Amazon FBA is the fulfillment service for sellers on the online trading platform Amazon. With FBA take over logistical tasks, such as receiving goods, warehousing, picking, packing, franking, and shipping the products to the end customer.
What does FBA mean?
The abbreviation for and is sometimes described as Amazon FBA box labels. It stands for logistics and goods processing by Amazon.
How does Amazon FBA work?
If you are a seller on Amazon, you can use the FBA service to store your goods in Amazon’s fulfillment centers. If a product is then sold via Amazon.com, Amazon takes care of the packaging and shipping to the end customer itself. In addition, the management of returns and customer service are also part of the FBA services.
Isn’t FBA dependent on Amazon?
Yes, but every company is dependent on other companies. For example, if you sell products via your website, you depend on the website provider and a logistics company. At the same time, however, you also benefit greatly from Amazon (awareness, customer trust, etc.) Tip: Launch several products on the market so that you don’t have to depend on the sales of a single product.
Are there no price wars in the niches?
If you sell the same product as another seller, there will be price wars. But if you have a clear unique selling point, customers will also be happy to pay more for a good product.
Will Chinese low-cost suppliers destroy our market?
No. Amazon’s algorithm quickly recognizes whether customers are satisfied with a product or not (customer reviews and sales). Due to the preferential playout, the best product will always prevail in the market.
Calculate the costs of holding stock.
Carrying costs can be considered as the loss in value of an asset, kept in stock, in the period between purchase and use or delivery to the customer. However, this definition is reductive.
This type of cost is typically represented by 4 cost categories:
- Maintenance
Costs These represent the most significant cost category because they are made up of all the cost items for the daily management of the warehouse and stocks (personnel, structure, etc.), and in turn are divided into:
- Explicit:
costs for the rental of warehouses, costs of logistics personnel, expenses for the handling of goods, insurance; in practice all the “obvious” costs that can be identifie by a precise cash outflow;
- Implicit:
identifiable in the costs associated with the investment of capital in inventories, a “hidden” cost given by the immobilization of financial resources (implicit as it cannot be identified in a cash movement).
- Deficit
costs Deficit costs are general. By stock-outs (depletion of stocks) both towards the end customer and in the internal flow of production/supply, for example: costs generated by order cancellations, requests for discounts, damage to image, etc.
Ordering
costs Ordering costs consist of 2 macro items: The so-called purchase costs, i.e. the costs related to the relationship with suppliers. (evaluation, selection, negotiation, and stipulation of the supply contract). And the procurement costs generated by all the activities necessary to get the goods on time (transport costs and administrative/bureaucratic practices).
To these costs must then be added the risk of damage. The possibility of a reduction in the value of the goods, inventory costs, and any taxes or customs duties.
For fear of running out of stock, it can happen that you incur very high maintenance costs, with a consequent loss of profit and with the risk of finding yourself with unused amazon FBA label service stocks that would decrease the value of the goods.
To optimize maintenance costs and avoid deficit costs. It is necessary to try to estimate a month-by-month sales forecast based on previous. Experiences and also take into account factors such as seasonality. The days of the month in which there is more movement of goods and holiday periods.
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