Here's what Amazon sellers
can't stop talking about — and why that's great for Amazon
At a recent
conference in New York City, professional Amazon sellers and consultants kept
talking about one thing.
The topic that kept
popping up: Fulfillment By Amazon, or FBA.
FBA first launched
nearly 10 years ago to let businesses use Amazon's infrastructure to store and
ship their goods, but it is still seen as one of the biggest opportunities for
sellers right now, according to several people whom Business Insider spoke to
as well as a panel of presenters talking about the "unwritten rules"
of Amazon sellers.
Four of the five
members of the panel answered a question about the biggest opportunity for
sellers in the coming year by pointing to FBA.
"There are very
few things in the world where you can say, 'If I just do this, my business
increases 30 to 50%,'" Eric Heller, CEO of Marketplace Ignition, a company
that helps businesses sell their goods online, said of FBA during the panel.
"It's a huge opportunity."
By using FBA to let
Amazon handle shipping logistics, sellers can cut their inventory and shipping
costs (though Amazon does charge fees
for the service) and make their goods eligible for Amazon Prime,
the company's $99-per-year membership program, which offers free two-day
shipping on more than 20 million items. The Prime aspect is a big part of what
makes FBA so valuable for Amazon.
FBA is generally a
hot topic in part because Amazon is investing in it heavily of late as it
becomes a bigger part of its business. In its fourth-quarter earnings last
year, Amazon said goods sold through FBA made up more than 40% of its
third-party sales. The company also announced last summer that it would add six
new fulfillment centers and more than 15 "sortation" centers in the
coming year to help it improve shipping efficiency for both its own inventory
and FBA goods.
The discussion of
FBA at the conference was overwhelmingly positive, which is great news for
Amazon.
Why? Because in
addition to fees from third-party sales, FBA can provide a big boost to one of
Amazon's most important businesses: Prime. The more businesses that use FBA,
the more products Amazon can offer through Prime. The more Prime products there
are, the more willing people might be to shell out $99 for a membership. And
people with a Prime membership end up spending way more money on the site than
other users.
A recent Consumer
Intelligence Research Partners survey of 500 Amazon
shoppers concluded that Prime members spent more than
double what non members
did.
Amazon has spent the
past year amping up its digital offerings for Amazon Prime and investing in FBA
because it banks on the fact that when it hooks people into its Prime
ecosystem, it will make more money from their increased shopping.
"Amazon is
investing in FBA right now," Heller says. "Amazon is using these
things to drive up the frequency of purchases from Prime."
Despite the warm
reception it received Tuesday, FBA isn't all sunshine and rainbows for
merchants.
Victor Rosenman, CEO
of FeedVisor,
the company that hosted the conference, told Business Insider that the risks
associated with using FBA were that businesses were handing over all their
sales data to Amazon and that if they misjudge demand and send too much
inventory to Amazon for FBA, it can be a very costly mistake.
"It's like a
marriage," he says. "There are parts that are good and parts that are
bad."
Disclosure:
Jeff Bezos is an investor in Business Insider through his personal investment
company Bezos Expeditions.
(Source: http://www.businessinsider.com/amazon-sellers-fba-2015-5)
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