Love it or not, Amazon changes the game for ecommerce businesses. Fulfillment by Amazon (FBA) opens the door for many brands to gain a near-instant profit lift with Amazon’s widespread fulfillment network and brand recognition. However, many e-commerce merchants don’t leverage FBA to its fullest potential, missing out on significant revenue gains. Now you may be asking, how can you be sure you aren’t missing out on the key opportunities FBA provides?
As we have seen with many of our customers, while the Amazon FBA program offers a range of benefits, you need to know how to overcome the potential drawbacks to get the most out of FBA. With our team of experts that built Amazon’s fulfillment network (we’re not kidding) and built the logistics operations for the likes of Zulily and Urban Outfitters, we know how to get the best out of Amazon FBA. In the coming pages we’re going to guide you through actionable strategies to maximize the benefits of Amazon FBA, while effectively minimizing its liabilities for your e-commerce business and/or omni-channel efforts.
In the upcoming pages, we’ll cover:
- How to get the most out of FBA, including optimizing product selection, maintaining excellent fulfillment metrics, and utilizing multi-channel fulfillment.
- How to overcome FBA challenges when it comes to inventory and cost management.
How to Get the Most Out of Amazon FBA
Optimize Product Selection
How do you know if you’re a good fit for Amazon FBA? Start by determining which products you’re going to use with FBA and which products you’re not. We say this because high-demand products with adequate margins help offset Amazon fulfillment fees and maximize your profits. Slow-moving and/or low-margin products are not always best suited for the higher costs and restrictions of FBA. Here are some essential strategies to optimize product selection for Amazon FBA:
- Conduct In-Depth Market Research and Analyze the Competition:
Thorough market research is the foundation of successful product selection. Utilize Amazon’s search bar, product categories, and research tools to identify trending products and understand consumer preferences. Analyze sales data, customer reviews (product detail pages are a good place to see reviews), customer purchases, and competitor offerings to gain valuable insights. As part of these insights you need to quickly assess the level of competition for the products you’re considering. Entering oversaturated markets often leads to lower profit margins and difficulty winning the Buy Box. Focus on niches with demand but less intense competition to gain a competitive edge. This may sound self evident but you would be surprised how many retailers have a “build it and they will come” approach to product sales.
- Evaluate the Limits of Both Your Products and FBA Restrictions:
Calculate the potential profit margins for each product, considering manufacturing or wholesale costs, FBA fees, shipping expenses, and other associated costs. Opt for products with healthy profit margins to ensure financial viability. Product size and weight directly impact FBA fees. Opt for products that are reasonably sized and lightweight to optimize cost efficiency and reduce storage and shipping expenses. Ensure that your selected products are eligible for FBA and do not have any restrictions or limitations. Certain products may require additional preparation or documentation to be accepted into the FBA program.
- Pick the Right Products
Consider offering a mix of seasonal and evergreen products to stabilize your revenue and cash flow. Before committing to large quantities, test potential products with small orders. This allows you to gauge customer interest and validate market demand. Based on the results, you make more informed decisions about scaling up or pivoting to different products. Beyond that, create a strong brand identity around your products to stand out from the competition. Offering unique features, packaging, bundles or branding can attract customers and allow you to charge premium prices.
By implementing these strategies you will increase the value you get from the platform along with your profitability. Careful consideration of product demand, competition, profit margins, and customer preferences is key to making informed decisions and thriving in the competitive e-commerce landscape of Amazon. If your products aren’t the right fit for FBA, consider FBM (Fulfillment by Merchant).
How The Best FBA Sellers Maintain Excellent Fulfillment Metrics
Maintaining excellent fulfillment metrics is crucial for professional sellers using Amazon FBA. Keeping high fulfillment metrics helps make sure orders are fulfilled smoothly and efficiently. This also improves visibility and eligibility for the Buy Box. Here are some strategies to achieve and maintain excellent fulfillment metrics on Amazon:
- Stay Quick, Reliable, and Disciplined
When it comes to Amazon, speed is the name of the game so you have to keep an eye on order volumes to restock Amazon’s fulfillment centers on-time to avoid issues and penalties. You have to move fast, but don’t cut corners. Ensure that your products are properly packaged to prevent damage during transit or it will cost you (not Amazon). Amazon takes customer feedback on packaging seriously, and negative reviews regarding damaged products adversely impacts your FBA seller metrics. Invest in sturdy, protective packaging materials, and shipping boxes to ensure safe delivery.
