Wednesday 16 June 2021

Tips When Selling on Amazon via FBA

 I have made two products sold on Amazon so far (the latest is my fun RPG-related product, the Dungeon Master's Advice Dice which started as a very successful Kickstarter campaign) and I have a few tips to share about what to expect from the Fulfilled By Amazon (FBA) process, and how best to use it.

  1. Be proactive about restocking (but don't overdo it.)
  2. Understand your costs really well.
  3. Amazon changes their policies sometimes, be prepared for that.

1. Be Proactive About Restocking (but don't overdo it)

When selling on Amazon via FBA, you send Amazon a box full of your product and they stock it into their warehouses for sale. When a customer buys your product, Amazon fulfills the order. That means Amazon does the sale and ships the product from the stock you sent to them.  

You ideally want to send a new box of product to Amazon before they run out of the previous stock, but be aware that this can take a while.  Once your box is delivered to Amazon, it must be processed before it can be made available for sale, and this can take days or longer.  During peak times, it might even be much longer.

How much to send to Amazon (and how often to restock) depends on how well your gadget is selling.  My first box to Amazon held 35 units, partly as a test to gauge demand.  They sold fairly well and I sent another box to Amazon a month later once they were down to 1 item left, but I should have acted sooner.  My restocking box has been delivered to Amazon for nearly a week now, but they're busy and haven't processed it yet.  As a result I'm looking at probably another week (or maybe more) before my product is back in stock, and there's no way to expedite this process.

Don't overdo it on being proactive if it leads to dead stock. Space is money, and no fulfillment company wants to waste shelf space on stuff that isn't selling.  Having too much stock sitting on a shelf and not selling well enough to justify the space may lead to a fee.  

2. Understand Your Costs Really Well

If you don't have a cost-of-goods (COG) spreadsheet worked out for your product, get that done as soon as you can.  Without it, you won't be able to calculate an accurate idea of your costs, and therefore won't know how much you make per sale.  The worst thing would be to discover you are actually losing money on every sale.

Here is how costs work with FBA: Amazon will charge a fee for every sale, which is a combination of fees including the actual fulfillment (shipping). Whatever is left is what you get.  Subtract your own cost, and you're left with your profit.  Example: One of my products is a small and lightweight item that sells for $16.99 and out of this, Amazon keeps $7.01 in fees from each sale.  That leaves a little under $10 for me on each sale.  If my total cost per-item can be $5 or less in the end, that's not bad.

Your costs should also include the cost of shipping the box of stock to Amazon FBA.  For example, if you send a box of 50 gadgets to Amazon and shipping was $22 and the box and packing materials was $3 for a total of $25, that adds an extra $0.50 to the cost of each item (which by the way ignores the labor involved to pack the box and use Amazon's FBA tools to create the shipment.)

Note: Occasionally a package will have a delivery problem. If this happens, you will be on the hook for it, not Amazon.  Your cost should include maybe 2-3% to allow for lost packages and other unforeseeable issues.

3. Amazon Changes Their Policies Sometimes

Amazon sometimes changes how they do things, or changes what kind of information they require from you about products before they can be advertised or sold.  I recommend that whenever something like this happens, don't waste time trying to find out why something changed; instead focus your energy on how it affects you and what you need to do to stay compliant.  Amazon's help documentation on their policies and actions is usually pretty good, so do some reading to find out what they need, and try to provide it in exactly the way they say they want it.

This also means that any guide you read from somewhere online might be slightly out of date regarding some details by the time you read it, so try to expect that.

You Don't Need Everything Solved at Once

It's okay to not have every blank filled out at once.  Just try to make sure to record everything, and when you get better data, update your records.  For example, when you add a product to Amazon they will give you an estimate on their fees, which will turn more concrete once you actually start selling.  It's okay to send a small box at first to see how well it sells and get some good solid numbers before committing to more.  Don't worry about having an incomplete to-do list, it's okay to focus on getting the process down first, and refine things later as you learn more.

No comments:

Post a Comment