July 3rd, 2021There is no doubt Amazon has made drastic changes in the world of online shopping. Its launch of FBA, Fulfilled By Amazon, only increased the company’s solid stance as a leader in the field. As the site continues to grow with more and more independent business owners breaking into various niches, FBA is fast becoming the preferred way to ship products.
The global pandemic certainly helped Amazon increase its foothold in the online retail industry. Currently, there are 300 million customer accounts on Amazon across the world, and that number continues to grow.
Sourcing Nova has gotten inquiries about FBA, signing up for the service and other valid, important questions from our customer base. To that end, we have created this post for you, the new Amazon seller, so you can begin using FBA for all of your products sourced from Chinese factories.
FBA does not require anything outside of your standard selling account along with a few extra, easy to follow instructions to add your products to the FBA portion of your account. A few clicks is all that is required to have Amazon help expand your business quickly.
What is Amazon FBA?
Amazon FBA is precisely what it says, Amazon fills orders for you and ships them to your customers. However, the service does more – product warehousing, picking, packing, returns, refunds and any of the many different activities that go on when it comes to selling products on Amazon.
Rather than have have your products sent to you or another location, Sourcing Nova sends the products to an Amazon facility. You are in charge of your own sales and keeping stock on hand – very simple to do.
Before we get to the remainder of this piece, there are a few things you should know. Firstly, there is a fee for the service. However, in return you get:
· Amazon’s 24/7 Customer service;
· Fulfillment and shipping costs;
· One of the most dynamic global fulfillment networks;
· And other perks we will be discussing along the way.
Depending on the products you wish to carry in your Amazon e-store, FBA is not ideal for certain products: low value items, large products or other circumstances. FBA offers the seller a myriad of awesome choices, but those choices are not necessarily perfect for all sellers. Is this something you can use with regularity and find success?
That is why you are reading.
The Story of FBA
FBA started in 2006 as a way to make selling products easier. There is no doubt Amazon has been a world leader in the online retail industry since its modest start in the late 1990’s.
The goal of FBA was simple and altruistic – helping small businesses gain benefits from fulfillment and a solid customer service infrastructure and program. The explicit goal – helping its independent e-sellers with increased profit margins via the ‘Amazon Way.’
FBA, like all of Amazon, is a program in flux. There is constant refinement and change to meet the needs of the seller, customer and the online shopping environment. There is a paradox to be found here – it is easy to stay abreast of the changes, trends and demands, but it is also difficult to keep up with the same plus the demands of Amazon’s policies and terms of service.
These changes are constant, but Amazon does a stellar job of keeping their e-sellers on the cusp of these changes, along with time to adjust as necessary.
Sourcing Nova wants to cover as much of these as feasible with the understanding FBA changes, just like Amazon.
Changes and features of FBA
The newest change that has affected the e-seller is the concept of comingling, a system if Amazon bar codes are part of the e-seller’s Amazon e-store.
Comingling definition
Basically, comingling means Amazon stores 100 percent of a product, taking the seller out of the equation, and shipping the product to the customer. Some refer to this as ‘stickerless inventory.’
The comingling system can save money in the long run due to their multiple facilities around the country. This also explains their super fast shipping.
There are advantages and disadvantages to this, as there are any online shopping ventures. We will be discussing this element in greater detail later on in the blog.
Inventory Performance Index
The other big change in the FBA program is the Inventory Performance Index, a measurement tool that helps determine what inventory moves well and tips to improve selling your excess inventory. A score of 500 is ideal, and the score is calculated with the following:
· In stock inventory
· Excess inventory
· Stranded inventory (more on this coming)
· Sell-through rate
The ASIN helps ensure that sellers have their products on hand and the easy to use dashboard makes it quick and easy to monitor all of the details. Users can track inventory, watch IPI and get information from Amazon itself on how to improve inventory and sales.
The question everyone has
This sounds like a great program, however –
What does it cost?
There are fees, naturally. These fees are not astronomical and unaffordable. Consider how Amazon assesses fees – storage items are based on two factors: size and weight, cost is not a factor. This means if you are going to carry a low dollar product, FBA could cost more than its value. This means you will need to make the decision about your products and if FBA will work for you.