- Respond to Customer Questions and Return Requests Promptly
Think in terms of minutes, not hours; and especially not days. As we all know, timely and effective communication in your customer service management process is essential. Amazon’s high standards for FBA sellers makes it even more crucial to provide excellent customer service, since poor customer experiences and delayed returns or refunds are likely to get you kicked off the platform. Respond to customer inquiries within 24 hours (max) and address any issues or concerns they may have. A high response rate and quick resolution of problems contribute to positive seller metrics. If you can’t get to customer inquiries yourself, leverage Amazon’s customer service for FBA orders. If Amazon Prime customers encounter any issues with their orders, Amazon’s customer service team will step in to resolve them. This saves you time and effort while ensuring a positive customer experience – but it will take a chunk out of your margin.
- Minimize Late Shipment Rates and Other Key Metrics by Monitoring Performance
The Late Shipment Rate is the percentage of orders that you ship after the expected ship date – as much as this is a bad customer experience you may also feel financial wrath from Amazon. To avoid this, ensure that your shipping processes are efficient and that you promptly notify customers of any potential delays. Regularly review your Amazon seller performance metrics on Amazon’s Performance Metrics Dashboard. This dashboard provides valuable insights into your fulfillment performance, allowing you to identify areas needing improvement.
To stay in Amazon’s good graces, level up your game by staying quick, reliable, and disciplined. Doing so enhances your Amazon seller reputation, helps to win the Buy Box, and builds long-lasting customer trust on the Amazon platform.
You Don’t Have to Stick To an Amazon Fulfillment Center, Utilize Multi-Channel Fulfillment (MCF)
Multi-Channel Fulfillment (MCF) is a powerful strategy that allows you to extend the benefits of Amazon FBA to your other sales channels. The primary difference between Amazon MCF and Amazon FBA is that MCF supports sales on non-Amazon channels (like your website or other e-commerce channels/stores) versus FBA, which is for Amazon sales only. Moreover, MCF is significantly more expensive, offers lower service levels and support, and also has slower speed tiers. With MCF, you have the ability to fulfill orders from your website or other e-commerce platforms using Amazon’s network. Seems complicated, but it’s actually quite simple to implement (with the right partner, of course). Here are a few tips to increase your fulfillment efficiency with Amazon’s wide-reaching online marketplace:
- Integrate Multiple Sales Channels and Simplify Order Processing:
To maximize the benefits of MCF, integrate your various sales channels with Amazon’s platform. Connect your website, social media stores, and other e-commerce platforms to Amazon’s MCF system. This integration ensures that orders from different channels are automatically processed and fulfilled through FBA. With MCF, order processing becomes more streamlined and efficient. When a customer orders on your website or any connected platform, the order details are sent to Amazon’s FBA system for fulfillment. Amazon then picks, packs, and ships the order, eliminating the need for you to manage multiple fulfillment centers or handle shipping logistics.
- Tap into Amazon’s Global Fulfillment Network, Expertise, and Benefits:
One of the significant advantages of MCF is access to Amazon’s global fulfillment network. By storing your products in Amazon’s warehouses across different countries, you efficiently fulfill international orders. This helps reduce shipping costs and delivery times for international customers, making your products more attractive to a global audience.
Additionally, Amazon is known for its expertise in fulfillment and logistics. Using MCF, you leverage Amazon’s proven fulfillment processes, fast shipping capabilities, and reliable delivery networks. This improves customer satisfaction and increases trust in your brand, as customers recognize the familiar and reliable Amazon fulfillment process.
When you use MCF, your orders from other sales channels can still be eligible for Amazon Prime benefits. This is a significant advantage, as customers value the fast and free shipping offered to Prime members. Using MCF, you can attract more customers and boost sales by providing Prime-level service across multiple channels.
- Simplified Inventory Management and Price Synching
Amazon’s MCF system provides real-time inventory tracking and management. You can monitor the availability of your products in Amazon’s fulfillment centers and adjust your inventory levels accordingly to avoid stockouts. This ensures prompt fulfillment of your orders and maintains a positive customer experience across all channels. To create a seamless shopping experience for customers, ensure that your pricing and promotional offers are consistent across all channels. Syncing your pricing and promotions helps avoid confusion and ensures that customers receive the same benefits regardless of where they purchase.
Overcoming Amazon FBA Challenges
Optimize Inventory Management
While it’s great, Amazon FBA isn’t perfect. One of the biggest struggles we hear from business owners is that if you aren’t on top of your inventory management you’re not going to get the best from Amazon FBA. Efficient inventory management helps Amazon sellers minimize storage costs, reduce stockouts, and maintain a healthy cash flow. Here are some key strategies and tools for optimizing inventory management:
- Forecast Demand Accurately to Implement Just-in-Time (JIT) Inventory
Accurate demand forecasting is the foundation of effective inventory management. Analyze historical sales data, seasonal trends, and market insights to project future product demand. This allows you to maintain optimal stock levels without tying up excess capital in excess inventory. Adopting a Just-in-Time inventory approach can help you minimize holding costs and the risk of overstocking. With JIT, you order inventory only when needed, and products arrive just in time for fulfillment. This approach ensures that you have enough stock to meet demand without incurring excessive storage fees. It’s better for your bank account, keeps you from getting out of alignment with Amazon requirements, and for the customer experience; a win-win. To implement JIT inventory management, check out Amazon’s inventory management dashboard.
