Amazon Sellers can save money, take back valuable time and grow their businesses by adopting an optimized operations model designed for current Amazon policies.
Over the last several years Amazon has made one thing very clear, they don’t want your excess inventory in their fulfillment centers. Why do I say this? Amazon has continued to raise their already very expensive storage fees and adopted a long term storage policy that is assessed monthly. Both are absolute profit killers for anyone who has more than a couple months of inventory stored at FBA fulfillment centers. So what does this mean for Amazon sellers? For many, it means they need to adjust their business model.
The Current Standard
The business model that many Amazon sellers currently run on is as follows:
develop a product
source it
ship all inventory directly into Amazon FBA fulfillment centers
market the product exclusively through Amazon
Issues with the Current Standard
So what are the problems Amazon sellers will experience using this model under current Amazon policies:
Any more than a months worth of inventory being stored with Amazon becomes excessively expensive to warehouse.
If inventory takes longer than six months to completely sell through, be prepared to start being assessed long term storage fees every month until the items are removed or sold off. Long term storage fees are extremely expensive. To be successful, sellers must avoid them at all cost.
Working exclusively through Amazon for your warehousing and fulfillment needs severely limits a sellers ability to engage with other distribution channels like: eBay, Overstock.com, Groupon, Walmart, Target, Kohl’s, etc. Or to fulfill orders from their own websites in a high quality way.
Amazon offers a very limited offering of prep services for Amazon sellers. For the services they do offer, they charge extremely high rates and are known to take an extremely long time to accomplish the tasks.
Amazon makes mistakes on inventory receipts. When you run a model where you are sending all your inventory into FBA all at once, if an issue comes up, be ready to not have access to your inventory for possibly months with absolutely nothing you can do about it. That’s a lot of risk.
A New Business Model
So what can Amazon sellers do to optimize their businesses and protect their profitability? The benefits of having Amazon handle fulfillment via FBA for Amazon orders is still undeniable. We propose a new business model that inserts a warehousing and prep service provider between your factory and Amazon’s FBA fulfillment center. So the model goes as follows:
develop a product
source it
ship your finished inventory to a warehousing and prep service provider
ship bi-weekly or monthly replenishment shipments into Amazon FBA fulfillment centers
market the listing through Amazon and other distribution channels
Advantages to the New Proposed Model
So what advantages do Amazon sellers gain from adjusting the standard model to my new proposed model. We see them as the following:
Most sellers will save money using this model by lowering their standard warehousing rates and taking long terms storage fees out of the equation. While some expenses are picked up under this model, the savings will outweigh the increased costs in most cases.
A good warehousing & prep service provider will offer access to a variety of prep services including: quality control inspection, bagging, labeling, safety labeling, bundling, finish manufacturing, etc. This makes it significantly easier for Amazon sellers to ensure their inventory shows up to Amazon’s FBA fulfillment centers ready to be sold and minimizes customer issues and returns.
Under this model, Amazon sellers gain a large amount of flexibility when it comes to what they can do with their inventory. By utilizing order fulfillment and returns processing services from their warehousing & prep service provider, Amazon sellers can engage new sales channels and grow their business.
Increase inventory sell through rates by enabling a dual FBA & FBM sales model. While the preference is always to sell via FBA, there will be times when FBA inventory is depleted. A good logistics partner will automatically switch to an FBM sales model to sales continue while Amazon replenishes inventory. FBA resumes when inventory is available.
This model significantly lowers the risk of inventory receipt issues with inbound shipments to Amazon. By holding the bulk of your inventory back, if an issue arises with a shipment to Amazon, an Amazon seller has the option to just send in another shipment from the inventory they are holding back.
Gaining the Benefits of the Optimized Model
Oxspring Paul has developed a suite of services with the challenges that Amazon sellers face in mind. By using our Amazon storage & preparation services, Amazon sellers can save money, grow their business and save valuable time.
If you are interested in a complimentary analysis of your business and the possible benefits you could experience from updating your operations model with Oxspring Paul…