Amazon does have due digilence when it comes to FBA and provides plenty of information, communication and assistance for transparency in the system.
There are fees to house products and fill orders. The more inventory you have on hand, the higher the fees will be. Amazon wants its sellers to have a constant flux of outgoing inventory, so after 180 days, costs for storing products rises.
Amazon will track products that are in the warehouse but not listed as sale – the stranded inventory. There are fees for this, but you also get the stranded inventory report.
You also have access to settlement fee reports in the reporting section of your FBA dashboard. There are times, such as peak holiday season and demand, when storage fees will rise to cover increased demand. This is a perfect opportunity to stay on top of your inventory. It is wise to shed any products that sit idle since these are money sinks. Get them out of your inventory ASAP.
How does Amazon FBA work?
It is not a difficult system to follow. It works very much like a standard e-seller account. Here is what you do:
· Open a seller account – If you do not have one, do so. Select your marketplace region as you do.
· Find products – You are still responsible for finding products. Sourcing Nova can help with that decision.
· Set up the FBA – Add this to your account. It takes a click or two.
· Create your listings – You are in charge of this. Read up on how to post Amazon images.
· Maintain inventory – Amazon will let you know when you are running low. Plan accordingly around holidays and shipping times.
Amazon’s job
That is all you have to do for your products sourced from China. At this point, Amazon will take over for you.
Shipping products
Once you place your order with us at Sourcing Nova, inform us where to send your products. Amazon has about 100 different locations around the U.S. for warehousing, and Amazon will direct you to the warehouse with the most logistical location for you.
You cannot begin your selling until there is stock on hand. Use the time between your order and arrival at the warehouse to set up your business and marketing plan.
Storage
As your products arrive at the warehouse, employees sort and store your products with a tracking code. There are exceptionally rare instances of damage and loss, but Amazon does reimburse you for this. Now, Amazon will house your products for a storage fee until the products sell.
Purchases
A customer makes a purchase from your e-store after you have posted your listing according to the Amazon guidelines. As soon as a customer makes a purchase, Amazon:
· Verifies the payment
· Locates, picks and packs the products according to specifications
· Ships the products out with tracking information for customer and you
· Ensures delivery
· Customer support, questions and returns – if any
· Handles customer care followup
You get a deposit every two weeks directly into your bank account.
While you pay a fee, you save on the labor, storage, packing and postage.
FBA advantages
At this point, you probably have more questions than we have provided answers. Perfectly understandable that you would feel that way. There are advantages and disadvantages to FBA like anything. Let’s cover each.
Amazon’s reputation
There is no doubt Amazon has a solid reputation of quality products, customer service and shipping. People across the world use and trust Amazon daily. This means they order, will receive and can return products purchased from you or another.
The other Amazon option, FBM, Fulfilled By Member, means you are responsible for all of the details: inventory, labels, packages, shipping, tracking and customer service. If you are doing your Amazon e-selling on the side, can you devote time and space to all of this? Be realistic with yourself.
Allowing Amazon to take care of these details means you can focus on what is important to your individual success – marketing, product development and refinement, keyword search, websites, advertising, SEO and so much more. All of these things are absolute for success – miss one, and you may not make it.
Fast service
Amazon’s logistics and ordering means fast processing and dispatch. Amazon can get products to your customers much more rapidly than you can. Amazon has the ability to leverage shipping rates because of their size and volume of shipping. Amazon Prime customers can get free two-day shipping on any FBA products – making your products considerably more appealing to your customer base. Without free shipping, Prime customers will likely elect for your competition.
Better ranking
The FBA system gives you the chance to rank better on search results. Those who do not have FBA have items by total price – product plus shipping. FBA products are listed strictly by price – thus putting those products higher on the search results pages.
The Buy Box
Shop on Amazon. There is the ‘Add to Basket’ button on products available. As a seller, you and Amazon proper may be selling the same product. Amazon will always have the Buy Box as an option, but you can still compete with this. Amazon’s algorithms like seeing FBA, so the chances of you have the Buy Box on your other products is high.