- Set Reorder Points by Analyzing Sales Velocity and Lead Times:
Understanding the sales velocity of your products (how quickly they sell) and lead times (the time it takes to restock) is crucial for efficient inventory management. Products with high sales velocity may require more frequent restocking, while those with longer manufacturing lead times may need to be reordered earlier to avoid stockouts. Establish reorder points for each product based on demand forecasts and lead times. When inventory levels reach the reorder point, it triggers a replenishment order to maintain sufficient stock on hand. Setting reorder points ensures that you never run out of stock while avoiding unnecessary stockpiling. For products with seasonal demand, make appropriate inventory adjustments. Ramp up inventory levels before the peak season to ensure you can fulfill orders promptly. After the peak season, consider discounting or liquidating excess inventory to avoid storage fees (which can be significant with Amazon). To set reorder points, visit your Amazon inventory management dashboard.
- Monitor and Mitigate Excess Inventory with Amazon’s Inventory Tools and Storage Options:
Excess inventory ties up capital and incurs additional storage costs. Regularly monitor slow-moving or stagnant inventory and implement strategies to reduce it. Offer promotions, create product bundles, or consider discounts to move excess inventory and free up space for faster-selling items. Amazon provides FBA sellers with various inventory management tools that can help optimize stock levels. These tools include the Inventory Performance Index (IPI), which measures your inventory efficiency, and the FBA Inventory Age report, which helps you identify slow-moving inventory and take corrective actions.
Additionally, Amazon offers different storage options as part of their fulfillment service, such as standard-size and oversized storage, as well as long-term storage. Understanding the storage fees associated with each option can help you choose the most cost-effective solution for your products. Regularly assess your storage needs and adjust your inventory accordingly, depending on whether you need more or less storage space.
Optimizing inventory management is a continuous process that requires careful analysis, forecasting, and adjustments. By staying vigilant and constantly iterating, Amazon FBA sellers efficiently manage their FBA inventory. This reduces costs, minimizes stockouts, and sets the foundation for a successful and profitable Amazon FBA business.
Diversify Your Fulfillment Strategy with Standvast
Amazon FBA, MFC, and FBM are all great, but they have their limitations. The best-of-the retailers augment Amazon’s and/or their own systems with OMS, WMS and other advanced third party tools that seamlessly integrate with Amazon to get the most out of the channel. If you’re an Amazon FBA seller that needs more visibility into your fulfillment process and the unhindered ability to send products to the right Amazon fulfillment center at the right time, you need to diversify your fulfillment strategy and the tools you use to maximize your efficiency and margins. Consider using a combination of FBA and other fulfillment methods, such as Fulfilled by Merchant (FBM) or third-party logistics (3PL) for specific products or sales channels. This approach offers greater flexibility and control over your fulfillment process.
With that said, let us be the ones to make your (FBA) fulfillment even stronger. Standvast is not about replacing what works, but rather augmenting it with a flexible, customizable approach. You are placed firmly in control, determining how, where, and when you deliver on your customers’ expectations. Beyond that, you won’t be held captive to a single platform – like Amazon. This empowers you to manage your business confidently and effectively.
At Standvast, we specialize in providing comprehensive support for FBA sellers by offering innovative solutions for auto-replenishment and inventory management. Our platform gives you complete control and visibility into your shipments to Amazon, ensuring a seamless and efficient fulfillment process. With our advanced demand planning tools, we analyze your sales data and forecast future demand, helping you determine the optimal replenishment levels to maintain the right stock levels. This data-driven approach allows you to maximize sales while minimizing storage costs. By leveraging our expertise in FBA and inventory management – don’t forget that our leadership built Amazon fulfillment – you will streamline your operations, make informed decisions, and achieve long-term success on the Amazon platform.
With our integrated automation tools, we streamline the entire process, saving you time and eliminating the guesswork. Our solutions provide you with the visibility and control needed to make informed decisions, eliminating the challenges of poor reporting and overall visibility. By leveraging our expertise, you can confidently manage your FBA inventory, achieve higher sales, and maintain a cost-effective and efficient fulfillment process.
Partner with Standvast to optimize your entire supply chain. With a balanced approach and strategic implementation, you will harness the full potential of Amazon FBA while mitigating its potential challenges; setting your e-commerce business up for sustained success.