FBA and eBay: Using Amazon’s Fulfillment Program to Ship your eBay Orders
By: Chris Green, President , FBA Power
There is a lot of talk lately about Amazon’s fulfillment program called Fulfillment By Amazon, or FBA, but is it only online sellers who sell on Amazon who can get in on all the fun? The answer is no. A common misconception is that FBA is for Amazon only and while Amazon and FBA certainly go hand in hand, a seller’s items are not tied to the Amazon sales channel once they are stored in an FBA fulfillment center.
Amazon’s FBA program has what is called Multi-Channel Fulfillment meaning that you can still list and sell your FBA inventory on other channels and fulfill those orders through FBA.
This article has two ‘A-HA’ moments. The first is that you can ship your FBA inventory to fulfill orders that you receive from any channel such as eBay or your own website at very competitive rates (likely less than what it costs you to do it yourself). Using Multi-Channel Fulfillment allows you to sell on any sales channel and still fulfill your orders needing only access to a computer. You don’t need to store your own inventory, multiple sizes of boxes, print labels, or go to the Post Office every day. You get the orders, Amazon ships them out. This goes on whether you are at home or on vacation. Once you get your inventory to an FBA fulfillment center, you can manage it from anywhere on the planet! A-HA!
The second is the big one; how to LEVERAGE this new information into increased margins and a more efficient business model. Using Multi-Channel Fulfillment properly can truly revolutionize your business. You can lower your overhead in shipping costs, warehouse space, and labor costs while at the same time increasing your margins on every item that you sell. This is because of the extremely competitive costs associated with Multi-Channel Fulfillment. More on this after the fee breakdown.
This is truly a win-win-win situation that most sellers would not
believe is true:
This would seem like a magic potion from business fairlyland, but it’s not; it’s simply learning how to use the available tools optimally. Run the numbers (shown below) and take the steps to streamline your business.
Yes, there are fees involved but these fees are fixed and known upfront for Multi-Channel Fulfillment orders. Since they are your orders and not orders on the Amazon website, there is no Amazon commission.
Multi-Channel Fulfillment Fees
You can calculate your Multi-Channel Fulfillment rates prior to sending inventory to FBA. You can also experiment with your FBA inventory by making ‘pretend orders’ and reviewing the rates for Standard (Ground), Expedited (2-Day Air), and Priority (Overnight) shipping services.
I just did a ‘pretend order’ in my Amazon seller account on a five pound item. Total fulfillment fees (inludes picking, packing, boxes, shipping, etc.) are as follows:
Standard (Ground): $7.75
This is for anywhere in the USA. It is not based on zip code; it is based on fixed fees and weight. Once these costs are known, you can then price your items strategically on other channels (more on this later). For comparison, here are the UPS Published Rates and Daily Rates for a five pound shipment from Massachusetts to Washington State:
Ground Published: $13.98 – one week in transit
Remember, in addition to being more expensive to ship myself, I would also have to store the product, be home to process orders, keep boxes and other packing materials on hand, pick and pack my own orders, print shipping labels, and then get my boxes to UPS or the Post Office. Easy choice if you ask me!
Inbound Shipping Fees
‘A-HA’ Moment #2 – How to LEVERAGE Multi-Channel Fulfillment
Having access to Multi-Channel Fulfillment at Amazon rates a very powerful thing. Imagine UPS came to your small, fledgling eBay business and said that you can now have Amazon UPS rates for all of your shipping needs. Impossible? Too good to be true? You could lower your shipping costs drastically without having to be a big shipper? This is essentially what you get by using FBA’s Multi-Channel Fulfillment. Your shipping rates are now significantly lower than your competitors; use this to your advantage! Here’s how:
There is more to a purchase than ‘just the item’. There is more to a transaction than just price; even on commodity items where you and your competition sell the exact same item. Consider ways to differentiate yourself as a seller on eBay: feedback, return policy, a well designed listing page (or not), and shipping options/speed (among others). The shipping is where you can now trump your competition by offering your customers something that they simply cannot offer (at least not at the price that it costs you).
