For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.
Benefits and Drawbacks of Selling on Amazon
I'm asked all the time why I choose to sell on Amazon specifically and the answers make Amazon far more attractive to me than other platforms:
- Amazon is one of the leading eCommerce websites in the world. I want to sell where the most number of buyers are coming.
- When you sell via FBA, you items are available with Prime shipping, which is very valuable to customers. You can sell at a premium because people are already paying for prime and want their items fast.
- I don't need to fulfill orders myself. I've been averaging over 500 sales a month since January. That's more than 15 orders a day. Forget about quarter 4 where sometimes I had double that number. I wouldn't be able to fulfill those orders on my own and continue to run my business without employees, employees who are expensive. Instead I pay Amazon to fulfill orders for me via FBA fees. Sure eBay has eBay Valet but you can't set your own price.
- Discounted shipping to Amazon Fulfillment Centers. Not only would I need to pay employees to fulfill orders, I would need to pay more for shipping. Shipping into an Amazon fulfillment center is heavily, heavily discounted and makes a huge difference on margins.
- I don't need to store anything. That's huge. I wouldn't be able to scale my business without having to rent out a separate and costly storage facility. Sure, I need to pay Amazon for storage but that's cheap and free for any items that are sold within 30 days.
That doesn't meant that Amazon is perfect. It's not. There are a lot of issues. Here are the major ones:
- There is tons of competition and that is likely only going to increase. Sometimes what looked like a great deal falls apart because the price bottoms out from other resellers.
- You have to compete with Amazon selling the same items
- Amazon sometimes loses, breaks and accepts returns from customers that never send them back and it becomes your responsibility to be on top of that.
- You could be one of the only sellers on a item, for months or years, and sell at great profit. All of sudden someone else finds it and cuts into your profits and number of sales. It means that you often need to constantly find new products to sell. That's tough.
I'm sure I'm missing something but the point is that Amazon is great but not perfect.
What if there was a way to get all the benefits of Amazon without all the downsides, wouldn't that be amazing? Yes but don't get too excited, I'm pretty sure that doesn't exist, but that doesn't mean there aren't any other options.
Of course, there is eBay. If you make a name for your eBay store people will be more likely to buy from you just because of that. The problem is that all the reasons why I like Amazon are why I dislike the classical eBay model. I don't want to store and fulfill my orders, etc.
Amazon Multi Channel Fulfillment
Have you ever bought something from eBay or Sears (I'm thinking of a certain quality iPad seller) and it came in an Amazon box or came with Amazon labels but in a neutral box? How did that happen? The answer is Amazon Multi Channel Fulfillment.
Amazon Multi-Channel Fulfillment is a way to list and sell items on other sales networks like eBay and have Amazon fulfill the orders with your inventory stored at Amazon fulfillment centers.
- You don't have to choose between selling on Amazon and selling on eBay. You can sell wherever the items fetch a higher price
- Build your own eCommerse website and fulfill orders from Amazon. Once you are large enough you can start building your own distribution network more cheaply.
- You don' t have to store your items yourself.
- You don't have to do much to fulfill the orders (instructions to follow)
- You have to pay Amazon Multi-Channel Fulfillment fees (not FBA fees) and the fees of the website you are selling on. This is can be a major drag on your margins for inexpensive items.
- Fulfillment orders aren't automatic. You have to tell Amazon who to send orders to. It's not hard, but it's more work than FBA.
- You have to provide customer service directly to customers. Some may consider that a plus.
- Can make your accounting more complicated.
Multi Channel Fulfillment is actually quite easy. Let's take one example. The first thing to do is go to your FBA inventory to the item you are fulfilling to the customer. Click on it and change from "Send/replenish inventory" to "create fulfillment order" and click on "Go"
Add in the details of the customer for the order - that's a real address by the way
When you click on continue you will choose the speed of the shipping and you will see the price
Fulfillment is pretty cheap here since the item is small. The fees are based on the size of the item and the speed of shipping. Before you decide to list any particular item on another site, check the fees to make sure it makes sense with your desired profit margin. Larger items can be much more expensive.
When to use Multi Channel Fulfillment
Multi Channel Fulfillment is great when:
- Prices drop on Amazon but not elsewhere
- Amazon joins your listing - argh
- If profits will be similar after all fees, this gives you another platform to sell more and minimize storage fees.
- When you are building your own eCommerce website but aren't ready yet to fulfill orders yourself.
I have done a bit of Multi Channel Fulfillment with some success. I hope to do more going forward and I am looking to it for another way to scale my business.