Chris Green is an amazing person to learn from! I’ve known Chris on a couple of email lists for a year or so and I’m constantly amazed at his brain! He just thinks different. Comes up with these amazing products, does not know what “You Can’t Do That” means and really knows his stuff about eCommerce, selling on eBay and Amazon and much more.
I’m excited to announce a partnership between eCom Connections and FBA Power – if you sign up to try out FBA Power or the entire suite of FBA Products (FBA Scout, FBA Repricer AND FBA Power), you will get an EXTENDED free trial. Sign up at the official FBA Power website and you wil get a 2 week free trial. BUT use our link! and you will get a full 30 day free trial! This is a great chance to TRY out this tool set and find out if selling on Amazon using FBA (Fulfillment By Amazon) is for you!
Now for the bonus info I promised the listeners today. This is an article Chris wrote for his own blog and was also posted in Skip McGrath’s newsletter. I am re-posting the entire article here with a link to his blog so that you may follow his thoughts in the future. This is a fantastic piece on leveraging the power of Amazon’s amazing Shipping Costs to build your business anywhere, even, yes, EVEN, on EBAY!
FBA and eBay: Using Amazon’s Fulfillment Program to Ship your eBay Orders
There is a lot of talk lately about Amazon’s fulfillment program called Fulfillment By Amazon, or FBA, but is it only online sellers who sell on Amazon who can get in on all the fun? The answer is no. A common misconception is that FBA is for Amazon only and while Amazon and FBA certainly go hand in hand, a seller’s items are not tied to the Amazon sales channel once they are stored in an FBA fulfillment center.
Amazon’s FBA program has what is called Multi-Channel Fulfillment meaning that you can still list and sell your FBA inventory on other channels and fulfill those orders through FBA.
This article has two ‘A-HA’ moments. The first is that you can ship your FBA inventory to fulfill orders that you receive from any channel such as eBay or your own website at very competitive rates (likely less than what it costs you to do it yourself). Using Multi-Channel Fulfillment allows you to sell on any sales channel and still fulfill your orders needing only access to a computer. You don’t need to store your own inventory, multiple sizes of boxes, print labels, or go to the Post Office every day. You get the orders, Amazon ships them out. This goes on whether you are at home or on vacation. Once you get your inventory to an FBA fulfillment center, you can manage it from anywhere on the planet! A-HA!
The second is the big one; how to LEVERAGE this new information into increased margins and a more efficient business model. Using Multi-Channel Fulfillment properly can truly revolutionize your business. You can lower your overhead in shipping costs, warehouse space, and labor costs while at the same time increasing your margins on every item that you sell. This is because of the extremely competitive costs associated with Multi-Channel Fulfillment. More on this after the fee breakdown.
This is truly a win-win-win situation that most sellers would not believe is true:
Win #1: Increase margins and profits (higher payouts per item)
Win #2: Reduce work (outsource storage, picking, packing, shipping)
Win #3: Improve customer satisfaction (shipments arrive faster)
This would seem like a magic potion from business fairlyland, but it’s not; it’s simply learning how to use the available tools optimally. Run the numbers (shown below) and take the steps to streamline your business.
Yes, there are fees involved but these fees are fixed and known upfront for Multi-Channel Fulfillment orders. Since they are your orders and not orders on the Amazon website, there is no Amazon commission.
Multi-Channel Fulfillment Fees
The Multi-Channel Fulfillment fees consist of a per order ‘Order Handling’ fee, a per unit ‘Pick & Pack’ fee, and a per pound ‘Weight Handling’ fee. These fees can be seen below:
You can calculate your Multi-Channel Fulfillment rates prior to sending inventory to FBA. You can also experiment with your FBA inventory by making ‘pretend orders’ and reviewing the rates for Standard (Ground), Expedited (2-Day Air), and Priority (Overnight) shipping services.
I just did a ‘pretend order’ in my Amazon seller account on a five pound item. Total fulfillment fees (inludes picking, packing, boxes, shipping, etc.) are as follows:
Standard (Ground): $7.75
Expedited (2-Day Air): $11.25
Priority (Overnight): $23
This is for anywhere in the USA. It is not based on zip code; it is based on fixed fees and weight. Once these costs are known, you can then price your items strategically on other channels (more on this later). For comparison, here are the UPS Published Rates and Daily Rates for a five pound shipment from Massachusetts to Washington State:
Ground Published: $13.98 – one week in transit
Ground Daily: $9.76 – one week in transit
2-Day Air Published: $44.25 – two days in transit
2-Day Air Daily: $35.04 – two days in transit
Overnight Published: $77.00 – one day in transit
Overnight Daily: $67.04 – one day in transit
Remember, in addition to being more expensive to ship myself, I would also have to store the product, be home to process orders, keep boxes and other packing materials on hand, pick and pack my own orders, print shipping labels, and then get my boxes to UPS or the Post Office. Easy choice if you ask me!