Only Amazon’s engineers know the algorithm, and how it works for the Buy Box. Shipping, free and fast, is a factor, and that comes with FBA. After all FBA is guaranteed for the customer.
The Buy Box also gives you payment priority. You get next day payments with Instant Access, and with Instant Advance, you can get 75 – 150 percent of your Amazon sales upfront. Payability works with or instead of financing options like Amazon lending.
There are no credit checks, and you can be ready in as little as 24 hours time.
If this is not enough, and we do have more to go, 82 percent of Amazon purchases on the desktop come from the Buy Box. It is a higher percentage on mobile and the app.
Free delivery
Customers with Prime automatically get free shipping. If you have FBA, you get an advantage over those who do not. Prime customers often purchase heavily during the buying seasons. Really – who does not like free shipping? FBA gives you an advantage to reach these customers.
There is more to shipping an item than most people consider – the weight, size, destination, carrier, fuel and other incidentals. This adds up and quickly for all products.
The customer does not care about any of that. Many sellers will offer free shipping even if it means taking a loss, doing so can shrink your profit margins and/or put you into the red.
FBA makes sense in this way. Fees can be cheaper than if you try to handle the details on your own. Stop, and consider – do you understand the ins and outs of logistics?
Overhead
Look at what Sourcing Nova just said about incidentals. Things like storage, employees, administration, insurance and the like – all covered with Amazon.
Time
Shipping products eats up a ton of your free time. Amazon handles details. You handle making your business better.
You can be in an airport, on a lake, golf course or even in bed and take care of your business with FBA. Amazon works 24/7 for you.
You won’t have queries from customers, complaints or emails to answer.
Customer service
Amazon has stellar customer service. If there is an issue with their order, they contact Customer Service at Amazon. You do not have any direct contact with your customers at all.
Shipping is great, but the return policy ranks highly as well. There is a return processing fee you will pay, but you do not have to deal with the reverse logistics, messages or if the customer qualifies for a return. If they don’t qualify for a return, you don’t deal with the fallout for that matter.
Amazon Prime
Almost 67 percent of U.S. homes have Prime, and 85 million use it. Those who have Prime will not buy a product that is not eligible for Prime. Why would a customer wait up to eight days for a product when they can have it in two? Besides, there is a degree of trust behind that Prime logo that cannot be matched independently.
Easy
Think about never having to touch another product, answer customer email or track lost packages because of issues outside of your direct control.
Again, Amazon grants you the most important thing you can have as a small business owner – time. Precious, precious time to do the things that will make you more money instead of the thing that bog you down and keep you from turning profits.
FBA Disadvantages
By this point, it would make perfect sense for you to sign up for Amazon FBA and get started. All of the benefits seem too good to be true. As much as Sourcing Nova would like to have you believe there are no downsides, there are some. We still have a long way to go before finishing this piece, but the goal is to create an educated Amazon seller who can decide for themselves is FBA is right for them.
There is a cost
For all that Amazon offers with the FBA program, it has to assess you. Amazon, like your business, is in the game to make profits. Part of their profit margin is earned with storage and fulfillment fees.
Comingling – revisited
We discussed comingling previously as a way to help save money and briefly touched on the disadvantages of the system. Here is a bit more detail.
Comingling products do not have a label but a barcode. Products are pooled together based on the ID of the product. This means Amazon can store and ship items by product ID. The location that can get the products to the customer the fastest ships.
Here is what we mean. Your customer is in California and finds a product they want from a seller in Nebraska. However, there is an identical product in an Amazon warehouse in Nevada, which is considerably closer to California. The e-store owner whose products are houses in Nevada will get the sale. You will not.
This should not be an issue. All products are the same. Except –
Quality control becomes a huge issue at this point. There are reports of some sellers closing down or being forced to close down because of issues with products. These issues range from too many negative reviews to full legal actions. Customers complain of counterfeit or damaged products rather than the real products ordered and sent from Amazon.
This is not the fault of the seller, but they are the ones who suffer.
