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Justifying FBA

by justray
6 replies
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I hear Amazon fulfillment costs 22-30% in most cases. After considering labels, shipping/stamp/packaging/personal time/customer service, and integration costs, is this a value/savings in the end? Or, is it simply just taking some of the burden off of the seller? Just swapping? And, how much inventory and sales would you consider when deciding the point at which to make the move to a fulfillment center? If you are going to hire someone to do this, even part-time, those costs, along with the rest of shipping costs could approach professional fulfillment costs. What is your experience?
#fba #justifying
  • Profile picture of the author eshannon
    That math isn't exactly correct. There's 2 parts of the pricing to consider:

    1) 15% sales commission. Amazon is going to get that whether you use FBA or fulfill it yourself.

    2) FBA fees. See complete pricing here: Boost your sales with Amazon’s world-class fulfillment.

    3) Shipping the stuff TO Amazon. There's two sides of the shipping equation. Luckily, you get really steep discounts on this leg.

    Don't worry about storage fees, that doesn't amount to anything significant.
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  • Profile picture of the author malia
    1) 15% sales commission. Amazon is going to get that whether you use FBA or fulfill it yourself.
    The sales commission is for selling on Amazon. It does vary by category. You can use FBA without selling on Amazon, it's called Multi Channel Fulfillment.

    With multi channel fulfillment, the fees are actually quite low. It would be challenging to get the fees lower with another fulfillment center without significant volume, especially considering Amazon includes the shipping costs AND passes along their shipping discounts, where most fulfillment centers factor profit into the shipping costs.

    I do not think it makes sense to hire someone part time because not only do you have wages, but if you're hiring legally, you have other obligations such as unemployment insurance, worker's compensation insurance, space, safety regulations, state and federal legal requirements, employment taxes. Not to mention shipping staff is considered "warehouse" since they handle things like box cutters, tape guns and scissors and the workers comp rates are higher than for "administrative" staff.

    So the question actually goes the other way. Usually its not worthwhile to bring fulfillment in-house until your fulfillment costs are higher than the total cost of an employee plus space.

    Also factor this in:

    Amazon includes all boxes and fill like air pouches, kraft paper and whatever else. If you have products that ship in different size boxes, you have to buy all those sizes... it goes on. If you have something that just slips into a bubble mailer or polymailer, then it may be worth it to just fulfill yourself until it becomes a burden.
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  • Profile picture of the author tbk125
    Well I personally have not used FBA but from my observation amazon always presents a FBA featured seller as the first buying option on a page before multichannel featured sellers. That being said as far as I can see there is a huge sales advantage to using FBA.

    I personally don't use FBA because I like the control aspect .. being able to put stickers etc in the box and the money that would be going towards fulfillment is building equity for my business even if it is just packaging supplies, printers, and space.
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    • Profile picture of the author MrFume
      FBA is a very affordable solution, of course it depends on the volumes of inventory-getting the shipping-to Amazon side of the equation is the kicker-depending on if you are in the U.S.A or international. There are people from Jamaica to Australia doing very well indeed, it is all about targeting the right products, suppliers and private labeling. I am in this area, it is promising.
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      • Profile picture of the author Silas Hart
        Ive been using FBA for about 3 years now. Targeting Amazon Prime buyers is a great way to get a little extra, and things like shipping to Amazon is inexpensive. I think I just shipped a 45 pound box for $11 just a couple of days ago. People are probably going to send me a couple negative responses for this... but Prime buyers are pretty much the only reason to use FBA.

        However, recently the price changes from $25 being the amount of money that a Prime Member (who pay $80 a year) was increased to $35 - not a great move for FBA sellers because the average retail price for an item can be increased Just enough to reach that number, and what I mean by this is if you have an item that is selling New by other sellers (or Amazon themselves) for 19.99, but you are selling it on Prime for $25, chances are, you are going to land the sale because a customer will justify 2 day shipping for an extra $5, what results now is that people are simply going with the lowest cost prices and buying different things from different people to make up that $35 price point to qualify for free and super saver shipping. This is ultimately the reason why I won't being concentrating on FBA - because even though the cost of storage, shipping fees, and other associated fees are relatively low - I ship in a large enough volume that my overhead (with the cost of my employees) is less than relying on another company for fulfillment. I expect that things like Long Term Storage fee's will be deduced from a 1 year time frame to a 6 month time frame, and the cost of storage will be increased sometime within the next year. However, my information is probably not useful if you are just starting off or if you are a small or mid sized seller because there are a lot of benefits such as the cost of packaging materials, the warehousing, and the speed of shipping to your customers, the deduction in the cost of labor, etc.
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  • Profile picture of the author repricerexpress
    It will certainly take a good deal of labour overhead away from you and the fact that Amazon handles the delivery and returns does mean that it favours FBA sellers more for the Buy Box if you've got the right amount of stock available. Your decision to move to FBA or not should really come down to your long term business success and profitability, and how FBA may or may not contribute to that. I know that's oversimplifying things, but it does really come down to that.
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