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Featuring the New

FBA Fee Structure


for 2015

THE 2015 GUIDE TO


FULFILLMENT BY AMAZON
How Professional Sellers Can Strategically Implement FBA
Table of Contents
Introduction 3

Fulfillment By Amazon: The Basics 5

How FBA Affects Product Discoverability & Buyability 9

FBA Fees 20

The Pros & Cons Of FBA 28

Conducting A Catalog Analysis For FBA Inventory Selection 35

Final Thoughts 39

Appendix 43

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 3

Introduction
Amazon Optimization is not a term seen very often, but its a very real concept that
professional and sophisticated Amazon sellers are reaping the benefits of. Just as an ecommerce
store would invest time and resources into optimizing campaigns for Google Shopping, PPC text
ads, affiliate marketing, social advertising, or retargeting, Amazon is a sales channel that should
receive a well-thought-out, comprehensive strategy focused on growthand deservedly so.

For a brand or reseller, Amazonalong with Googleis the top online destination where high-
intent retail queries are occurring, so its vital that a sellers offers are front-and-center when a
shopper indicates a high likelihood of converting.

This white paper dives into arguably the single most influential lever third-party sellers can pull
to optimize their Amazon strategy: the Fulfillment by Amazon program, or FBA for short.

Knowing which segments of inventory to deploy for FBA is a huge advantage in both driving
sessions to listings and owning a higher share of detail page conversions.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 4

The Amazon Plateau


A discussion of Fulfillment by Amazon should begin with a discussion of a concept that
many Marketplace sellers encounter before ever even considering FBA. This concept is
called The Amazon Plateau.

The Amazon Plateau is a late-stage phase that most Amazon sellers languish in.
The narrative has been retold many times before:

A seller has either a great, unique product or a wide assortment of wholesale inventory, and
so they decide to sell on the Amazon Marketplace the largest online marketplace in the Confused
world. The products are simply thrown up there and the seller sees what sticks, checking in Uncertain
on performance every now and then. Sales start to come in consistently. Thats it. Frustrated
Inefficient
Stagnant
Without further optimization, the seller will hit the proverbial wall. The Amazon
Plateau is a long-term period of stagnant sales growth due to the seller spending
the majority of their time in the weeds, focusing primarily on operations and not on
strategic insights.

The result? Customer service overburdens the sellers already limited resources. The
Sales
competition consistently dominates Buy Box share. Top selling products arent receiving
enough visibility on the Amazon SERP (Search Engine Results Page). Sales become
flat-lined.

This is why a powerful, controllable lever like FBA is such a significant piece in a sellers
overall Amazon Marketplace strategy.

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Fullfilment by Amazon:
The Basics

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 6

Fulfillment by Amazon: The Basics


Adding a strategic layer that sits on top of Amazon operations is the solution to surpassing
the Amazon Plateau. While there are many aspects of Marketplace management that can be
evaluated and improved, one of the most immediate and significant changes a seller can
make is utilizing Fulfillment by Amazon for key catalog segments.

What is FBA?
Fulfillment by Amazon is a program where third-party Marketplace sellers can leverage
Amazons expansive and efficient fulfillment infrastructure to:

Warehouse units

Pack and ship orders to customers

Provide customer service for those orders

FBA services cost an extra percentage of the order on top of the existing Marketplace
referral and variable charges (see page 21). FBA can actually be used for fulfillment on
channels outside of the Amazon Marketplace (ex. the sellers site, eBay, etc.), but this white
paper will focus on FBAs role in the Amazon Marketplace only.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 7

How Does It Work?


With FBA, the seller is essentially only required to label and ship units to an Amazon warehouse. This is done through Seller
Central, where FBA inventory can also be tracked and replenished by the seller.

Once Amazon receives and scans-in the units, those products are immediately available for sale. From there, Amazon handles storage
(beware of long-term storage fees), packaging, shipping, and customer service on behalf of the merchant.

The video below explains this concept:

Initially, many sellers may find FBA to be an intimidating program simply


because of confusion around creating inbound shipments.

When creating an inbound shipment in Seller Central, Amazon will often


automatically implement split shipments, ie. 33% of FBA units go to Fulfillment
Center (FC) A, 33% to Fulfillment Center B, and 33% to Fulfillment Center C. This
is a standard practice because FCs have different capacity limits and capabilities
(ie. refrigerator units). In this scenario, the seller would be required to split up
their units and ship them to 3 different Fulfillment Centers.