A quick fix – with a catch
Your seller account will use the manufacturer’s barcode for tracking inventory. Comingled items of the same products use the same barcodes. You have to change the barcode preferences if you do not want products comingled.
Changing this policy to keep your products from comingling does have one major drawback – the shipping issue. Your customer in California, for example, cannot get their products within a day like they could if the products were comingled.
Accidents happen
Consider how many products Amazon ships on a given day, the number of products in a warehouse and the employees who pull, pack and ship. As awesome as Amazon is with their customer service and logistics, accidents can and do happen.
A shipping mistake with FBA will reflect badly on you – not Amazon. This could give you a negative review or cost you a customer.
Sales tax
You are required to collect sales tax in states where your business stores inventory. You, like many sellers, will be responsible for the sales taxes paid on your products.
There was a time when Amazon was reluctant to share warehouse inventory with their sellers. This information is now in your. Check Reports > Fulfillment > Inventory Event Detail to see where your products are warehoused.
Now, Amazon will collect sales tax on behalf of the sellers’ if there is a fulfillment center in that state.
You are still responsible for sales tax in states if Amazon does not collect on your behalf. It is on you to find this information and pay the sales tax accordingly.
If you are not familiar with business bookkeeping and accounting, the navigation of the tax system can be difficult. You cannot connect Amazon FBA to QuickBooks without a paid tool to do it. You can keep up with this information in a spreadsheet, provided you have the necessary hours to complete it.
One more thing, Amazon can and will move your inventory to another fulfillment center, and you will not know this unless you keep up with this fact.
Storage fees and inventory management
FBA continues to grow and grow quickly. This means the precious warehouse space in the fulfillment centers is premium real estate. If you have product inventory that is sitting for more than a calendar year or during peak times, you will be assessed at a higher rate.
Products with no shelf life or are left hanging in the inventory void mean you will be paying heavily for the storage. Keeping an account of these products can be bad for your profit margin. Too many products means you will struggle to keep products that sell well versus products you need to minimize.
Getting your products to the fulfillment centers
Yes; Amazon will handle most of the fulfillment for you – after they have your products in stock. Getting products to the fulfillment center can be challenging.
Of course, Sourcing Nova is going to help facilitate this process on our end with our network. You must decide the big decisions: how much to order and where to send each order. If you are dealing with a container full of product, this may take a while to plan and plan correctly.
Amazon will lay out the guidelines for shipping, and they are very strict and serious about their shipping policies. Thankfully, Sourcing Nova is familiar with them and will ensure you stay in complete compliance with those policies.
Products are not branded for your logo
Your products filled with FBA will have Amazon’s branding in addition to your own. This makes building your private brand logo and awareness difficult. If you are looking heavily into building a brand, this is a big deal. You need to decide if FBA will be something you can work with while trying to brand yourself.
Returns can become an issue
The quick and simple return process of Amazon means you could see additional returns. The best way to keep this from happening – keep your stock of quality high. Customers will not return products they like and trust.
This does not mean you will be excused from buyer’s remorse or impulse purchases. FBA makes this easy to happen. Amazon can also deem returned products unsellable, and you are out of pocket on that product. This can sting and sting badly on high ticket products. It is something to keep in mind while you make your decision.
Loss of total control
This business is like your child. You have grown it, nurtured it and seen it to where it is today. Turning over a portion of it to Amazon means you will lose control of direct oversight and decision making. If this bothers you, FBA is not your solution.
If it looks like there are more advantages than disadvantages, it is because there are more advantages. There are some who see the disadvantages and find this is not the program for them. This is completely understandable. Success does not depend on one thing – you have to put the effort, time, research and knowledge to make Amazon and FBA, if you want it, to work for you in the most efficient way possible.
It is a hope this information from Sourcing Nova is helping you make the most informed decision.
Getting your products from China to Amazon FBA
Sourcing Nova has a full blog on shipping your products from China. Your products will arrive in your port and then ship to the FBA warehouse. Sourcing Nova will take care of this on your behalf with the freight forwarding company. There are three ways to get your products to the FBA warehouse. We will touch on each of them for you.