There are several strategies that you can use. Since your shipping rates are now lower than your competitor’s, you can beat them on price and still make the same profit per item. This is an ‘apples to apples’ comparison. You may now be able to sell at a price that is profitable for you, but not for them. This may cause them to stop selling a product and you would not have to compete against them anymore (and prices will rise). You can also set up barriers to entry to new competition who can’t figure out how you are able to make a profit on your items since they don’t know you are using FBA Multi-Channel Fulfillment.
Another strategy to use would be to offer premium shipping such as 2-Day Air on your products at the same price as your competitor charges for Ground shipping. This makes it a ‘rotten apples to fresh apples’ comparison. You are both selling apples and for the same price, you are able to offer the customer MORE than your competitor can. If a buyer on eBay is buying a commodity type item and they can get it for $100 from you in two days or they can get it from your competition for $100 but will have to wait a week or more, who do you think will get the sale? You are able to maintain margins and take the lion’s share of the sales by offering your customers more but not increasing your overhead. This will drive your competition crazy as they will think that you are paying high shipping rates to ship 2-Day Air and must not be making any money. Let them think that all they want; just keep it your little secret.
How to Increase Margins with Multi-Channel Fulfillment
The previous examples are valid ways to use Multi-Channel Fulfillment, but personally, I don’t recommend these strategies, especially for small sellers. You are able to capture more sales, but that also comes with more work. I prefer to increase margins and differentiate myself as a seller from my competition and not compete solely on price. What I’ll show you below is how using Multi-Channel Fulfillment allows you to market you items at higher prices effectively, while keeping your overall fulfillment costs the same. This increase in margin goes directly towards your business’ bottom line.
I strongly recommend this book:
How to Sell at Margins Higher Than Your Competitors.
Above we talked about how you can use Multi-Channel Fulfillment to stop fighting in the ‘apples to apples’ comparison game. When you can change it to an ‘apples to oranges’ comparison, you can then market your oranges against your competitor’s apples (even though the actual items that you both sell are the exact same). You can make your oranges more attractive for the same price and capture sales, but I prefer to position my oranges as a premium seller. I can offer the same commodity item as my competition but with faster shipping and charge more for it. I can charge more because I am offering more (fast delivery options vs. slow delivery options). You will find customers that will see the difference and the added value that you provide with your oranges and they will pay you more for it. This is how you increase your margins on the same items that your competitors sell.
On eBay, you can also now add the Get It Fast option to your shipping settings. I recommend offering 2-Day Air shipping for free and factoring in your fulfillment costs into the price of your item. Then, just calculate the difference between Expedited (2-Day) and Priority (Overnight) and make that the upcharge for Overnight shipping (or round it to something neat like $9.95). Again, these are options that you competition simply cannot offer at a competitive price. EBay makes these options available because they know some buyers want their items FAST and these buyers are willing to pay more to get their items fast. They even let you sort search results showing only items with the Get It Fast option. You are able to charge more because you are offering more. Here are two images I made to pomote my eBay listings. Feel free to use them if you like.
Check out this example with costs and fee breakdowns. Note the increased Return On Investment (or ROI). This is the key.
$17.53 - $22.60 more on each transaction and 35.1% - 45.2% higher margins.
It’s all about the perceived value of what you are offering. 2-Day Air shipping is incredibly valuable, especially to a buyer who needs their items fast. It would normally cost $30-$40 for 2-Day Air shipping on that five pound item, but they get that value from you for less. This is what makes your items more attractive than your competitor’s.
This is not a volume game; it’s a margins game. Sellers who consistently make the most margins will thrive in the good times and survive in tough times. Sellers who ignore margin and try to ‘make it up in volume’ will work way too hard for too little of a reward. Always run the numbers!
Different channels may fare better by using different strategies. Learn the customer base of each one and market your items appropriately. What works on eBay may not be the best strategy for your own website. A combination of these strategies is also something to consider.
© 1999- Harry McGrath, Inc., DBA Skip McGrath, Auction Seller's Resource and Vision-One Marketing. All Rights Reserved.
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