If you are an online merchant taking your first steps or considering Fulfillment by Amazon (Amazon FBA), you’re probably looking to learn how to do it right. There are fundamental concepts and practical tips for selling on Amazon FBA. Although the service may sound risky or complicated, it can relieve much of the stress of fulfilling orders yourself.
Maybe your brand has grown enough that you need more advanced customer service. Perhaps, you’ve noticed that now, more than ever, you need to deliver your orders right on time. Using Amazon's logistics network may help you streamline the process. After all, Amazon FBA says it'll "pick, pack, and ship orders." for you. The best part? Your products will instantly qualify for Amazon Primes Members and Amazon’s Super Saver Shipping, opening up your product to a significantly broader audience.
While the platform offers an abundant source of information, it might be challenging to process it all at once if you're just starting. Following is a summary of a few basics from the site that will make your decision process or take-off easier.
What Is Amazon FBA?
FBA is an Amazon service that allows you to store your products directly at Amazon warehouses in bulk for a fee if you join the program. Once a customer buys a product, Amazon takes care of the shipping and customer service as soon as the purchase is made.
The company also assumes all risks related to the delivery and logistics of the items. It is a great advantage for sellers that they don't have to invest in warehouse space, fulfillment, or shipping materials, maximizing profits. Thanks to having their own shipping capability, Amazon can often ship products at a lower price than merchants who have to use third party shippers. While FBA comes at a cost, the price of your shipping and customer service is often more. And you can’t put a price on the exposure your products will get being a Prime product.
What Is Inventory Management?
A machine-learning-based inventory management system is automatically available to all Amazon FBA sellers. Inputs such as the cost of goods sold, shipping times, and inventory data from Amazon are used by the system to predict customer demand and set optimal inventory levels.
A typical eCommerce business defines inventory as the stock you have available for sale and own. A company's inventory management involves tracking and storing goods as quickly and efficiently as possible to meet customer demands. It consists of sourcing, storing, and preparing goods before they are sold.
Stock is an investment for a company. You could lose profits for months or years if you don't manage your inventory. Poor inventory management can lead to spoiled products, cold stock, high storage costs, depleted stock, and unfulfilled orders. Storage, holding, and additional fees can also cut profits.
Amazon's inventory management dashboard helps you manage inventory efficiently. With Seller Central, FBA sellers can handle their merchandise directly. Entrepreneurs and eCommerce businesses can manage inventory efficiently and fulfill orders faster using these tools. When stocks are running low, stock managers receive alerts with dashboard reports that forecast inventory levels and shipping timelines based on demand forecasts.
You can also use these dashboards to examine your inventory, including sell-through rates, aging stock alerts, and storage recommendations. Additionally, these systems can connect with innovative financial solutions that can provide you with cash based on your inventory sales.
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What Is Cash Flow?
Cash flow is something you likely deal with regularly as a business owner. But, for this quick guide, let's read a typical definition. Chron Small Business states that “Cash flow is composed of cash inflows and outflows based on three types of activities: operating activities, investing activities and financing activities.”
Due to both receiving and spending cash, business cash flow can be positive or negative. Positive cash flow means more money enters than leaves the business, and negative cash flow means the opposite.
By obtaining financing or selling products, you will generate positive cash flow for your business. Bills, payroll, inventory purchases, etc., are expenses that cause the company to lose money, resulting in a negative cash flow.
Positive cash flow does not always indicate long-term profitability, and negative cash flow may not mean long-term losses. Small business owners need to consider this issue when reviewing their financial statements to show how the cash flowed over a specific timeframe.
No tips for selling on Amazon FBA are helpful if you don’t dominate these concepts.
FBA: What Is the Relationship Between Cash Flow and Your Amazon Seller Business?
Maybe you are eager to learn about all the tips for selling on Amazon FBA. However, stop for a moment in this section before you read through them all. The fact that cash flow can be an issue for Amazon FBA sellers is widely known to experienced online business owners.
In eCommerce's fast-paced environment, you can't operate efficiently and effectively when your cash flow is disrupted every two weeks. The Amazon FBA program can help your business grow, but you will need some assistance in getting started.
Cash flow is a critical indicator of a company's stability and can significantly impact its health. Without sufficient funds, maintaining your inventory levels, running marketing campaigns, and making regular monthly minimum payments on your loans, credit cards, or lines of credit can be challenging. Issues with cash management can slow down growth and cause frustration.
This program has several risks for firms that don't do an excellent job of maintaining cash flow. Business owners worldwide deal with cash flow problems regularly. The good news is that there are innovative financing solutions that will help you grow your eCommerce if you integrate them with Amazon FBA.
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Tips for Selling on Amazon FBA… At Last!