Directly from China to the warehouse
This is direct shipping in its most basic form. This is the easiest way of all three as well as the least expensive.
The freight forwarder will arrange the shipping to the warehouse after arriving in port. How you get your products to port from China can be sea, air or express.
If you elect for the express option, our freight forwarder can ship directly to the warehouse on your behalf. The rates are the same across the U.S. and do not incur additional domestic charges.
China > Home > Warehouse
Amazon FBA will mean you will not see your products, except your samples or pre-shipment inspection, unless you ship them directly to your home first.
If you have ordered samples and a pre-shipment inspection, this should not be an issue for you. However, some still want to see their entire order, and this is perfectly acceptable.
You will, of course, have to pay for the next level of shipping from your home to the Amazon fulfillment warehouse. This could cut your profits unless you have taken this step into consideration. If you can do it without taking a profit cut, certainly choose to do this.
Package and label
Shipping, as you can see, is not an issue when using Sourcing Nova for your products.
Amazon has very strict packaging requirements. If you are curious how to make sure these requirements are met and products make it to the warehouse safe and sound, we have the solution. Keep reading.
How you can place labels
Required labeling
The correct label and label system means Amazon will get your inventory more quickly into the network and to the customer faster as well.
· FBA shipping – Each box of product in the shipment must have its own FBA label. This is printed from the shipping queue.
· FNSKU – The Fulfillment Network Stock Keeping Unit – This is an Amazon-only term for barcodes. This helps track products and helps Amazon label products in the fulfillment centers. The code is how you will be paid, so it is important. Each FNSKU must be unique and correspond to a unique product. Each different product you carry must have a different FNSKU.
· Unit sets – These must be marked clearly with a label that says the products are sold and shipped as a cohesive unit. Terms like: Sold as a set; Ready to ship; Set. Do not separate; are all appropriate.
· Warning labels – Poly bags, because of the suffocation potential, can have the warning directly on the FNSKU. This way there is no mislabeling or missing the warning stickers.
Additional notes
If you are shipping packs of products inside a single larger box, put the shipping label on the larger box.
If you are reusing any boxes for any reason, remove all old labels and markings.
The label should be easily accessible without unwrapping the package. This means no corners, edges or curves.
Individual product labeling
You will need to label your individual products. There are three options you have, but Sourcing Nova recommeds the first of these.
Have it done in China
We have discussed in detail the requirements for packaging on your products. Amazon packaging can be complex. We know this and have done it previously.
You can be certain it is done correctly when you order samples or pre-shipment inspections.
DIY
You can elect to do this on your own. You will need to have the products delivered to you, of course. Smaller, trial orders – this is a good idea. When you start ordering your products in bulk, you may want to consider another option.
Third party service
You can have a third party handle this on your behalf. There are normally teams who are FBA compliant and trained by Amazon specifically in all steps – FNSKU labeling, bundling, poly bags and other requirements.
Labor will be expensive in the U.S. over having it done in China.
Labeling is part of Sourcing Nova’s services.
Product packages
There are a few things you will need to recall about product packages for Amazon FBA.
· Material – boxes, poly bags and bubble wrap are all used to pack products.
· Wrapping – Each product must be wrapped separately from the other. All units, such as multi-volume book sets, must be in a single product package.
· Cushioning – At least two inches of cushion between items and inside. Shake the box after packing. Products should not move at all once packed correctly.
· Protecting: Use 2 inches of cushioning between each of your items and the inside of the box. After you pack your box, shake it gently. The contents should not move when shaken.
Special notes on poly bags
Poly bags with at least a five inch opening or larger, when flat, must have a suffocation warning as mentioned previously. Bags must be transparent and completely sealed as well.
Outer labeling
The outer labeling has specific requirements as well. These depend on several factors. These weights are enforced and done so strictly. Trying to skirt these will result in you being banned from warehouse privileges.
· Box size – Boxes with dimensions of 6 x 4 x 1 and weigh at least one lb. can reduce receiving delays. There should be no more than 25 inches on a side and weigh no more than 50 lbs. Total.
