With all of these associated fees and logistics, you may be asking yourself if it is worth selling on Amazon. In short, yes.
Why Sell on FBA?
Amazon FBA is a gateway to success like no other.
Selling online used to require building and maintaining a website, devising a marketing campaign, and fulfilling orders. Amazon FBA businesses get all of that instantly with a storefront, exposure to millions of potential buyers, and hands-off order fulfillment.
It’s no wonder that third-party sellers now account for over 50% of Amazon’s yearly sales. And that number is growing and it has a potential to grow into a solid source of passive income with amazon.
So the question isn’t really ‘why sell on FBA’ as much as ‘why are you still waiting to do so?’
FBA vs. FBM
In addition to FBA, Amazon offers a service called Fulfillment by Merchant (FBM).
True to its name, FBM enables sellers to use Amazon’s marketplace, but fulfill orders on their end. There are a couple of reasons why we recommend against using FBM:
No Prime. There are 142.5 million Amazon Prime users and they account for 90% of purchases on Amazon. While FBA supports Prime shipping, FBM does not. This mere fact is a nonstarter for many customers.
Difficult Buy Box. It is easier to get FBA products into the Buy Box. This isn’t so relevant for private label products, but if you’re selling goods in competition with others, it’s essential.
FBM is the preferred (and only) option when you ship HAZMAT goods.
Tip: Despite their designation as HAZMAT, you may ship lithium-ion batteries on FBA, but it requires approval from Amazon.
How To Set Your Price and Deal with Amazon Price Wars
Before setting your price it’s important to get a good idea of the market for your product. Once you see how much people are willing to spend on a similar product, you can calculate the landed cost of your goods to see if you can match or beat them.
A price war occurs when your competitor undercuts you – sometimes even by pennies – in an effort to drive you away from selling your product. As a seller, you have several options for fighting a price war:
Actively fight. Change your price as required if you can do so while still remaining profitable. This tactic is not recommended.
Play the waiting game. Your competitor doesn’t have unlimited stock and price wars often become simple waiting games — especially if competing products are priced so unreasonably low that your competitor’s profits are slim or non-existent.
Go high. As counterintuitive as it sounds, pricing your item 20% higher than the lowest-priced seller is another tactic that people use. Although you won’t see many sales, you will still see some thanks to the rotation of the Buy Box.
How To Protect Your IP for FBA Shipping
If your product is intellectual property (IP) or is a unique representation of something already patented, sign agreements with your suppliers to ensure they won’t sell them to other clients.
To do this, you will need to prepare and have the supplier sign an NNN agreement (non-disclosure, non-use, non-circumvention) which is available both in English and Chinese and falls under Chinese legal jurisdiction.
Although contracts like these tend to have high minimum order quantities and long-term commitments, if your product sells well, it’s a no-brainer.
The fewer people competing with you on a product, the greater your potential for success is and the less likely you are to get into a pricing war.
Conclusion
Selling on and shipping to Amazon FBA may seem like a daunting task, but with dedication and practice, it will become second nature. All it takes are some trusted partners, the right tools, and a desire to stay informed and continue to grow.