Last week we spent a lot of time packing up boxes of stock to go to Amazon warehouses around the UK. Amazon FBA is one of our additional revenue streams. If you own a shop and are not in the Amazon FBA programme, then you are missing the opportunity to create an additional revenue stream for your shop. Amazon FBA is a no-brainer. Yet so few shops are doing it. Our mission is to change all that.
It’s January at the moment, which is a notoriously quiet time of year in retail. We think it’s partly because customers receive their January credit card statements after Christmas and realise they’ve spent too much, so decide to reign in their spending. January is an ideal time to focus on Amazon FBA. If you own a small shop and you don’t know about Amazon FBA, it’s time you did!
How can shops sell on Amazon?
There are different ways for us as retailers to sell on Amazon. The most well known is as an Amazon Marketplace seller, where you receive the order from Amazon and send the order off to the customer yourself. You are responsible for everything including ensuring the correct item is received by the customer, handling any issues and any refunds. So it is not unlike Ebay, in that it is a traditional marketplace way of selling.
There is also Seller Fulfilled Prime where, again, you do everything as the retailer. Seller Fulfilled Prime is by invitation only at time of writing. Amazon may invite you to join the programme when they are confident you have the stock you say you have, and will get it to the customer the next day – as Amazon Prime customers expect. You are responsible for the on-time delivery of your product. We are enrolled in this programme and I can tell you things can get a bit fraught. That is because the delivery process is of course out of your hands once you handle it over to Royal Mail or your preferred carrier, but you are liable if it goes wrong.
In addition, there is the Amazon Small and Light Programme which is a specific subset of Amazon FBA, allowing you to send small, light products and pay less for them to be sold by Amazon. We will cover this another time.
The programme we are focusing on in this post is standard Amazon FBA.
What is Amazon FBA?
We participate in some Amazon programmes on and off depending on the time of year, but we sell via Amazon FBA all the time. It is a fantastic way for us small shops to increase our turnover and grow our businesses without growing our costs.
FBA stands for Fulfilment by Amazon. If you search for articles about Amazon FBA, you’ll see a lot of articles about importing from China. Thereby potentially becoming a millionaire overnight. That is not the FBA we are talking about. I’m quite sure some have done that, we haven’t and neither has anyone else we know who has FBA as part of their small shop toolkit.
The FBA we’re talking about enables small shops in the UK to source stock they could sell themselves, then choosing to send it to Amazon to sell it for them instead. More sales, without more staff.
The way that FBA works for us, and it really is very simple, is as follows. We buy product, it arrives in our shop and we prepare it to go to an Amazon Fulfulment Centre around the UK. Sometimes we have to barcode it for Amazon like this, sometimes we don’t.
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We prepare the shipment in Amazon’s software, they tell us where it needs to go, we label it and it is collected. It is then checked in to Amazon’s warehouse, at which point we start to benefit from their 24/7 operation.
Whilst we sleep, our inventory arrives, is checked in and made available for sale. This is when we see ‘cloning ourselves’ in action. We love our customers, but even we would never be working between 1 and 2 in the morning ! This is a screenshot of my inbox last Tuesday night/Wednesday morning.
The stock sells, Amazon pick, pack and ship it for you. They handle all the customer service. If anything goes wrong, replacements need to be sent, refunds need to be issued… Amazon handle everything.
Payment goes into your account, less the Amazon fees. You draw done the money into your bank account, and Amazon provide reporting on all the sales, fees and VAT. And that’s it.
FBA is a true Additional Revenue Stream for small shops
We have had a shop for 16 years. Our 10 Commandments are the things which have enabled us to grow through a global pandemic, and economic recession and whatever else life has thrown at our little shop.
FBA can represent many things for a small shop. When we send stock to Amazon that we also sell in our shop we are, in effect, cloning ourselves. When we send stock that we wouldn’t otherwise sell in our own shop, we have a true additional revenue stream into our business.
FBA allows us to provide the level of service that Amazon is known for, next day delivery and no-quibble returns and replacements.
And most importantly, FBA enables us to be where our customers are. Whilst some people are quite vocal about not buying from Amazon, the reality is: that is where many of our customers have been hanging out for the past 12 months.
Many customers stopped shopping with independent shop websites during recent nationwide lockdowns due to the global pandemic. If you were paying for Google ads over the past 12 months to drive traffic to your website, potentially you were throwing money down the drain. Because customers switched their buying patterns and went to marketplaces, in their droves. Shoppers were four times more likely to shop on a marketplace platform during 2020 than on small, independent websites. They perceived Amazon as a safe way to shop during lockdown because, if it went wrong, they knew Amazon would fix it. And quickly.
FBA enables us be where our customers are, rather than hoping that somehow things are going to go back to ‘normal’ and waiting for customers to come to us. Amazon FBA is a way we can all take action to get our product in front of customers, regardless of what is happening with COVID, Brexit or whatever.
Impact on the Rapid Growth Formula for your Business
We bang on about the Rapid Growth Formula a lot here. For, as you know, there really are only 3 ways to grow your Shop Sales.
It is important to note that the customers who buy your FBA products are not your customers, they are Amazon’s customers. But FBA allows you to get your product in front of more customers and sell it, so it still drives the customer metric in the formula. It can also drive customer frequency, if they are a die hard Amazon customer who buys a product that only you sell with the Prime Badge. Which means that, in reality, you benefit from the increased frequency metric too.
And as we know, if we increase the Customer Metric and the Spend Metric and the Frequency Metric all at the same time, we grow much more quickly as a business.
Amazon FBA can cost less to sell, and the margin can be higher
Yes, that’s why I said. If you choose the stock to send wisely, the fulfilment fee can work out less than it would have cost you to sell it yourself. And the margin can be higher. There are lots of reasons for this which we will cover another time, but it is absolutely the case.
If you want to know more about Amazon FBA and how you can make it work in your small shop, check out our Masterclass on our new Scrawny Goat Youtube Channel or watch it below.
Periodically we also run the Amazon FBA 5 day Challenge. At the end of the 5 day challenge, you will have a better understanding of FBA, how it could dramatically increase your turnover, and have decided which products to include in your first shipment. If this is of interest, sign up here (if you have missed the latest challenge you can go on a waiting list).