If a seller opts-out of split shipments, which is typically not recommended, they


will have to pay around 30 cents/unit to be able to send to just a single FC.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 8

Why is FBA a Big Deal?


Perhaps the most obvious beneficiaries of FBA are small business owners, who likely dont have
efficient fulfillment systems in place and dont want to risk the potential negative effects that a
poor customer experience could instigate. For this reason, Amazon is a very favorable business
partner.

Yet professional Amazon sellers see the bigger picture, namely:

FBA inventorys eligibility for Amazon Prime

Its hugely influential role on Buy Box ownership

The added safeguard for other significant Buy Box factors like Fulfillment Latency and
Seller Rating

The benefit that FBA represents a sellers brand in a more positive light. There is a very
strong correlation between FBA utilization and higher sales performance.

While there are a good amount of professional Amazon sellers who FBA 100% of their inventory,
this isnt to say that every third-party seller should do this. One of the goals of this white paper
is to paint FBA as a very immediate, strategic tool sellers should deploy only for the listings it
makes sense for. A common misconception is that sellers should either be 100% FBM or 100%
FBA, yet most professional Amazon sellers are an FBA/FBM hybrid.

Not every product a seller offers will be a good candidate for FBA for a variety of reasons,
mainly size, sales performance, and margin. Knowing which listings it makes sense for is
called FBA inventory selection, and this will be covered in the last section of the guide.

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How FBA Affects Product
Discoverability & Buyability

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 10

How FBA Affects Product


Discoverability & Buyability
Product Discoverability. Product Buyability. Get to know these 2 terms well.

Amazon actually uses discoverability and buyability internally and for good reasonthey
encompass and dictate almost every strategic lever that impacts sales performance
on the Amazon Marketplace. Lets apply some definitions first:

Discoverability
The ability for a product listing to be found on Amazon. From a consumers point of view,
Amazon is essentially seller agnostic, focusing search results on products rather than the sellers
of those products.

For a third-party seller of a given product, there is an incentive to increase the overall number
of visits to a product detail page provided that the seller is in a good position to win the sale for
that product. To relate it to more traditional product ad channels, think driving traffic.

Buyability
Buyability is focused on converting that traffic into orders, but it essentially refers to two highly
overlapping factors:

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 11

Factors That Influence Detail Page Conversion

To relate it to more traditional product ad channels, think converting traffic. A shopper will look
at factors such as feedback score when deciding whether or not to buy an item from a particular
seller. The seller, therefore, needs to account for and optimize for these factors.

Detail page factors that affect conversion rate, including product title, product description, feature bullets, and product images.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 12

Factors That Influence a Sellers Buy Box Percentage

Because there can be multiple sellers for an ASIN, a seller also needs to attain as large a
percentage of the Buy Box as possible.

The Buy Box is a coveted space which can be won by any seller with an active offer against an ASIN. A shopper of this
product may see one such seller in the Buy Box, while another shopper may see the same product with a different seller a
few minutes later. The seller Block Party Bricks is the current Buy Box owner for this ASIN.

Why is the Buy Box so important?

The Buy Box is the single most essential piece of property on the Amazon marketplace. In 2013
alone, $61 billion out of the $74.5 billion of revenue on Amazon went through the Buy Box, with
$30 billion going directly to third-party merchants.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 13

With 82% of Amazon website sales going through the Buy Box, and an even larger figure in
Amazon mobile sales, the Buy Box is seen as the key opportunity for online marketplace sellers
today to increase their selling potential.

It is crucial for sellers to learn about how the Buy Box works and how Amazon determines who
wins this coveted spot.

So what motivates Amazon when it comes to choosing who wins the Buy Box?

Simply put, Amazon will always favor offers that are most customer-friendly and
consequentially, the most likely to be purchased.

Amazons Raison Detre

Amazon prides itself on the companys extremely high levels of customer service. In fact,
Amazons whole essence focuses around offering the best possible experience to their
customers.

As Amazon CEO, Jeff Bezos, himself says:

We see our customers as invited guests to a party, and we are the hosts. Its
our job every day to make every important aspect of the customer experience
a little bit better. - Jeff Bezos

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 14

It is for this reason that the Buy Box was created with the objective of comparing multiple
offerings of the same product in order to determine which will provide the customer with the
highest levels of satisfaction. To Amazon, this means the offers with the best price, fulfillment
method, seller rating, etc.

The Amazon Buy Box winner is determined by an algorithm that aims to give the
customer the best possible value.