Data from Statista indicates: “Internet sales have played an increasingly significant role in retailing. In 2021, eCommerce accounted for an estimated 19.6 percent of retail sales worldwide. Forecasts indicate that by 2025, the online segment would make up close to a quarter of total global retail sales.”
Amazon alone generated sales worth approximately 386 billion U.S. dollars in 2020. In addition to electronics and other products, the company's most significant sources of revenue are third-party sellers, subscriptions, and AWS cloud services.
Those just entering the eCommerce arena using Amazon FBA know they are stepping into a competitive environment where they need to provide the most professional service and helpful advice, which requires working hard to succeed.
Here are some helpful tips for selling on Amazon FBA.
1) Ensure updated inventory to meet customer expectations
These days, consumers expect fast and convenient service. Shopping and checkout should be as easy as possible, and products should be readily available with convenient shipping options. In addition to having your product on hand, they also expect your customer service team to be on hand.
The good news is that much of this challenge can be met when you succeed at being a part of the FBA program.
Amazon FBA eCommerce vendors get a lot of pressure from these expectations. You'll need to know how to use inventory visualization tools to make quick decisions when keeping inventory balanced, but this is not always easy. The most successful eCommerce businesses stock their inventory well.
2) Know your sales records and trends to prevent supply chain problems
It's been a rough few months for the supply chain management. COVID-19 consequences and global economic uncertainty are becoming critical problems. Staying on top of sales and trends lets you know where you are in the sales cycle.
Ordering inventory well in advance with cash flow allows you to keep customers and reduce supply chain volatility. You can prepare by buying stock ahead of orders or front-loading inventory in uncertain times.
3) Diversify your product offering
Add more products to your catalog if you have extra cash. You don't want to double up on products and risk your resources when you've taken out a loan. But expanding your product line and diversifying is a good idea, especially since you can leverage all Amazon FBA program advantages.
Offering accessories, product variations, or even designing and manufacturing your products allows you to eliminate the middle man and keep the revenue and control.
4) Take advantage of digital marketing and branding
Being marketing-savvy is essential to standing out. The product must be excellent, widespread, and competitively priced. The only thing left is to attract the right customers to your website and make sure they complete their purchases.
There cannot be enough emphasis placed on accurate branding. Ensure that your brand is the first thought people have when searching for your product category. With the assistance of a digital marketing agency, you can increase brand awareness, enhance brand personality, and provide creative, relevant messaging.
Digital marketing and branding also require a social media strategy. Influencer marketing has become a highly effective marketing method in social media. Targeted digital marketing will also have a tremendous impact on your business. If you have a knowledgeable employee on staff or work with an agency with this expertise, you can maximize your investment in your advertising campaigns.
5) Be mindful of your cash flow and build your capital stack wisely
Whatever the size or stage of your business, you can always benefit from extra funding. All the other tips in this guide can also help business owners boost their cash flow to fill up on inventory, fund marketing campaigns, cover general business expenses, or cover day-to-day expenses.
An organization's capital stack contains the following types of financing, each of which is suitable for a different purpose:
- Bank loan: To make long-term investments like a privately-owned warehouse to store extra inventory (aside from what Amazon FBA offers), technology equipment or software, and expanding the number of employees, you should take out a bank loan. When you are preparing your budget, you must consider the interest rate, the minimum payment amount, and the fact that bank loans can take up to three months to fund due to the lengthy process of application and approval.
- Credit cards: Credit cards are much easier to obtain than bank loans and can be used well to pay for small, incidental items such as office supplies. These instruments are not ideal for larger purchases. As your revenue grows, the bank will reevaluate your credit limit, and it will be adjusted accordingly.
- Alternative financing options: Personalized eCommerce financing is designed to meet the unique needs of online sellers. Short-term investments such as inventory and marketing costs can be financed with this funding type due to its nature: No interest, no minimum monthly fees, and no lengthy approval process. Payments are based on sales and are calculated in real-time when the chosen platform connects directly to your Amazon store. You don't need to worry about making monthly payments because your financial partner automatically repays you when you sell inventory. You get working capital aligned with your sales, reducing your risk.
Grow on Amazon FBA. Your Ideal ECommerce Financial Partner Awaits
It can be hard to balance the cash flow, inventory to meet demand, and overall growth of your company. An intelligent financial platform will understand this and build a solution tailored to eCommerce sellers dealing with the challenges of Amazon FBA. Their solution perfectly aligns with what entrepreneurs and small companies need to be successful.
There are no minimum monthly payments, no interest charges, and no hope that you aren't able to pay so they can make more money. Rather than getting into trouble with cash flow, they help you maintain a balance in your finances. They save their customers 50% on average and expose them to significantly less risk than banks.
Small businesses need cash to grow and scale, and this financial solution combines years of expertise and a commitment to delivering money when small businesses need it. Get in touch today.