Inbound Shipping Fees
To use Multi-Channel Fulfillment, you have to get your items sent to an FBA fulfillment center. They have to be labeled properly with special barcodes so that Amazon can properly identify your items. You are able to use Amazon’s partnered UPS rates for inbound FBA shipments. These are the best rates around. Depending on where you are located and what fulfillment center your items are going to, this will be about $.20 – $.60 per pound.
Amazon does charge storage fees based on unit volume. These rates are very low and can easily be managed by only sending in enough supply to match your sales. Many sellers find the storage rates to be so attractive that they want to send all of their inventory to FBA. It is recommended to only send in a maximum of one year supply at a time as Amazon charges $45/cubic foot for items left in FBA inventory more than one year.
If you no longer want to have your inventory in Amazon’s fulfillment centers, you can request to have your items returned to you or destroyed. Having your items returned to you costs $.50 per unit for regular items and $.60 per unit for oversize items. If you want Amazon to simply remove and destroy your inventory items, the cost is $.15 for regular items and $.30 for oversize items.
‘A-HA’ Moment #2 – How to LEVERAGE Multi-Channel Fulfillment
Having access to Multi-Channel Fulfillment at Amazon rates a very powerful thing. Imagine UPS came to your small, fledgling eBay business and said that you can now have Amazon UPS rates for all of your shipping needs. Impossible? Too good to be true? You could lower your shipping costs drastically without having to be a big shipper? This is essentially what you get by using FBA’s Multi-Channel Fulfillment. Your shipping rates are now significantly lower than your competitors; use this to your advantage! Here’s how:
There is more to a purchase than ‘just the item’. There is more to a transaction than just price; even on commodity items where you and your competition sell the exact same item. Consider ways to differentiate yourself as a seller on eBay: feedback, return policy, a well designed listing page (or not), and shipping options/speed (among others). The shipping is where you can now trump your competition by offering your customers something that they simply cannot offer (at least not at the price that it costs you).
There are several strategies that you can use. Since your shipping rates are now lower than your competitor’s, you can beat them on price and still make the same profit per item. This is an ‘apples to apples’ comparison. You may now be able to sell at a price that is profitable for you, but not for them. This may cause them to stop selling a product and you would not have to compete against them anymore (and prices will rise). You can also set up barriers to entry to new competition who can’t figure out how you are able to make a profit on your items since they don’t know you are using FBA Multi-Channel Fulfillment.
Another strategy to use would be to offer premium shipping such as 2-Day Air on your products at the same price as your competitor charges for Ground shipping. This makes it a ‘rotten apples to fresh apples’ comparison. You are both selling apples and for the same price, you are able to offer the customer MORE than your competitor can. If a buyer on eBay is buying a commodity type item and they can get it for $100 from you in two days or they can get it from your competition for $100 but will have to wait a week or more, who do you think will get the sale? You are able to maintain margins and take the lion’s share of the sales by offering your customers more but not increasing your overhead. This will drive your competition crazy as they will think that you are paying high shipping rates to ship 2-Day Air and must not be making any money. Let them think that all they want; just keep it your little secret.
How to Increase Margins with Multi-Channel Fulfillment
The previous examples are valid ways to use Multi-Channel Fulfillment, but personally, I don’t recommend these strategies, especially for small sellers. You are able to capture more sales, but that also comes with more work. I prefer to increase margins and differentiate myself as a seller from my competition and not compete solely on price. What I’ll show you below is how using Multi-Channel Fulfillment allows you to market you items at higher prices effectively, while keeping your overall fulfillment costs the same. This increase in margin goes directly towards your business’ bottom line.
I strongly recommend this book:
It will change the way you see price, buyers, and your competition. It is worth every penny. I only wish I read it before I started selling on eBay where I tried to compete solely on price!