It does this by first determining which product offering meets all the necessary minimum
requirements. It then breaks down each eligible offering into many different variables and uses
them to find the seller who offers the best balance between high seller performance and
low cost price.

Returning to the topic of Buyability, lets look at an example.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 15

Say there were 100 overall orders for this portable battery charger in the last 30 days.
AnkerDirect, the current Buy Box owner, may have 50% Buy Box ownership share during
50 50 = 100 orders
that time period and thus won 50 of those 100 orders. With the goal of maximizing product
buyability, a third-party Marketplace seller would want to increase 2 variables.

A) The overall number of page conversions occurring on the product detail page
(e.g. increasing from 100 to 150 total orders)

Its very possible that plenty of shoppers are landing on this product detail page but dont end
up purchasing the product for a number of seller related or product-page related reasons,
75 75 = 150 orders
including a short product description, undescriptive feature bullets, or a lack of product reviews.
By improving the factors that influence conversions on the product detail page, a seller can
effectively convert a higher percentage of the overall number of sessions to a product detail page.

B) Their percentage of the Buy Box (e.g. increasing it to 75%.)

Since the Buy Box winner stands a higher chance of making sales than any other seller, the
higher the sellers share of the Buy Box, the higher the number of orders they will make. This is
most effectively accomplished by increasing Buy Box ownership share.
75 25
= 100 orders

Fulfillment by Amazon influences both product discoverability and buyability, but


increasing product buyability is where FBA will have its most significant impact. The
following page breaks down how FBA specifically influences both concepts.
AnkerDirect

All Other Sellers

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 16

Discoverability Factors Impacted by FBA Buyability Factors Impacted by FBA

Sales Performance History Fullfilment Method

Relevance (Product Content) Fullfilment Latency

Search Keywords Landed Price

Product Images Seller Rating

Product Reviews Seller Feedback

Sponsored Products Product Content

Fulfillment Method Product Reviews

Landed Price Inventory Quantity

Inventory Quantity

FBA and Discoverability


When it comes to driving visits to Amazon listings, products that are FBA are more discoverable
through 2 main routes:

Search Filters
Sales Performance History

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 17

Search Filters

There are over 25 million Amazon Prime users. These customers spend more and shop more
often on Amazon than the standard consumer. Most importantly, they intuitively shop for Prime
eligible products and will filter search results to show only Prime offers, effectively eliminating all
non-FBA offers.

Sales Performance History

This is an indirect correlation, but the idea here is that ASINs which feature an offer that shows
Fulfilled by Amazon are more desirable to Amazon customers both Prime and normal than
ASINs which dont feature this. This is because the shopper can expect an efficient, trackable
delivery and exceptional customer service from an FBA product. In turn, a historically high-
performing ASIN indicates to Amazon that consumers like this product, and so it ultimately
receives better visibility in search results.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 18

FBA and Buyability


When it comes to increasing Buy Box percentage and conversion rate on detail pages, products
that are FBA are more buyable through 4 main routes:

Fulfillment Method:

There are 2 main options for this, FBM (Fulfillment by Merchant) or FBA. An offer which is
fulfilled by Amazon automatically gives it a much higher likelihood to win the Buy Box. All
things equal, an offer that is FBA will likely have a higher Buy Box ownership share than one
that is FBM. A high Buy Box ownership share puts your offer in the best position to receive the
majority of conversions occurring for a given ASIN.

Fulfillment Latency

Fulfillment latency can be seen on the Other Sellers page. The shorter the fulfillment latency,
the larger the positive influence on Buy Box ownership. Fulfillment by Amazon automatically
defaults to this shortest window while FBM offers are subject to longer windows (ex. in 24 hours,
1-2 business days, 3-4 business days).

Seller Rating

Because all aspects of fulfillment are handled by Amazon, the seller is not subject to negative
ratings for metrics like On-Time Delivery Rate (ODR) and Late Shipment Rate. These directly
affect a sellers seller rating (seen in Seller Central), which is a heavy Buy Box factor.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 19

Seller Feedback

Most negative customer feedback has to do with late shipments or damaged products during
shipment. Both of these are aspects of fulfillment. So because the customer service for FBA
products are handled by Amazon, the seller is not subject to negative feedback that relates
directly to aspects of fulfillment. This is a huge advantage in maintaining a high seller rating
because well-fulfilled orders which are the majority of FBA orders will also reflect positively
on the seller if the customer chooses to leave feedback.

