Today’s consumers have grown accustomed to fast delivery times when they shop online, and 5 or 7 day shipping can result in a lost sale. So how is it possible to be competitive in a “gotta have it yesterday” society? The Fulfillment by Amazon program (FBA) can provide the leverage needed to be competitive in the Amazon marketplace by offering to stock and ship merchandise to end customers and make them Prime eligible. By packaging, storing, and shipping to customers the same day or within a day or two, FBA can maximize sales volume.
Amazon Prime is a program that businesses should tap into as the company boasts over 200 million Prime subscribers with approximately 147 million based in the United States. Prime members get fast and free shipping on millions of products and will seek out those businesses offering Prime benefits.
FBA offers many advantages; however, before diving in, it’s best to know how to optimize the FBA experience and the pitfalls to avoid. Amazon has strict requirements on how items need to be prepped and shipped. This can be done in-house, as part of the manufacturing process or by utilizing Amazon’s prep service. For shipping, there are two available options.
- Ground Shipment – This option is for those sending small parcel shipments, and
- LTL or FTL – for those sending pallets with either less than a truckload (LTL) or full truckload (FTL) shipments.
So what are some of the ways to optimize shipping products to FBA? First, take a look at the ship-from location. The ideal situation is to have products shipped from the point of origin to avoid over-handling as merchandise travels to its destination. Direct shipping is the most convenient and cost-effective way to get products from point A to point B.
The next step is to determine who will do the labeling. Amazon has specific labeling and prep requirements. If Amazon is the only marketplace a business uses, it’s possible to have products pre-labeled with Amazon stickers during the manufacturing process. Another option is to have Amazon do it, for a fee, of course. This is beneficial for businesses that use multiple selling platforms.
A third consideration is ground versus LTL shipments–small parcels versus LTL shipments are based on the size and weight of the item, and sometimes ground shipments just won’t work. Ground will be more expensive per pound, but it will reach Amazon quicker. LTL is cheaper, but it’s a longer process to get into the Amazon warehouse. So it could be weeks by the time the shipment is picked up and received into Amazon’s warehouse.
Sometimes it’s best to combine both shipping options by sending small ground shipments, then send the larger LTL shipments. It’s not a one-size-fits-all strategy, but there are ways you can optimize along the way.
Recent changes to consider
Amazon has made some changes to the process of shipping products when using FBA. The biggest thing has been the “send to Amazon” workflow that’s now the default when building shipments in seller central, and this has essentially replaced the former workflow that was time-consuming and cumbersome. With the new send to Amazon program, essentially one page, it’s an easy workflow. Amazon now keeps your box content information. There are still some limitations and drawbacks with the send to Amazon program, and the company is working out the kinks. After all, they want FBA members to succeed.
Another big thing that’s affected brands in the past year has been restocking limits. Amazon now considers the following:
- Its storage capacity
- The amount an FBA member is selling
- Sales forecasting
This can really affect brands with a high SKU count. If inventory has to be covered across a large number of SKUs, it can be very difficult and cumbersome to manage all the active SKU counts and the inventory levels of each. It’s become a moving target because the amount that can be replenished is based on how much inventory space is available for each FBA account.
So what does success look like at this stage?
Ideally, you want to have a system down at each stage of the FBA shipment process, so inventory never runs low. It’s best to have a planning and producing process, so there’s always inventory at a stage where it’s being prepped, labeled and in transit to Amazon’s warehouses, as well as ample inventory at Amazon’s warehouses. Being caught off-guard when there’s a significant sales spike can put a business in a tailspin trying to keep pace with demand, and expedited shipping costs can cut deeply into profits. Of course, this is based on spacing availability, so it’s important to keep track of inventory and space accommodations.
By forecasting production and sales for each product, the stock should never run low. This will allow a business to grow, and Amazon handles the customer service and returns, removing what can often be time-consuming.
We recently had a client who had a successful product on Amazon but faced many logistical challenges. Things weren’t being done optimally on their side, and shipping inventory to FBA was not conducive for business. Inventory was being handled multiple times in the beginning. Labeling had to be done in different ways, and shipments weren’t happening at each stage of the process.
Essentially, when we started working with this client, we were able to optimize the workflow and eliminate some unnecessary stages by having Amazon do some of the prep work. Inventory was streamlined to get the products from the point of origin into Amazon’s warehouses. By doing that, our client was able to maintain stock levels and not run out. And when that happens, because Amazon uses sales history as a page indicator rank on the search pages, our client was able to raise the rankings, increase sales, and again, because they had inventory at every stage of the pipeline, they were able to manage growth and still stay in stock.
Amazon has made its FBA program vital to the success of the marketplace and that equates to success for businesses large and small.