Above we talked about how you can use Multi-Channel Fulfillment to stop fighting in the ‘apples to apples’ comparison game. When you can change it to an ‘apples to oranges’ comparison, you can then market your oranges against your competitor’s apples (even though the actual items that you both sell are the exact same). You can make your oranges more attractive for the same price and capture sales, but I prefer to position my oranges as a premium seller. I can offer the same commodity item as my competition but with faster shipping and charge more for it. I can charge more because I am offering more (fast delivery options vs. slow delivery options). You will find customers that will see the difference and the added value that you provide with your oranges and they will pay you more for it. This is how you increase your margins on the same items that your competitors sell.
On eBay, you can also now add the Get It Fast option to your shipping settings. I recommend offering 2-Day Air shipping for free and factoring in your fulfillment costs into the price of your item. Then, just calculate the difference between Expedited (2-Day) and Priority (Overnight) and make that the upcharge for Overnight shipping (or round it to something neat like $9.95). Again, these are options that you competition simply cannot offer at a competitive price. EBay makes these options available because they know some buyers want their items FAST and these buyers are willing to pay more to get their items fast. They even let you sort search results showing only items with the Get It Fast option. You are able to charge more because you are offering more. Here are two images I made to pomote my eBay listings. Feel free to use them if you like.
Check out this example with costs and fee breakdowns. Note the increased Return On Investment (or ROI). This is the key.
$17.53 – $22.60 more on each transaction and 35.1% – 45.2% higher margins.
This isn’t even an ‘apples to apples’ comparison! In addition to making more money per sale, I’m doing less work AND my customers get their items faster. But don’t just take my word for it; run the numbers yourself.
It’s all about the perceived value of what you are offering. 2-Day Air shipping is incredibly valuable, especially to a buyer who needs their items fast. It would normally cost $30-$40 for 2-Day Air shipping on that five pound item, but they get that value from you for less. This is what makes your items more attractive than your competitor’s.
This is not a volume game; it’s a margins game. Sellers who consistently make the most margins will thrive in the good times and survive in tough times. Sellers who ignore margin and try to ‘make it up in volume’ will work way too hard for too little of a reward. Always run the numbers!
Different channels may fare better by using different strategies. Learn the customer base of each one and market your items appropriately. What works on eBay may not be the best strategy for your own website. A combination of these strategies is also something to consider.
FBA Multi-Channel Fulfillment is currently only for domestic orders although I would expect that Amazon is working towards adding more international options. If you get a lot of international orders, you may want to consider keeping some of your items on hand to ship yourself and only sending a portion of your inventory to Amazon’s fulfillment centers.
Chris wrote up this amazing piece and posted it in the FBA Forum. He sent it to me this morning with permission to repost for you. The FBA Forum is a help site for FBA Power users and FBA Power recently hired one of our favorite guests, Bob Wiley, to help out there so it should be run well!
Years ago I would never dream of sharing info like this, but I’ve mellowed out a bit since then. This the type of deal that we make big bucks on. It’s too easy. Check it out:
They are likely trying to move a bunch of inventory to make room for Q4 (Christmas) stuff.
This works because multiple things are happening at once. Price drop on both kits: $149 down to $129 and $269 down to $199.
Buying these kits for RESALE means you do not pay tax. Anyone buying these kits should to go the Post Office on the way to Home Depot and ask for a Mover’s Packet and get the 10% off Lowe’s coupon. That makes the OUT THE DOOR price for these kits $116.10 and $179.10.
Buying the smart way (tax free and with a 10% off coupon) means that you are paying LESS than any competitors. In Texas, this was 18.25% LESS! If we sold at the same price as our competition, we made more per sale because our costs were lower.
Plus you get a FREE TOOL on the spot (way better than a mail-in rebate).
Best tools to get free:
Ryobi P260 18V Impact Wrench
Ryobi P221 18V Rotary Hammer
Why are these the best? Because they have the highest resale value.
P221 isn’t even on Amazon yet.
You could sell as kits, or the money-maker way is to part them out. This is like a ‘chop-shop’ where the pieces are worth more than whole kit. RUN THE NUMBERS YOURSELF. See what you can sell the tools, batteries, chargers, even the bag: http://cgi.ebay.com/New-Ryobi-22-Large-Contractor-Tool-Bag-18-12-volt-/310297750572
HomeDepot.com even has them pre-bundled:
How do you get tax free online?
You will have to pay tax at checkout, but you can fax your tax exempt status to Home Depot afterwards and they will refund it back to you. Spend $249+ to get free shipping.
If you have a Home Depot 10% code for online use, you can enter it here. The best price would be in store. Go to the Pro Desk and explain what you want to do.