What is Amazon FBA and How Does it Work?

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Amazon FBA, or Fulfillment by Amazon, is a service offered by Amazon that allows you to sell your items through Amazon’s online platform and allows Amazon to manage much of the inventory associated with the process. By using Amazon FBA, many businesses have been able to grow their customer base and their sales, which can make it easier for their businesses to expand. 

How Does Amazon FBA Work?

When you utilize Amazon’s FBA services, you can rely on Amazon to take care of many of the logistics associated with your business. 

1. You send products to Amazon fulfillment centers

Amazon fulfillment centers often have more space for inventory than you have for your business. Furthermore, Amazon fulfillment centers are often geographically more convenient to customers, which means that shipping is handled more effectively.

Your products are stored at the Amazon fulfillment center until a customer makes a purchase from your Amazon listing. While you need to keep up with the inventory available in the Amazon warehouse, you do not have to worry about storing your own inventory.

2. Amazon services takes care of receiving orders, packing them, and shipping them out

When a customer makes an order through Amazon, it goes straight to the Amazon fulfillment center. You don’t have to worry about keeping up with customer orders. Amazon’s workers will go to the warehouse, pick up those items, and put them into the customer’s order–often, an order that includes items from other sellers. Amazon will then take care of getting those items shipped out for you. In many cases, which  means you can offer your customers free, faster shipping than you could access on your own, since Amazon has its own contracts with the major carriers. 

3. Amazon will take care of any customer service issues for you

Instead of customers having to contact you directly to deal with immediate product problems, including broken products or moments when the wrong product was shipped out, Amazon’s customer service team will handle it. That means that customers can access Amazon’s online support through chat, call in to talk to an Amazon representative, and receive the 24/7 support that Amazon offers its clients. 

4. Amazon will also manage any product returns

Returns on your products won’t come back to you, but instead will go back to Amazon, if needed. As a result, you do not have to monitor those processes or deal with financial returns. You can simply keep track of your net sales over time. 

Managing Inventory with Amazon FBA

While Amazon FBA can offer convenience in handling your product inventory, including making it easier to find new customers and streamline the ordering process, that does not mean that your inventory management falls by the wayside. There are still several things you need to keep track of when it comes to ensuring a steady supply chain and easy access to your products for your customers. 

1. How much inventory is available?

You need to know, at any given time, how much inventory is available in Amazon’s fulfillment centers. In the case of high-demand products, you may want to keep a great deal of your product available so that you won’t end up with shortages when customers need it most. At the same time, however, since Amazon charges a fee for the inventory you have stored in the system, you want to make sure that you do not inadvertently keep too much inventory in the warehouse, which could cut into your profits and lead to unnecessary costs. 

Furthermore, if you have perishable items or items that may expire, including bath and body products, food, or medication, you may want to make sure that you do not allow inventory to sit longer than necessary. You need, instead, to make sure that quality inventory is available when your customers are ready to place an order. 

2. How quickly does inventory move?

How often are customers making purchases from your Amazon listings? What products are customers most likely to purchase on Amazon? Chances are, you have an idea of how inventory moves through your existing online store, but you may need to take a look at the products you sell on Amazon. Is the Amazon audience different? Do they make purchases differently? You need to move fresh inventory into the Amazon warehouses swiftly enough to keep up with that demand, but not so often that you end up paying additional fees. 

3. Are there particular seasons when sales occur more rapidly?

Some seasons lead to more sales than others. Many businesses note increased sales around the holidays, especially if they participate in Amazon’s Black Friday sales. Others may find that they see increases in sales during particular times of the year, depending on the type of inventory they offer. For example, do you see more sales during back-to-school season? Around a specific holiday? Do you offer products that are more appropriate for summer, or products that your customers are more likely to want in the winter? By tracking the times of year when you’re most likely to see increases in sales, you may find that you’re in a better position to retain the right inventory in Amazon’s warehouses.

4. Are you facing any potential supply chain challenges?

Have you noticed that it takes longer to get your items to Amazon fulfillment centers, especially if there are shipping delays? Do you know that you have a shortage of some items that you need to handle your usual production? Keeping up with those supply chain challenges can help you come up with solutions before the issue becomes more serious and you end up short on inventory.

If you use Amazon FBA to handle some or all of your business’s sales, it’s still critical that you keep up with your inventory, including inventory forecasting and supply chain management. StockIQ can help. Contact us today to learn more about how we can help you track your supply needs, whether for your physical store or your Amazon FBA inventory.

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