Ecommerce in 2016: To FBA or not to FBA, that is the Question

In the world of ecommerce, you either have to be very unique, serving a particular niche – see what Chrono24 has done in the luxury watch sector for an example – and really stand out from among the competition, or you need to get a little help from the big boys. Even if your business actually is niche, especially if you are just starting out and haven’t built up a reputable brand yet, something like Amazon’s FBA can help to fast track you along your road to success.

Amazon Services - Fulfillment (FBA)

What Exactly is Amazon FBA?

Amazon FBA, being one of the top 10 booming industries to watch this year, is a buzz word or term being heard around every virtual water cooler at the moment. But it is trending for a very good reason.

Amazon FBA (Fulfilment by Amazon), essentially offers small business owners access to the raw power, reach, and resources of the world leading ecommerce giant. Essentially, small ecommerce business owners are able to sell on their own online shop, but have the items stored within Amazon fulfillment centers and have them shipped out to buyers by Amazon. This allows small business owners to have access to Amazon’s wide network, as well as all of the amazing Amazon shipping perks and time frame.

What are the Pros and Cons?

Amazon isn’t just offering this service out of the goodness of their hearts merely to benefit emerging entrepreneurs and help them quickly grow a profitable online business. Everything with a big payoff is usually going to have some upfront costs as well. The service is set up as a Pay-as-you-go model; so you as a small business owner will pay for storage space and the fees for each order that is filled.

However, a prudent small business owner would have to weigh the cost vs. the return on investment. If you are sending out products from your own home, then you wouldn’t have to pay for storage fees; however, you would have to pay for packaging and shipping, as well as rely on a longer shipping process via your local post. If you can get your product to customers quicker and through a dependable medium that makes returns easy and hassle free (Amazon handles all returns and customer service), then you will be able to better secure sales in general.

Amazon warehouse in Madrid, Spain
Amazon warehouse – photo credit: Wikimedia Commons

It all depends on how your product sells, how well it is marketed to the key demographic, and whether that demographic would be more willing to make a purchase if it can fall back on such widely trusted Amazon guarantees.

In the end, whether to FBA or not to FBA is a question of where you are in your business development plan. Being able to offer this type of service can exponentially grow your business, but the trick of the situation is that you already need to have enough traffic and customers in order for something like FBA to be worth your while. As long as you believe you will see an adequate ROI it might be worth considering, but it should be considered carefully.