Since Amazon considers its own fulfillment service to have perfect scores across many variables,
an FBA seller is far more likely to win the Buy Box over an FBM seller, who would have to have
very high relative scores in all areas and a competitive price to do so. FBA is also more likely to
increase general conversion of the product because potential customers would be impressed by
the service FBA offers.

Want More Buy Box Wins? Contact Us for a Free Demo


Feedvisor is an algorithmic repricer that guarantees your business more Buy Box share,
without lowering your profit. Our success has been proven by the numbers, time and again.
If youre interested, feel free to contact us!

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FBA Fees

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 21

FBA Fees
On top of the existing Marketplace referral and variable charges, Amazon charges multiple fees to sellers who wish to use the
Fulfillment by Amazon service. FBA fees are added in addition to the typical Marketplace fees for a sellers product category. However,
sellers should not view the fees as an incremental, extra cost for selling on the Marketplace. FBA fees are in place of a sellers
normal operational costs (outbound shipments, packaging, customer service, etc.). This is a huge consideration that many sellers
often overlook.

The following is a complete breakdown of all the obligatory fees, as well as the fees that cover the additional optional services.

* Due to Amazons recent changes to its fee structure, the below information is effective as of February 18, 2015. See page 43
for the Amazon Marketplace fee structure prior to February 18, 2015.

Note: For product size tiers, see chart at the end of this section.

Fee

This fee is charged for all units stored in an Amazon fulfillment center and is based on
calendar month and daily average volume. This is calculated in cubic feet when the unit is
properly packaged and ready for shipment to the customer.

Monthly Storage * From January to September, the fee is $0.48 per cubic foot per month.
** From October to December, the fee is $0.64 per cubic foot per month.

* From March 1, 2015, this fee will change to $0.51 for standard-size units and $0.40 for
oversized units.
**From March 1, 2015, this fee will change to $0.68 for standard-size units and $0.53 for
oversized units

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 22

Fee

A fee of $22.50 per cubic foot is charged semi-annually (August 15 and February 15) for
units that have been stored in Amazons fulfillment centers for 365 days or more.
Long Term Storage

* From August 15, 2015, a fee of $11.25 per cubic foot will be charged for units that have
been in Amazon fulfillment centers between 6 and 12 months

For standard-size media items, there is no fee.

For standard-size non-media items, there is a $1 fee per order, unless the order cost $300
Order Handling or more, in which case there is no fee.

For oversized items, there is no fee.

There is a $1.04 fee per unit of standard-size items, unless the unit cost $300 or more, in
which case there is no fee.

For small oversized items there is a fee of $4.05.

Pick & Pack For medium oversized items there is a fee of $5.12.
For large oversized items there is a fee of $8.21.
For special oversized items there is a fee of $10.34.

(For certain clothing products, there is an addition $0.40 per unit.)

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 23

Fee

This is based on the Outbound Shipping Rate (Unit Weight + Packaging Weight). The total for
Weight Handling each unit is then rounded up to the nearest pound.

For all small standard-size items that weigh 1lb. or less, there is a fee of $0.50.
For all large standard-size items that weigh 1lb. or less, there is a fee of $0.63.
For large standard-size media items that weigh 1lb. to 2lb., there is a fee of $0.88.
For large standard-size non-media items that weigh 1lb. to 2lb., there is a fee of $1.59.*
For large standard-size media items that weigh over 2lb., there is a fee of $0.88 + $0.41/lb.
over the first 2lb.

* For large standard-size non-media items that weigh over 2lb., there is a fee of
$1.59 + $0.39/lb. over the first 2lb.

Note: In the above cases, if the orders are worth $300 there is no fee for weight handling.

* For small oversized items, there is a fee of $1.59 + $0.41/lb. over the first 2lb.
* For medium oversized items, there is a fee of $2.23 + $0.41/lb. over the first 2lb.
For large oversized items, there is a fee of $63.09 + $0.41/lb. over the first 90lb.
For special oversized items, there is a fee of $124.58 + $0.41/lb. over the first 90lb.

* For large standard-size non-media units weighing more than 1lb and all oversized units,
Dimensional Weight (Unit Volume divided by 166) will be used to calculate Outbound
Shipping Rate, if it is greater than the Unit Weight.

A $40 fee applies to plasma and projection large-screen television units with screens
Special Handling
of 42 or larger.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 24

Fee

If a customer returns an item for which Amazon offers free return shipping (such as apparel,
watches, jewelry, shoes, handbags, sunglasses and luggage), the seller will be charged a fee
Returns Processing
for each returned unit. This is calculated as the total fulfillment fee (Order Handling + Pick &
Pack + Weight Handling) for a given product.

