0.99, and the professional starts at $39.99, plus additional fees to both. If you sell fewer than 40 units per month, have not finalized a product lineup, and do not plan to advertise or use the program’s selling tools, the individual plan is best.
A referral fee will be charged for each item sold. Depending on the product category, most range from 8%-15%. Additionally, Amazon assesses a fulfillment fee depending on whether the seller ships through Amazon FBA or alone via the seller's supply chain network. Other fees might include:
These fees also do not consider the cost to ship to Amazon FBA, meaning total profitability may be lower.
Take Advantage of Amazon’s Cost Calculator
Amazon’s Cost Calculator provides a rough estimate of the unit sales margin. Product characteristics, fulfillment method, optional services, and other factors determine the cost to sell through Amazon. The product category and cost of the product per unit paid by the seller and the listing price are also needed Finally, sellers choose whether they or Amazon fulfills the order. The cost calculator produces likely profit margins based on current data. It’s also important to note that the calculator does not include taxes, selling plan fees, optional service fees, FBA storage fees, and potential shipping expenses incurred after the fact, such as higher ocean shipping costs in moving freight from suppliers to Amazon DCs.
Take a Few Trade Finance Considerations
Selling through Amazon can benefit businesses of all sizes. But acquiring capital to fund FBA can be challenging, especially when going through the traditional route via bank loans. Amazon FBA loans are an option to consider, but there are a few things to consider about freight financing:
Sellers considering Amazon FBA may have questions pertaining to how to ship to Amazon FBA without increasing delays in cross-border trade. This can add frustration and extra fees to the selling process if not handled correctly. But again, customs clearance protocols can help.
Remember the Role of Customs Clearance and How Digital Document Management Can Help
To have products enter the U.S. and arrive on time at the Amazon warehouse or distribution center, a pre-inspection in the country of origin must occur. For customs clearance, the proper documentation, custom bonds, and paperwork must be 100% accurate and complete. Failure to do so will cause issues and delays. Using a digital freight marketplace like FreightMango provides an automated customs clearance service that’s integrated with ocean container procurement and trade finance teams.
That will help streamline the process and provide stakeholders with real-time visibility. Based on demand and service level, a digital freight marketplace simplifies the process of entry through ocean freight with reduced compliance costs.
Use Digital Freight Marketplaces to Find Capacity to Leverage Amazon FBA When Appropriate
Working with digital freight marketplaces for shipping to Amazon FBA helps sellers meet the required delivery methods and seamlessly ship products to the distribution center. The option to combine LCL shipments into FCL helps to reduce transportation costs, reduce wasted space, and increase shipment and order visibility, while also increasing consistency with shipping schedules.
A digital freight marketplace can assist the seller with these import processes and find capacity in volatile markets. Moreover, strategic guidance helps ensure your freight arrives without damage, delay or hold-up with Customs and Border Protection. Using a trustworthy digital freight marketplace can prevent such casualties and make selling easier.
Enable Turnkey Amazon FBA Strategy With FreightMango
To complete shipping your products to Amazon, it’s important to have an eye on the prize - lower shipping costs and streamlined inventory management. Taking advantage of the right resources will enable turnkey Amazon FBA and yield strong benefits. Remember, these benefits include lower costs, less overhead, improved service, and timely, top-notch service at the right service level and rate. Furthermore, the benefits of shipping products to Amazon by way of a digital freight marketplace reduces confusion while streamlining cash flow.
Amazon FBA can be complex, and your profitability depends on a cohesive strategy to manage the entire shipment lifecycle from supplier to arrival at an Amazon facility. Take the time to know what to expect by following the advice above and putting your strategy in the hands of the experts. Connect with FreightMango to leverage your turnkey strategy to manage imports headed toward Amazon FBA.