Blog Series: Why All Companies Should be Selling Online, and Why Amazon is the Best Way To Do It – Part 2, How to Sell on Amazon
COVID-19 has created a huge boom in online shopping and purchasing, and its showing no signs of slowing. The global online shopping market size is predicted to reach $4 trillion in 2020. eCommerce is clearly the dominant channel now and likely will be for the foreseeable future.
This trend should not be limited to retailers! All businesses, including manufacturers and distributors, are adding eCommerce as a new channel—and so should you.
How do you get started? It might seem intimidating because of logistics or cost, but Amazon has done a great job of taking on the logistics end and more. Their goal is to offer more products to their customers, and that means they need to bring on more sellers because the more sellers, the better market coverage. So, they make it as smooth as possible for you to join as a seller.
This blog series talks about why you should start selling online, why you should do it through Amazon, how Amazon works with sellers, and finally, how ArcherPoint can help you do it. Part 1: Why Sell Your Products Through Amazon, discussed why Amazon is hands-down the partner of choice. If you’re not sure whether you should be selling online and/or whether you should select Amazon as your vehicle, read Part 1 before this—you need to be confident that you should put your efforts into a relationship with Amazon before you learn about how they operate.
Part 2: Three Ways You Can Sell Your Products on Amazon
Now that you’ve read Part 1 of this series, we assume you’re convinced that: 1) You need to start selling online NOW; and 2) You need to sell through Amazon. This blog discusses how.
Amazon has clearly put a huge amount of effort into perfecting the logistics side of online sales and fulfillment. With their size, resources, capabilities, and experience, they have evolved from their start as an online book seller (Remember that?) to offering three options for sellers so they can select the option (or combination of options) that fit their needs.
Ultimately, these options include Amazon covering both the back end and the front end—taking on all or part of the distribution, warehousing, and fulfillment of a seller—at a lower cost and lower hassle than trying to do it all yourself. In short, you can be as hands-on or off as you want to be. Here are the options:
The Direct Model
This was originally the only way Amazon sold. In the direct model, Amazon acts as a traditional storefront for the seller’s product, buying the products from the seller and then selling them to Amazon customers, with fulfillment handled by Amazon. When the seller registers as a vendor, Amazon becomes a full-time distributor, handling inventory, shipping, pricing, customer service issues, and returns/exchanges. This model has become practical mostly for very high volume, commodity items. Amazon owns the inventory in this model.
Today, Amazon has the Amazon Marketplace, where products are provided by third parties, but the transactions are processed by Amazon, which acts as the marketplace operator. There are two ways to interact as a seller with Amazon using the Marketplace.
The Fulfillment By Merchant (FBM) Model
With FBM, the seller warehouses their own products, and their products are listed on Amazon’s marketplace (Amazon.com). The seller is responsible for fulfilling the order and providing the tracking information to Amazon. Amazon charges a fee to cover handling listings, advertising, and promotion. This model puts more responsibility on you, as you need to tool your facility to meet Amazon’s—well actually, Amazon’s customers’ fulfillment expectations. That takes money and expertise and will affect your COGS.
The Fulfillment By Amazon (FBA) Model
With FBA, your products are listed on Amazon’s marketplace, Amazon holds your inventory for you, and they fulfill orders for you. This is the most popular model because Amazon takes on what they do best—and you don’t have to be a logistics company. You continue manufacturing or whatever you do best and let Amazon handle the rest.
WARNING: If you think you’ll save money by avoiding the fee for using this model, remember this one thing: Amazon can ship more than one million items a day during the peak season—and they need only one minute of human labor to ship a package. We don’t know you or your business personally, but our guess is that you don’t have that capability (nor should you).
The Bottom Line: Amazon Does It Better
It’s just a simple fact: Amazon does logistics better, so it makes sense to use them. Want to learn more? Download our latest eBook, Why Manufacturers and Distributors (and Everyone Else) Should Be Selling Online and…Why Amazon is the Way to Do It.
Then be sure to look at Channel Sales Manager for Microsoft Dynamics 365 Business Central and Dynamics NAV. This integrated management tool for Amazon and other platforms connects with NAV or Business Central for seamless selling and managing the back office of your eCommerce business.
Read part 3 of this blog series to learn how to get started selling on Amazon.