If a seller wants their inventory to be returned or disposed of, they need to pay a fee. To
return a standard-size item costs $0.50 per unit. To return an oversized item costs $0.60 per
Inventory Removal
unit. To dispose of a standard-size item costs $0.15 per unit. To dispose of an oversized-size
item costs $0.30 per unit.

This would include the cost for shipping the items to an Amazon fulfillment center. A seller
Inventory Shipping
can choose to utilize Amazon Partnered Carriers or the Inventory Placement Service for this.
(Optional)

This is the cost involved to prepare the item for FBA. Preparing the item includes labeling it
and properly packaging it, according to Amazons particular requirements. Amazon offers an
Product Preparation
FBA Label Service and an FBA Prep Service to sellers.
(Optional)

Amazon offers an FBA revenue calculator for sellers to calculate how much profit a seller would make using FBA.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 25

Product Size Tier Chart

Chart taken from


Amazon.com.

Examples

So how much would it cost to fulfill the following products using FBA?

1. Large Standard-Size Non-Media

Fee Prior to After


Feb. 18, 2015 Feb. 18, 2015

Order Handling $1.00 $1.00

Pick & Pack $1.02 $1.04

Weight Handling $0.55 $0.63

Inventory Storage (3/1-3/31) $0.04* $0.04*


* Fee amount has been rounded. This fee will change from $0.042 to $0.0446 for a
Total $2.61 $2.71
single unit.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 26

2. Large Standard-Size Media

Fee Prior to After


Feb. 18, 2015 Feb. 18, 2015

Order Handling $0.00 $0.00

Pick & Pack $1.02 $1.04

Weight Handling $0.55 $0.63

Inventory Storage (3/1-3/31) $0.11 $0.12

Total $2.77 $2.86

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 27

3. Small Oversize

Fee Prior to After


Feb. 18, 2015 Feb. 18, 2015

Order Handling $0.00 $0.00

Pick & Pack $4.03 $4.05

Weight Handling $25.13 $26.60

Inventory Storage (3/1-3/31) $2.73 $2.27

Special Handling $71.89 $72.38

Total $71.89 $72.38

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The Pros & Cons of FBA

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 29

The Pros and Cons of FBA


The decision of whether or not to fulfill through Amazon should not be made on a whim. Sellers
must evaluate many different factors in their decision making process, since what may be right
for one seller may not be the correct way to go for another. Sellers may also decide that some of
their products may be suitable for FBA but others are more appropriate to fulfill themselves.

The selling points to FBA are many:

The Pros
Convenience

FBA relieves the seller of a potentially large headache. Amazons fulfillment centers store
the sellers products and do all the legwork for them. When an order is received, Amazons
employees pick, pack and ship the products, plus theyll deal with all the customer service
queries and returns.

Eligibility

With FBA, a sellers products are eligible for Super Saver Shipping, Amazon Prime and Buy Box
Eligible status, which all lead to a higher conversion rate.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 30

The Amazon Reputation

Many believe that customers are more likely to buy from a seller who has the Amazon name
attached to them. This is due to the strong level of trust that the company inspires in them. If
something goes wrong, people know that Amazon will take care of it. They also know Amazon
has mastered the distribution process and will send the item quickly.

Sales Performance

Theres also the argument that FBA sellers can sell more because they have the Amazon name
attached to them. For example, lets say a seller has 10 boxes of coffee and is selling them from
home at $42 + $8 for shipping. They would have to go to the post office and pay to ship each
sale individually, including the materials to put the coffee in. On the other hand, if they were
selling FBA, they could ship all the boxes to Amazon in one go and then list them at $50 each
with free shipping. So the cost to the customer would be the same, but as an FBA seller, they
would be making more profit.

The Cons
Fees

Using FBA can be extremely costly, particularly for large products. See page 21 for details on
Amazon FBA fees. Oftentimes a seller may have the manpower and willpower to be taking care
of certain elements themselves, so switching to FBA could hike their costs up. However, as noted
earlier, using FBA doesnt necessarily mean that a seller will be expensing more to be
able to sell a product on the Amazon Marketplace. FBA fees are in place of a sellers normal
operational and fulfillment costs.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 31

Commingling

When using FBA, Amazons fulfillment centers will ask that the seller identifies their products
using unique product identifiers, which include a:

UPC or EAN barcode

FBA label (this can be printed from your Seller Central Account)

Amazons default FBA label setting is Labeled Inventory. Labeled Inventory requires a FBA
label for each product you send (print from Seller Central) and identifies products you send as
attributed to your seller account. However, many sellers choose not do this labeling process
mainly because its a time-costly process. So the alternative is to send units to Amazon as
stickerless, commingled inventory.

