Top 10 Insights from the Experts: Amazon FBA Experimentation
How often are you testing new channels? It can be difficult to decide which channels are best to test new products, new offers, or new creatives with. There are a multitude of considerations to analyze before making a decision. Making the right channel choice can be pivotal to business growth and expansion.
Ten of our ecommerce leaders explain which key considerations they recommend for brands looking to test new channels. Read below to learn if Amazon FBA is the best option.
1. Amazon FBA Advantages
“FBA is a great way for merchants to test out Amazon as a new sales channel. FBA essentially handles all of the logistics work on your behalf, from fast fulfillment to returns. Plus, you get the added conversion bump of the Prime designation. FBA gives you access to a mega marketplace and lowers your barrier to entry by handling logistics and fulfillment, which is arguably the most daunting part of an eCommerce business. This is evident in that if you handle fulfillment in-house, it becomes an entire additional business model where you have to hire and train staff, purchase or rent equipment and warehouse space, etc.” - Rachel Go of Deliverr
2. Make Your Customers Comfortable
“While from a working capital standpoint, tying up inventory in Amazon FBA warehouses is not a strong strategy, there are some benefits. Growth-stage omnichannel businesses should be strategic about how they utilize FBA. Companies that have a strong direct or wholesale channel intentionally use Amazon to highlight their most high-performing products (1-2 hero products). By doing so, the businesses are able to drive brand awareness through Amazon search and sales, without overextending the amount of inventory sitting in Amazon warehouses. Aside from driving traffic to your website, Amazon can be beneficial for meeting the customer where they feel comfortable. For example, if the business has a subscription product, their customers might feel more comfortable having Amazon manage those regular purchases. The reason why a growing brand should allocate inventory to FBA warehouses conservatively is because Amazon charges businesses per unit, so the more unsold inventory a business has sitting in FBA warehouses, the more fees it will be responsible for.” - Tiffany Chan of Dwight Funding
3. Minimize Error With Automation
“Amazon has strict fulfillment requirements and sales channels don't have the same difficult requirements they do. Testing new sales channels with Amazon presents its own set of risks and challenges, however, it's doable and the potential for error can be minimized with automated fulfillment integrations to pass orders between sales channels and FBA. It's often more beneficial and the margin for error is smaller if sales channels are tested with the merchant's ERP or a sandbox environment so live orders aren't impacted during the testing phase. ” - Samantha Maze of DropStream
4. Assortment is Necessary
“Yes & No. It's a channel where you can try to validate a product in a real environment. The volume that you can reach with FBA is something you can not estimate with a FBM logistic. The push that Amazon could offer if you use FBA is higher than any other leverage, but this is a test you can't afford with a long assortment of products. You can test FBA with a few products to validate a final idea and then decide if the volume that you estimate is the right one. FBA it's not useful for a new product, with no historical data. In that case, FBM would be better to validate your idea.” - Carlos Garijo González
5. Know Your Warehouse Structure
“This depends on the warehouse structure and setup. For example, if there is an in-house warehouse presence, maybe not be a great idea because there are fees associated. However, if the merchant does not want to handle fulfillment, it might be worth it to give it a try. The profitability could be something extremely significant and could also be very low. However, one major thing to have in place is a tool to track those details such as where to cut costs and what is flying off the shelf. It all boils down to having something to provide data analysis throughout the process.” - Shannon Sharpe of Skubana
6. Consider Your Warehouse Size(s)
“Amazon FBA reduces the stress on your warehouse if you already have one. If you are a small seller you can quickly expand to such channels since they will help you manage the stock and how fast you process orders. Usually, marketplaces prefer to show your product more often when you use their FBA solution.” - Pawel Fijak of DataFeedWatch
7. Acknowledge Alternative Amazon Programs
“Sellers should be careful about Amazon branding on fulfillment experience rather not mix within their new channel expansion strategy. On the other hand, the newly introduced Multichannel Fulfillment Program by Amazon can be a good way to create a FBA like experience without spoiling the branding or losing the customer’s attention to competition on Amazon. The Customer service aspect of FBA fulfillment should be managed by the company representative rather than Amazon newly introduced customer service sourcing service.” - Gary G. of StoreAutomator
8. List the Pros and Cons
“Yes and no. Yes, FBA offers turnkey, affordable fulfillment. It also offers the "Buy" button to FBA sellers which has a higher conversion than merchant fulfilled. No, as Amazon is known for changing the rules on sellers so there is a lot of risk there. Amazon owns the seller data and service is limited. DCL has written a number of articles on the Pros and Cons of FBA.” - Brian Tu of DCL Logistics
9. Simple Trust and Reliability
“FBA is quite trusted and reliable in terms of an online seller. It doesn’t matter whether the order is from Amazon or any other marketplace, FBA treats the same.” - Saket Tripathi of CedCommerce
10. Assess Quarterly Profits
“I highly recommend deferring to an FBA expert, but if you are working with new channels, just make sure you have data to justify implementing FBA for a new channel. Let me put it this way, if FBA has been costing you more than you have invested in your last two channels, which - in turn - is dipping into your quarterly profits, then you probably want to stop and take a quick step back to review if FBA is even worth your time. FBA is sleek and cool and works for some folks, but not for all. At the end of the day, it's all up to you and how you want to hustle in ecommerce.” - Rodolfo Villarreal of Skubana
Interested in learning more about how Skubana can help you avoid under and overselling your inventory?
Ashley Brown is the Partner Marketing Manager at Skubana. She’s passionate about people, thinking outside of the box, and ecommerce!