The extra demands placed upon online businesses in 2020 have been enormous. As well as the normal year on year rise in purchases made online, the Global pandemic has meant that online platforms have had to take on much of the sales volume normally serviced via the high street.
This challenge has been met by many eCommerce businesses while others are still adjusting to the change or waiting for some sort of confirmation that the ‘new normal’ will maintain sales levels worthy of any investment.
New Ways to Source Funding
That investment can be hard to find in the current financial climate. Conventional lenders such as banks are very risk-averse due to the types of high street retailers they would normally deal with experiencing difficulties. With online retail not suffering in the same way, many businesses are seeking new ways to source e-commerce funding to expand their operation.
The key to this expansion for many sellers is the switch over to Amazon’s FBA service.
What is Amazon’s FBA service?
In a nutshell, FBA (fulfilled by Amazon) is a service whereby Amazon will store the inventory of your Amazon listings, then pick, pack and send your items for you. There is a price for this service, but for many small or medium-sized businesses that do not already have a distribution network, it seems to be more cost-effective.
Over half of Amazon sellers now use FBA as part of their business because (although a lot of them are) the benefits of this service aren’t limited to just logistics.
1 Your products may be eligible for Amazon Prime
With Amazon in complete control of the process, they can mark your product with their Prime badge, a key factor in why many people shopping on Amazon may select your product over somebody else who has exactly the same product but does not offer that service.
2 You can benefit from Amazon distribution prices
The economies of scale mean that Amazon has rather exceptional deals with distribution companies. Even with Amazon making a profit from sending your item for you, the prices still stand favorably with doing it yourself, especially when you also account for packaging costs.
3 You only pay for the services you use
There is no start-up fee, no deposit, and no subscription fees for FBA. You pay only for the space you use and for packing and sending the items you sell. In practice, this means your expenses are relative to your sales as there are no real fixed overheads.
4 Amazon deal with customer service issues for you
FBA will not only send your item; it will also deal with any returns. This includes liaising with the customer to arrange a return as well as putting the item back into stock if necessary.
5 Your business expansion has no logical limit
As your business gets bigger and you invest in more product lines and volume, you can just use more space at the Amazon warehouse. You don’t need to upscale your logistics because Amazon is already the biggest out there in eCommerce. In practice, the only noticeable factor that your business is doing five or ten times what it was last year are the larger numbers in your reports.