Commingling inventory is essentially the process of pooling Seller As units with Seller Bs units
of the same UPC at an Amazon fulfillment center.

When you choose to commingle inventory, your products become interchangeable


with the same products from other sellers for both order fulfillment and removals.
Amazon

If a seller chooses not to label their inventory, commingling is a potential con for FBA
because fake products from other sellers can enter the mix.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 32

This opens the door to the possibility that a customer purchases a product from you and
receives the fake version from another sellera high risk for products like sunglasses. Other
risks include the product from another seller being damaged or faulty. However, there are some
upsides to embracing commingling.

The It Depends
While there are obviously both clear advantages and disadvantages to FBA that may sway a
seller in either direction, the discussion is actually a lot less straightforward and the following
must be taken into account by each seller considering FBA.

It Depends What You Sell

Although some of the fees associated with FBA change according to product size and weight, the
pick & pack handling fees are fixed. Therefore, if items tend to be relatively small, not too heavy,
and sell at higher prices, it makes the FBA fees more manageable.

For example, a $10 item that is large and heavy will represent a large percentage of your
margin, whereas the fees for a small and light item that sells at $30, will represent a much
smaller percentage. For this reason, high ASP (average sale price) is a big consideration for FBA
inventory selection. An example of a small, light, and high ASP product category is Jewelry.

Popular items that sell quickly are also great for FBA. It does not make sense to send
something to Amazon that isnt likely to sell and may languish in storage, racking up storage fees.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 33

While some sellers dispute this by claiming that low sales rank items are ideal to sell via FBA,
since their chances of selling usually go up quite a bit due to their Amazon Prime teaser, its a
high-risk move that makes a seller vulnerable to very costly storage fees. As a side note, sellers
should be aware of the fact that storage fees increase during busy periods like Q4.

It Depends How Much You Sell

For high-volume sellers, physical storage space could be an issue which FBA would solve. The
higher the turnover rate for your inventory, the more storage space Amazon will grant you.

For growing sellers, FBA could also be a useful since their workload would decrease significantly,
freeing up their time to focus on growing their business.

It Depends How Much Manpower You Have

FBA could prove extremely useful to a seller who lacks the manpower to cope with an
overabundance of orders. Fulfilling an item oneself involves going to the post office or engaging
with a shipping carrier, and with people expecting quick shipping, a seller would need to be
ready to fulfill their order within a day or two.

Taking on extra employees would involve managing a fleet of employees, which a seller might
not want. It is also sometimes difficult to judge when there will be an influx of orders, and
therefore hard to prepare the necessary manpower in advance.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 34

So is FBA Worth It?


The answer is that a seller really needs to know their business. They need to have an in
depth knowledge of their inventory and invoices and be able to strategically assess which
listings it makes sense for.

Have Questions About Your FBA Strategy?


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data with an Amazon Advisor.

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Conducting A Catalog Analysis For
FBA Inventory Selection

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 36

Conducting a Catalog Analysis for


FBA Inventory Selection
Most Amazon Marketplace sellers do a mix of both FBA and FBM to fulfill orders. So how does a
seller determine which products in their catalog to FBA?

Size and weight are the most obvious factors in determining FBA selection. This is because the FBA
cost structure (referenced on Page 21) quickly scales as the product becomes bulkier and heavier.

However, sophisticated Amazon sellers also analyze their catalog from a product-performance
perspective. Aside from costs, there is a focused strategy behind FBA selectiona strategy that
strongly emphasizes manipulating Buy Box ownership to increase revenue.

This selection process depends heavily on performance metricsnot which products a


seller wants to sell but rather which products will have the best chance of performing
with FBA.

So with the goal of increasing the overall number of orders on a detail page (via increasing Buy
Box ownership %), sellers should segment their catalog based on the products that are already
receiving both a high amount of sessions and generating significant revenue and orders.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 37

For example, the Mohu Leaf is an ASIN where the detail page is competitive and (probably) high
trafficked (judging from the product review volume).

For this reason, sellers should sort their catalog by ASINs with:

A. The highest number of visits

B. The highest number of orders

C. The highest revenue volume

D. Moderately high average sale price (ASP)

E. The highest existing Buy Box ownership share (%)

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 38

In general, sellers should also be mindful of their products competitive landscape,


particularly for ASINs where Amazon.com has an active offer. This is because in this scenario, an
FBA offer has a smaller chance of unseating an active Amazon.com offer (which is automatically
Prime eligible), and is thus less likely to significantly improve Buy Box ownership share.

