Fulfillment By Amazon (FBA) has taken the e-commerce world by storm. Many small businesses feel caught in the momentum of working with FBA. Unable to dedicate the resources to prep-services themselves, they often feel forced into a costly partnership that is anything but fulfilling. Here is the case for using Seller-Fulfilled Prime, a way to use the Prime badge and have your own warehouse do the fulfillment.
As we start to head into the key shipping season of the year for most brands, we thought it would be good to break down the costs of doing business with Amazon. We will show in general terms, so your specific costs could be higher or lower depending on your products and agreement with Amazon. These prices were taken directly from the Amazon website, in case you want to investigate them yourselves (https://services.amazon.com/fulfillment-by-amazon/pricing.html).
Here are the costs associated with using Fulfillment By Amazon (FBA):
Amazon Referral Fee: This is essentially the cost of having an active listing on Amazon, hence they “refer” customers to you. The fee is generally a percentage of the retail cost (differing by category). This fee reduces your sales margin and increases your cost of goods:
- One pair of shoes would cost you $10.63 referral fee
- One men’s polo shirt would cost you $1.50 referral fee
Pick & Pack: The cost of getting your item from the warehouses, packing it (including the packing materials). This is basically covering Amazon's labor costs in their warehouses.
- Pricing at FBA ranges from $2.41 - $4.71 per item, NOT per order.
- Any item considered “oversized” can range from $8.13 - $137.32 per item additional, NOT per order.
Shipping (Weight Handling): This is the shipping cost to get the product to your customer. It is calculated by the product weight. When they advertise “Free 2 Day Prime Shipping” for any Prime and FBA product, guess who pays for it? That’s right, you do as the seller.
Monthly Storage: Pretty self-explanatory, calculated in cubic volume for storage on a per-month basis.
- Jan-Sept pricing is $0.69/cubic foot
- Oct-Nov-Dec pricing is $2.40/cubic foot (that is a 3.5 times increase during peak time!)
- Oversize items are an additional $0.48 - $1.20 per item.
- Long Term Storage: Wow, just read this article from August 15th, 2018 and cry: (https://sellercentral.amazon.com/gp/help/external/help.html?itemID=201411300&ref=asus_fba_pricing_storage&ld=NSGoogle#long_term_storage_fee)
Prep Service: If you paid for Amazon to apply labels like the UPC codes, it could be $0.30 per product. Pricing ranges based on what you want done with your products.
Margin Impact: This is a term Amazon uses to tell you what your Net Profit is on a sale.
Verde has found that by using our fulfillment services vs FBA, Verde’s clients save an average of 21% - 43% on fulfillment fees alone. On top of that, being able to speak with an actual human being that can answer your questions and take care of you...is priceless, and in this case, there is no price! That’s just part of what we do all day, everyday.
Not using FBA doesn’t mean you can’t sell on Amazon, especially to Prime customers, but you now have the option of using Seller-Fulfilled Prime (SFP) as well as Fulfilled By Merchant (FBM). Using SFP Verde has the ability to ship directly to your Prime customers using our Amazon integration to our cloud-based system. The system is entirely automated for you, and once it’s setup, you don’t need to do a thing. Amazon customers will still feel like they’re buying from Amazon PRIME. Don’t feel you must use FBA if you don’t have to. Verde gives you all of the reasons not to:
- No Referral Fee
- Lower Pick & Pack Fees
- Shipping to all of your Prime and non-prime customers
- Lower Monthly Storage and no peak storage times during the year
- Retain More Profits
- A customer service team who is always available to speak with you over the phone or email
- Automated product returns that include full inspection of your merchandise upon return
There are several key reasons that you, as an Amazon seller, may want to consider using Amazon Seller Fulfilled Prime:
- Eliminate FBA shipping and handling fees outright
- Stop splitting FBA shipments due to Distributed Inventory Placement
- Gain access to Amazon Prime’s tens of millions of members to your brand’s boost sales
- Avoid long-term FBA inventory storage fees
- Get more control over returns and refund collection
- Retain higher profits on large, bulky and heavy items
- Sell products that are ineligible for FBA
There are very specific requirements that must be met to be a part of Seller-Fulfilled Prime, so make sure to visit their site or login to your own Seller Central account and read up. If you want more info, please contact us and we can walk you through the process of working with Verde and SFP.