Fulfillment by Amazon: A Profitable Program for Startups

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Small businesses often find it difficult to have their products sold online. This is the case if you have not been successful with branding and you do not have an established website or online store. Fortunately, Amazon – the largest marketplace – now offers some alternatives of partnership to help startups. One of them is Fulfillment by Amazon (FBA) program. This is a kind of consignment between the brand owner and Amazon. The program is expected to benefit for parties.

Fulfilled by Amazon: Advantages and Disadvantages

Of course, every kind of partnership has its advantages and disadvantages. Fulfillment by Amazon (FBA) program gives the retailer control over the brand and pricing strategy. For the retailers, the program helps them in promoting the products. Being the world’s largest marketplace, Amazon connects small retailers to consumers across the world. This way, the retailers do not need to spend much for advertising. Therefore, the sales potential is much greater.

Furthermore, startup business may not have sufficient expertise in choosing the right marketing strategies. With Amazon, they do not need special strategies, since Amazon has an established customer base. So, how does Fulfilled by Amazon work? Here are the details:

Fulfillment by Amazon

  • Retailers send the products to Amazon’s warehouse
  • Then, Amazon displays the product on its online marketplace
  • When the customers make a purchase for a certain product, Amazon sends the product directly.

With the system, the retailers are responsible for making sure that the products are always ready when requested by the customers. For some startups, the retailers find it intimidating to manage the inventory. In addition, they have to manage customer service, product replenishment, refund, product exchange, listing maintenance, and many more. However, when they are accustomed to the jobs, FBA is actually a lucrative program for startups.

When Fulfilled by Amazon Is For You, and When Not

Fulfillment by Amazon (FBA) program allows you to maintain the brand’s equity and pricing strategy. Some retailers are afraid that Amazon will drop the prices. This may be problematic for retailers that also sell the products through other marketplaces. In fact, Amazon can only drop the prices if you wholesale on Amazon. In the case of wholesale, Amazon fully controls the pricing. The case is different for FBA.

Of course, Amazon is a great partner for startups, but it is not a single platform for every business. The program is recommended if:

  • Your target is global customers.
  • You offer competitive prices
  • You have enough stocks to handle any order
  • You have enough human resources to deal with the program.

However, FBA is not recommended when you do not have consistent product supply. In Amazon wholesale program, the marketplace will stop accepting orders when the product is running out of stock in the warehouse. This is less stressful for the brand owner.

The case is different for Fulfillment by Amazon. In this program, Amazon marketplace assumes that the product supply is  always ready. It keeps accepting the order as long as the products are still there on the product pages. Therefore, the retailers are full responsible to replenish the stock.

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