The Hookup From Heaven – How You Can Own A Virtually Stress Free Amazon Business

The Hookup From Heaven – How You Can Own A Virtually Stress Free Amazon Business

Posted on 17. Aug, 2013 by in Archived Post

So, for some time now, you’ve heard me talk about transitioning my Amazon business to Fulfillment By Amazon (FBA) with the hopes that their program will free up more time for me to grow my other endeavors. And, just recently, someone left a comment asking “when am I going to make that move?”. Now, you should know that I’m not going to make a move like that without taking a detailed look at FBA and determining how much cost I would incur. I’m also trying to picture in my mind how things would be after the transition takes place.

I know that at the moment, with my profitable Amazon business, I can see myself being limited by space and the lack of additional help. The easy way to resolve the manpower issue would, of course, be to hire someone. Or, look to outsourcing to help get more done without the expense and commitment of onboarding employees.

As my product line grows, I’m noticing that my time spent packaging and running off to the post office has grown as well. The same can be said for your growing Amazon business…..as it grows and becomes more successful (yes, I’m talking to you), you will run into the moment when you realize that  your business is expanding well beyond the capacity of you to handle EVERYTHING. Thankfully, FBA is well-suited to help us offload most Amazon fulfillment-related tasks.

By rolling over to Amazon the tasks of picking, packing and delivering some (if not all) of our products, we are essentially teaming with one of the most efficient and effective order management systems in the world without taking on additional staff.

From my research, if you are just starting out as an Amazon seller and want to get involved with FBA, list your products on Amazon as described in an earlier post. For those of us that have existing inventory in Amazon’s Marketplace or system, all we need to do is login to Amazon Seller Central, go to “Manage Inventory”, then select each product we want Amazon to fulfill, click the “Actions” drop-down and choose “Change to Fulfilled by Amazon” and click the “Save” button. That’s really it. See image below (click to enlarge)

change-to-fba

Just keep in mind that the moment we select “Change to Fulfilled by Amazon”, our products will no longer be available for potential customers to buy until we ship them to an Amazon warehouse. Therefore, if we have a good-size inventory, we may want to consider shipping in stages so that we can keep the sales going and not hurt our cash flow (lack of cash flow can shut down a small business quickly).

After we have decided which products we want to be fulfilled by Amazon, we can start shipping them. The shipping process appears to be rather simple, with the only decision being whether we want to use labeled inventory or stickerless. If we don’t make a decision on that, Amazon will produce stickers for us to apply to our products. We can then set the amount/quantity of each product we want to send and choose the carrier from their list of options.

Determining how much inventory we want to send to Amazon is crucial. We need to remember that there should be at least enough to cover any restock gaps (amount of time it takes to restock the product). To determine this amount, estimate your daily sales and multiply that by the time it will take to ship our products to Amazon. It could take up to five business days from the moment Amazon receives our product to them showing as available to purchase in their Marketplace. Ouch….

Let’s not forget the cost of shipping those products to Amazon – let alone the fact that they may want us to split up the shipments and send them to their various distribution centers. I’ve considered this expense and still believe it’s worth it. That expense will mean a higher cost for the buyer, but I simply believe that our customers should get the best all-around deal and the highest level of customer service available.

Amazon says they will let us know when a sale is made. Therefore, our goal is to monitor our inventory levels and prepare to ship to Amazon when needed. It’s our responsibility to monitor their stock levels and our inventory levels as we don’t want our products to become unavailable on Amazon, yet we don’t want unsold stock just sitting on Amazon’s shelves.

That can be extremely challenging for those that have seasonal business. Some of us may see our sales increase 50% or more in the months of November and December, so an inventory miscalculation can be extremely costly.

Regardless of the few potential pitfalls, if we can keep an eye on our inventory levels and correctly factor in FBA cost when adjusting our product prices, we can see that a properly managed FBA program can definitely be worth it for most of us. By simply rolling over at least some of our products to Amazon for fulfillment, we are essentially outsourcing more than just delivery, but warehousing and, more importantly, customer service. Let’s say a product gets ship to the wrong address or lost or damaged, the buyer will contact Amazon instead of us. Amazon will work with the carrier to reimburse the payment refunded to the buyer from our account – so, we’re covered. Oh, and did I forget to mention that Amazon will offer Free Shipping to buyers? That should push your sales up, too.

And, Amazon will take care of all payment processing and will remit our credit balances every other week or every two weeks. Again, we can see that all we need to focus on is inventory levels and Amazon handles the rest. As a result, we can sit back and relax for awhile without taking a cash flow hit….sounds good, doesn’t it? The only time I’ll be hanging out with Amazon is at night…and that’s only to check my stock.

All in all, for those of us doing business on Amazon, the FBA program can provide an automated fulfillment system that should help as we grow. Yes, now more than ever, it’s certainly possible to start a profitable (nearly passive income) business that utilizes the backbone of one of the most sophisticated and efficient fulfillment systems around.

If you have an existing product in Amazon’s Marketplace or you want to sell a similar product in Amazon, Amazon’s FBA calculator can help you identify the cost of switching to FBA. From there, you can determine if you will benefit from their program. See image below (click to enlarge)

fba-calculator

 

 

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5 Responses to “The Hookup From Heaven – How You Can Own A Virtually Stress Free Amazon Business”

  1. Sky

    17. Aug, 2013

    I’m still fascinated by this service. I played around with the FBA calculator for a bit…interesting.

    Reply to this comment
  2. John

    18. Aug, 2013

    Very cool! The free shipping should provide a decent boost, depending on how much you need to raise prices to offset FBA costs.

    Reply to this comment
    • Sky

      22. Aug, 2013

      Everyone loves free shipping – when I’m comparing two similar/same items, shipping is ALWAYS factored into whether or not I buy it. So it’s awesome that Amazon offers that as a perk.

      Reply to this comment
  3. Charlotte

    18. Aug, 2013

    Turning any business over to a big “machine” can be tough. This really helps determine if it’s worth the cost.

    Reply to this comment
  4. ChrisSleckski

    14. Feb, 2014

    It seems like a lot of hassle, but I can definitely see the perks. I always go with the offer that has free shipping, so I can imagine that other people would too. I’m just not a fan of how long it takes to restock and other things that could go wrong. I’ll be checking to see how it ends up working out for you Dave.

    Reply to this comment

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