How FBA Is Changing the E-commerce Model

 

Are you an e-commerce company wanting to broaden your sales and product distribution channels?

Fulfillment by Amazon (FBA) has taken the industry by storm and it’s changing the e-commerce model.

FBA is a service that gives business owners to sell online in ways that were once unimaginable.

With FBA, merchants set their own prices through Amazon and ship items to regional warehouses of the company before they are sold. But sending them to these locations is not a guessing game. It’s the result of analyzing different segments of the population and projecting demand for the product.

You are also able to utilize the strength of Amazon’s brand to benefit your business.

In 2016, an estimated 2 billion units were delivered on behalf of active FBA sellers — growth of over 70-percent from the year before.

How is FBA changing the e-commerce model?

In more ways than you may think! Read on to find out more.

 

Order Fulfillment

One major benefit of the FBA service for you as a business owner is that you are taking advantage of Amazon’s expansive network of distribution channels.

In October 2015, it was estimated that Amazon had 173 order fulfillment centers. With 104 located in the United States and 69 located overseas. It’s a number that continues to grow.

With your goods located in the right facilities, you are able to leverage the multi-channel fulfillments that you couldn’t if you kept all of your items in one place.

One way you are able to leverage this business relationship is that anything FBA is, of course, shipped by Amazon. This means Amazon Prime’s two-day priority shipping applies to your items.

This is arguably the FBA program’s biggest benefit to your business.

Amazon doesn’t publicize the number of Prime memberships. But it has recent estimates put the number of members north of 65 million!

Through the Amazon Prime service, you are able to deliver your products to customers quickly. You are also connected with the powerful Amazon name as you sell your product.

 

Exposure to a Wider Audience

Besides the benefits enjoyed by Prime members on orders FBA, listing your product on Amazon puts it in good company. It’s in the stream of commerce on a widely recognized marketplace selling website.

As recently as 2015, there were an estimated 304 million active Amazon accounts across the world.

An entrepreneur can choose to sell their product on Amazon and fulfill the order themselves. But as your business seeks to reach a wider audience, why would you?

Foregoing the FBA option separates you from Amazon and their Prime member shipping benefits. 

 

Quality Customer Service 

When your business uses the FBA service, there are also advantages in the form of order management.

This allows your business to use the manpower of Amazon in a way that your average small business might not be able.

When your product’s sale is FBA, Amazon handles the management of the order — from the packaging and to the delivery. Perhaps, more importantly, they also handle the need for exchanges and return requests. All things that, if handled by you, the business owner, can be costly and time-consuming.

In this respect, FBA is turning order fulfillment into a commodity and revolutionizing the e-commerce model.

 

Powerful Analytics

Wondering what products of yours are selling and at what price? What are the trends in the marketplace for similar items like yours?

It’s no secret that there’s strength in information and in numbers. Data — and the study of data — are behind successful businesses across many different industries. (Look at Google!)

With Amazon’s FBA dashboard, you are able to use some of their analytical data in a way that helps you grow your business. For example, you can help track demand for certain offerings over others. Is a product of yours selling noticeably better at a price point in one location over another? Perhaps there is a need to shift inventory efforts to different parts of the United States (or the world).

Amazon’s FBA service won’t do all the work. After all, there’s a high level of “business know-how” that comes with being an entrepreneur. But the service will add to your tool box.

 

The E-Commerce Model Is Transforming

By now, it should be easy to see why choosing to have your Amazon orders FBA is changing the face of the e-commerce model.

By taking advantage of this service by Amazon, you are leveraging the strengths of the Amazon brand to benefit your business.

You are putting the shipping process in the hands of a trusted leader in the industry. This gives you more time to develop and market your product. It also allows your business to increase your reach in the worldwide marketplace selling.

When you evaluate the FBA service from the customer’s perception, it’s easy to see why they would lean towards it. For Amazon Prime members — and there’s a lot of them — they can take advantage of free two-day shipping. 

Using the FBA service, you give your employees more time to focus on product development. It also gives them more time for marketing efforts. This is because Amazon handles exchanges and returns on your businesses behalf.

But there are also considerations for you to make as a business owner. Your sales strategy is in your hands and distribution must be modeled in an effective way. You should also be prepared for the tax consequences of selling products overseas.

The power of Amazon in the e-commerce model may be best described by Mark Mitchke. He is Amazon’s Vice President for Fulfillment by Amazon program.

“It’s never been easier for sellers to grow their businesses on Amazon,” said Mitchke in a 2016 article published at Entrepreneur.com.

“With access to Amazon’s fulfillment and customer service expertise through FBA, businesses of all sizes can harness the power of Amazon Prime and instantly reach millions of customers around the world. In fact, sellers on Amazon last year shipped more than 1 billion items to customers from more than 185 countries using the FBA service.”

With this sort of growth, FBA is changing the e-commerce model and doing it at a rapid rate.

What’s your take on how FBA is changing the e-commerce model? Join the conversation in the comments section below.

 

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