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Is FBA Dead?
Stay on top of the latest e-commerce and marketplace trends.
It is no secret that Amazon is the largest player in e-commerce today and the leader of the online buying revolution, with its platform making up 43% of all online sales. Although there are challenges with adapting to the constantly changing landscape of Amazon’s marketplace, there is a vast opportunity for both sellers and brands for product discoverability, brand awareness, and increased conversions and profitability.
Amazon’s growth has reached new heights as of late, evident in the fact that the company profited $1.6B in Q1 2018, which is more than double the same timeframe in 2017. These numbers not only illustrate Amazon’s strongest revenue growth in more than six years, but the power of the Amazon ecosystem and its broad array of services. With a renewed commitment to and investment in optimizing their fulfillment centers and warehouses, it is evident that Fulfillment by Amazon is certainly not dead.
Although Amazon’s business model has expanded to include other lucrative arms such as cloud computing, Amazon Web Services, voice technology, and movie production, their e-commerce core remains a strong contributor to their overall success. With the right knowledge, starting a business on Amazon via FBA can be highly profitable.
Although other fulfillment methods exist for sellers looking to maintain more control over their inventory (Fulfillment by Merchant and Seller Fulfilled Prime), Feedvisor’s “State of the Amazon Marketplace 2018” report reveals that there is greater profit potential with FBA. The report, which surveyed over 1,200 Amazon merchants, shows that for any profit margin above 11%, seller respondents that are more than 60% FBA always have greater profit margins than FBM merchants. Additionally, one-fifth of FBA-dominant sellers that were surveyed are experiencing 31-50% profit margins.
The advantages of FBA are many. Amazon does the heavy lifting when it comes to storage, picking and packing, shipping, customer service, and returns. However, as Amazon operations aren’t “one size fits all,” you will only be able to determine if FBA is right for you based on your business model and goals.
To figure out which fulfillment method will be the most impactful for which items, you need to have in-depth knowledge of your inventory position, portfolio, and sales and profit metrics. With AI-powered technology, you can slice-and-dice your catalog and fulfillment methods based on what will yield the most powerful results for your bottom line.