There are also special considerations in the FBA inventory selection process. For example,
a sellers supplier relationships will play a role as well as if a sellers dropshipper will ship to
Amazon Fulfillment Centers.

Knowing the overlap for buckets A through E (cited above) will allow a seller to prioritize their
time on the products which stand to have the biggest impact on their bottom line. Once a small
subset of high-session and high-value products are identified, a seller can cross-reference these
products with those where Buy Box Ownership % is less than ideal.

These are the segments of a Marketplace sellers catalog where marginal increases in Buy Box
Ownership % via FBA selection stand to most significantly influence revenue volume.

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Final Thoughts

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 40

Final Thoughts
Amazons FBA program is an incredible opportunity that I believe to be
misunderstood by the majority of third party sellers.

Many sellers are wary of placing too much control of their business in
Amazons hands, but the reality is that FBA should be viewed as a
controllable, strategic lever that sellers can employ to leverage access
to Amazons growing number of Prime customers, exceptional customer
service, and their exclusive shipping ratesall while typically costing less Sprigley Allan
than traditional FBM. Sr. Marketplace Channel Analyst

Ultimately, Fulfillment by Amazon allows a third party seller to take


advantage of what was previously thought of as Amazons most significant
competitive advantages. Ive consistently seen third-party Marketplace
sellers implement more profitable fulfillment and customer service
operations by taking advantage of FBA.

I would highly recommend sellers consider integrating FBA into their


Marketplace operationseven with just a small, initial subset of products
and keep a close eye on its effect on sales performance, customer
service metrics, and fulfillment cost. -Sprigley Allan

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 41

Theres a reason why FBA has grown by 65% year over year. It offers
strong value propositions and can drastically save time and money for the
right merchant selling the right products.

Two of the strongest pulling points are the Buy Box and Amazon
Prime. With such a high majority of Amazon sales going through the Buy
Box, no seller would want to miss out on winning this prized piece of real
estate, and FBA can help them achieve it. In addition, with millions of
customers joining the Amazon Prime every year, FBA sellers are opened up
to a huge market of dedicated Amazon customers, who they wouldnt
Shmuli Goldberg
have had access to otherwise.
Director of Marketing

I would strongly recommend that every Amazon seller looks into FBA and
possibly even tests it out with a small number of items in order to see the
effect it can have on their business. -Shmuli Goldberg

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Need Help Implementing an FBA Strategy?
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your Seller Central data with an Amazon Advisor.

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Appendix

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 44

APPENDIX
The Amazon Fee Structure

Fee Old Fee New Fee Date of Change

This fee is charged for all units stored in an This fee is charged for all units stored in an March 1, 2015
Amazon fulfillment center and is based on Amazon fulfillment center and is based on
calendar month and daily average volume. calendar month and daily average volume.
This is calculated in cubic feet when the This is calculated in cubic feet when the
unit is properly packaged and ready for unit is properly packaged and ready for
shipment to the customer. shipment to the customer.
Monthly Storage
From January to September, the fee is From January to September, the fee is$0.51
$0.48 per cubic foot per month. for standard-size units and $0.40 for
oversized units.
From October to December, the fee is
$0.64 per cubic foot per month. From October to December, the fee is
$0.68 for standard-size units and $0.53 for
oversized units, per cubic foot per month.

A fee of $22.50 per cubic foot is charged An additional fee of $11.25 per cubit foot August 15, 2015
semi-annually (August 15 and February will be charged for units that have been in

Long Term Storage 15) for units that have been stored in Amazon fulfillment centers between 6 and
Amazons fulfillment centers for 365 days 12 months.
or more.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 45

Fee Old Fee New Fee Date of Change

For standard-size media items, there is no fee. No change

For standard-size non-media items, there


Order Handling is a $1 fee per order, unless the order cost
$300 or more, in which case there is no fee.

For oversized items, there is no fee.

There is a $1.02 fee per unit of standard- There is a $1.04 fee per unit of standard- March 1, 2015
size items, unless the unit cost $300 or size items, unless the unit cost $300 or
more, in which case there is no fee. more, in which case there is no fee.