· Weight – All boxes have a standard weight of 50 lbs. or a single item over 50 lbs. Boxes over 50 lbs. must have a ‘Team Lift’ notice on the top and all four sides.
◦ Boxes with oversized items exceeding 100 lbs. must have a ‘Mechanical Lift’ notice on the top and all four sides.
· Boxes with jewelry or watches cannot exceed 40 lbs.
· Boxes must be rigid, have six-sides with flaps. The B flute regular slotted cartons are ideal.
Special note on outer labeling
Excessively large boxes relative to the unit may have restrictions on shipping, additional fees or possible refusal at the FBA warehouse.
Alibaba to Amazon FBA
Alibaba is a B2B group, and Sourcing Nova has a more complete piece on the company.
You will need a freight forwarder that has logistics services for shipping to an Amazon warehouse. You will need FOB or ExW prices and have your freight forwarder ship to a port closest to the supplier or from the Chinese supplier.
Risks shipping from Alibaba
Many who sell on Amazon and have shipped from Alibaba have had issues. The suppliers may not take adequate care of your products, send them out defective and more – all of which can hurt your Amazon ranking.
Alibaba is fine if you have used a reliable supplier previously. Your first order may need an agent to inspect everything for you.
An inspection is a standard part of Sourcing Nova’s process.
Advantages of Alibaba direct shipping
· Saves time
· Some suppliers will package and label by Amazon standards for a low cost or free
Disadvantages of Alibaba direct shipping
· No pre-shipment inspections. This can lower your ranking or close your business.
Tracking your products
It is not a problem to track your products as they leave China for the U.S. Here are the ways you can do it.
Sea or air
Transit shipping or batch shipping will require the real-time shipping information. Sourcing Nova’s freight forwarder does not have its own tracking system, so it is a bit more complex to track. It can be done.
Check with the freight forwarder
Your contact with Sourcing Nova will be able to update you on the status of your products during shipping on request.
You will need ask about the estimated dates for the following shipping points
· Dates when leaving China
· Dates when arriving in the U.S.
· Dates when clearing customs
· Dates when products arrive at warehouse
Track the sea shipping or airline company
The major shipping companies by sea: Maersk and COSCO and air: Air China do provide tracking information on their websites. The only information available will be the port of loading, estimated date for the U.S. or when the products will be unloaded.
· Sea shipping – Put the following information in the website: Shipping Company Name, Container Number, B/L( Bill of Lading) Number or Vessel Booking Number
· Air shipping – Put the air waybill into the website’s tracking box
Case study – Lost products after arrival at warehouse
Amazon is exceptionally good about keeping up with their products and preventing loss, but as we stated above, it does happen. Here is a case of a customer who lost their product order and the resolution process.
The customer ordered about 100 boxes of products to be delivered to the Amazon warehouse. Amazon signed off on receipt of the entire order. Two weeks later, 25 of those boxes were missing.
What happened? No one is certain, but the customer did get compensated for the lost products. Here is how it played out:
Contact Customer Service
You may have part of your order, or it is completely lost. Either way, contacting Customer Service is the next step. You have three options for contacting Customer Service:
· Amazon ‘Call Me’ – Fastest
· General contact
◦ Toll free: 1 (888) 280-4331
◦ Español número gratuito: 1-866-749-7538
◦ International: 1 (206) 922-0880 — charges may apply
· Customer service chat
The customer contacted Customer Service and shared the information. The customer needed to show proof Amazon lost the products.
Delivery receipt
Keeping that delivery receipt is absolutely paramount for your protection in the case of a situation like this. The receipt shows Amazon took possession of your products after checking for the correct quantity and other details.
Product Invoice
If the investigation turns out that Amazon did lose your products, your Product Invoice will show the value of the products and the appropriate amount of compensation.
After this, it is only a matter of Amazon making good on your lost products.
Final thoughts
Amazon FBA is a very detailed process and requires considerable research on your part to make the most informed decision. It is a hope this piece from Sourcing Nova will be adequate to help in that decision.
If it is not, what did we miss that you feel is important to cover? Let us know in the comment section.
