To talk about Amazon is to talk about an innovative and successful business model. Amazon made record profits in 2018, earning more than $10 billion in net income, up $7 billion from the previous year.
Another interesting fact is that the company had barely recorded large profits until 2016. Probably the insistence and belief of its creator in the idea and... in a revamped business model in which everyone can sell products on Amazon.
More than two million people are selling on Amazon.
Amazon offers several alternatives so that you can sell your products and take advantage of their advantages and visibility. The latest big trend is Amazon FBA. We are going to talk about it and try to explain what this new modality consists of and whether it is a viable and profitable alternative.
What is Amazon FBA?
FBA or "Fulfillment By Amazon" is the system that Amazon makes available to its sellers offering the following services:
They receive your products.
They store your products.
They ship the products.
They manage returns.
They provide customer service.
In other words, the seller will only have to send the products to amazon FBA box labels, and the rest is taken care of by the e-commerce giant. At first glance, it seems like a solution that greatly simplifies the seller's work. Let's delve a little deeper into the innards of how Amazon FBA works.
How does Amazon FBA work?
Up until this point, you know that most of the work is going to be done by Amazon and the seller only has to ship the products to Amazon. Thus, it can be said that the seller acts as a supplier of Amazon products.
But before we start talking about the functional methodology of Amazon FBA, let's go to the initial and fundamental step to being part of this system: registering as a seller.
Register as a seller on Amazon
It's worth remembering that there are two categories of sellers on Amazon: Individual and Pro. The Pro version is the best plan for sellers with a sales volume of more than 40 products per month (it carries a monthly cost, more on that later).
We register on the Seller Central platform, here you must be as specific and careful as possible, both in the information and in the listings of your products (quality photos, description, etc.).
You will not be the only seller, so it is essential to carry out this step with the maximum effort and care as one of the great competitive advantages we will have to achieve the highest possible performance.
Sell in FBA mode:
In the list of platforms (within Seller Central) you must modify the FBA profile in those products that you want to be in that sales modality. You will then need to create an inventory shipping plan and select the Amazon warehouse where your products will "travel". Amazon will tell you which warehouse the products should be shipped to.
Watch out for this step! The order to ship inventory to Amazon is placed from Seller Central. Then you must correctly label the products and prepare them to send them to the indicated warehouses. Luckily, Amazon offers a lot of information and examples so that its sellers act correctly and there are no problems. One of the issues to highlight at this point is that, in general, Amazon usually opts for the option of dividing its customers' inventory into different warehouses in different geographical locations. Amazon knows what it's doing.
How much does it cost to sell products with Amazon FBA:
Well, to better understand the expense involved in selling products in the Amazon FBA modality, we are going to list the steps that entail spending in an orderly manner, for a better understanding:
Spending on Amazon FBA:
Registration as a seller.
The Individual plan does not carry a monthly payment, but it does carry a fee of 0.99 euros for each sale made. On the other hand, the Pro plan comes with a monthly payment of €39 per month (no per-sale fee).
Referral Fees.
Amazon applies a referral fee based on the category of the product sold. This means that a percentage "preset" by Amazon is added to the expense. These percentages vary periodically, so it is advisable to keep in mind the updated data for better control of spending. Thus, by way of example, we can indicate the following reference rates: Books, Music, Video and DVD 15%, Computer 7%, DIY and Tools 12%, Jewellery 20%...
In addition, with Amazon FBA, new variables are added to the costs for their calculation:
Fulfillment fee:
An equivalent value and reference to the size of the products and their weight.
Storage fee.
As the name suggests, it is a cost associated with the storage of your sellers' products. This value varies depending on the time of year as it is a data closely linked to seasonality.
Other types of costs.
Costs associated with packaging, product recalls, etc. amazon FBA label service offers tools to calculate the costs and profit margins of potential sales. Analyze all costs very well to set a correct unit price.
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