For small oversized items there is a fee For small oversized items there is a fee
of $4.03. of $4.05.
Pick & Pack For medium oversized items there is a fee For medium oversized items there is a fee
of $5.07. of $5.12.
For large oversized items there is a fee For large oversized items there is a fee
of $8.12. of $8.21.
For special oversized items there is a fee For special oversized items there is a fee
of $10.25. of $10.34.

(For certain clothing products, there is an (For certain clothing products, there is an
addition $0.40 per unit.) addition $0.40 per unit.)

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 46

Fee Old Fee New Fee Date of Change

This is based on the Outbound Shipping This is based on the Outbound Shipping
Rate (Unit Weight + Packaging Weight). The Rate (Unit Weight + Packaging Weight). The
total for each unit is then rounded up to total for each unit is then rounded up to
Weight Handling the nearest pound. the nearest pound.

For all small standard-size items that weigh For all small standard-size items that weigh
1lb. or less, there is a fee of $0.46. 1lb. or less, there is a fee of $0.50.

For all large standard-size items that weigh For all large standard-size items that weigh
1lb. or less, there is a fee of $0.55. 1lb. or less, there is a fee of $0.63.

For large standard-size media items that For large standard-size media items that
weigh 1lb. to 2lb., there is a fee of $0.82. weigh 1lb. to 2lb., there is a fee of $0.88.

For large standard-size non-media items For large standard-size non-media items
that weigh 1lb. to 2lb., there is a fee that weigh 1lb. to 2lb., there is a fee
of $1.34. of $1.59.*

For large standard-size media items that For large standard-size media items that
weigh over 2lb., there is a fee of $0.82 + weigh over 2lb., there is a fee of $0.88 +
$0.41/lb. over the first 2lb. $0.41/lb.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 47

Fee Old Fee New Fee Date of Change

For large standard-size non-media items For large standard-size non-media items
that weigh over 2lb., there is a fee of $1.34 that weigh over 2lb., there is a fee of $1.59
+ $0.39/lb. over the first 2lb. + $0.39/lb.over the first 2lb.*
Weight Handling
(Continued) Note: In the above cases, if the orders Note: In the above cases, if the orders are
are worth $300 there is no fee for worth $300 there is no fee for weight handling.
weight handling.
* For small oversized items, there is a fee
For small oversized items, there is a fee of of $1.59 + $0.41/lb.over the first 2lb.
$1.34 + $0.39/lb. over the first 2lb.
* For medium oversized items, there is a
For medium oversized items, there is a fee fee of $2.23 + $0.41/lb. over the first 2lb.
of $1.91 + $0.39/lb. over the first 2lb.
* For large oversized items, there is a fee of
For large oversized items, there is a fee of $63.09 + $0.41/lb.over the first 90lb.
$61.62 + $0.80/lb. over the first 90lb.
* For special oversized items, there is a fee
For special oversized items, there is a fee of $124.58 + $0.41/lb. over the first 90lb.
of $124.08 + $0.92/lb. over the first 90lb.
* Effective Feb 18, 2015, for large standard-
size non-media units weighing more than
1lb and all oversized units, Dimensional
Weight (Unit Volume divided by 166) will be
used to calculate Outbound Shipping Rate,
if it is greater than the Unit Weight.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 48

Fee Old Fee New Fee Date of Change

A $40 fee applies to plasma and projection No change

Special Handling large-screen television units with screens


of 42 or larger.

If a customer returns an item for which No change


Amazon offer free return shipping (such as
apparel, watches, jewelry, shoes, handbags,
sunglasses and luggage), the seller will be
Returns Processing charged a fee for each returned unit. This
is calculated as the total fulfillment fee
(Order Handling + Pick & Pack + Weight
Handling) for a given product.

If a seller wants their inventory to be No change


returned or disposed of, they need to pay
a fee. To return a standard-size item costs
$0.50 per unit. To return an oversized
Inventory Removal item costs $0.60 per unit. To dispose of a
standard-size item costs $0.15 per unit.
To dispose of an oversized-size item costs
$0.30 per unit.

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The Fulfillment By Amazon Guide: How Professional Sellers Can Strategically Implement FBA 49

Fee Old Fee New Fee Date of Change

This would include the cost for shipping No change


the items to an Amazon fulfillment center.
A seller can choose to utilize Amazon
Inventory Shipping
Partnered Carriers or the Inventory
(Optional)
Placement Service for this.

No change
This is the cost involved to prepare the
item for FBA. Preparing the item includes
labeling it and properly packaging
Product Preparation
it, according to Amazons particular
(Optional)
requirements. Amazon offer an FBA Label
Service and an FBA Prep Service to sellers.

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