Amazon Basics
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Benefits and Disadvantages of Using FBA

Lesson 10 Chapter 1 Module 2

(Start of Day 4)

Everything in life has benefits and disadvantages.

Our challenge is not finding a perfect business model. It's finding one with a good balance of 'pros and cons' where the 'pros' outweigh the 'cons' and make it worthwhile to pursue.

Having worked online for over two decades, I've seen and experienced enough to say Amazon is worth it. I am not biased in this regard - I've researched and tested every model out there and simply came to the conclusion that Amazon is one of the best. 

That being said, you, as a 'newbie', should know what you're getting yourself into and make an informed decision. 

Here are the benefits and disadvantages of using FBA:


FBA PROS AND CONS

A Comparison of the benefits and disadvantages involved in using Fulfilment by Amazon. 

Pros

  • YOU DON'T HAVE TO WORRY ABOUT LOGISTICS AND SHIPPING

    As a FBA user, you benefit from Amazon's world-class logistics capabilities. You don't have to keep inventory or worry about shipping out orders in time.
  • FLEXIBLE STORAGE SPACE

    Using FBA means you don’t have to worry about how much or how little storage space you need for your products. You don’t have to pay for an entire warehouse or worry about what size warehouse you need. There are no inventory minimums, so you can send in as little as just one product (which you'll never do but it's good to know). Plus, sellers with high inventory performance scores (meaning your products sell quickly) get unlimited storage.
  • MULTI-CHANNEL FULFILLMENT

    As your business grows and expands, you can use Amazon FBA to fulfil orders you receive from other platforms such as your own website.
  • AMAZON MANAGES RETURNS

    Processing returned products from customers is a huge burden. From dealing with upset customers to inspecting returns and handling all of the administrative aspects, Amazon takes care of all of that for you.
  • WORLD-CLASS CUSTOMER SERVICE

    Amazon has a reputation for providing excellent customer service. They offer 24/7 support via phone, chat and email.
  • TRUST

    Even if you're just starting with your online business, customers will automatically trust your product(s) and be more likely to buy from you just because it's available on Amazon.
  • QUICK DELIVERY

    Amazon has hundreds of fulfillment centers all over the world. So no matter where your customers are, they can reliably get products delivered to them within just a couple of days. What's more, they have a premium subscription Service called Amazon Prime whereby customers pay a yearly fee to qualify for 2-day free delivery on all FBA products. As an FBA user, your products automatically qualify for the Amazon Prime service. You also benefit from discounted shipping rates as Amazon’s contracts with the major shipping carriers give them steep discounts on shipping costs.

Cons

  • FBA FEES ARE HIGH

    Amazon charges you for storing your inventory in their fulfillment centres and for fulfilling your orders. While these costs are not impossible to absorb, many sellers don't do proper research to make sure FBA will work for them and then suffer negative consequences. Apart from FBA fees, you will be charged a monthly fee of £25 (excluding VAT) to use their Marketplace, plus additional seller fees such as referral fees and returns admin fees.
  • ​PRODUCT PREP CAN BE DIFFICULT AND COSTLY

    When sending your new inventory to Amazon, they have very strict guidelines about how you should prepare and ship your products to them. If your shipment doesn't meet their standards, they will do everything over and charge your for it.
  • INVENTORY MANAGEMENT

    While you don't have to keep inventory, you do need to keep an eye on your stock levels at Amazon. This can be a daunting task without software programmes to automate the process for you. Another downside about inventory management is that Amazon will charge you more for long-term storage. Anything that stays in their warehouses for more than 6 months is considered long-term storage. However, this will never happen with proper inventory management.
  • COMINGLING MERCHANDISE

    To increase efficiency, Amazon gives you the option of commingling, or pooling, your products with the same products from other buyers. If you accept, you save time on labeling and prepping your products. But some unscrupulous sellers have been known to send in counterfeit or damaged products. There have been instances of legitimate sellers receiving negative reviews and even being banned from selling on Amazon due to this.

All of the disadvantages (or cons) associated with Amazon can be eliminated by simply educating yourself properly about Amazon's Terms of Use and procedures. We'll walk you through every aspect of managing your business through FBA in the Advanced Training Programme. With our guidance, you will have very little to truly be concerned about.

We'll conclude this Chapter by talking about why FBA is a good choice to use when you start your online business. See you in the next lesson.

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