We have all seen it, the constant rhetoric that Amazon’s marketplace in Australia will be bad for small brick and mortar stores in Australia. It is coming from everywhere, from print media to advisory groups. The problem is these groups are using fear tactic’s to mislead retailers about what Amazon Market Place really is. Business now have online presences from social media, web-stores, to in-store data collection at the Point of sale, it is all out there, all linked together to gather data on how the customer shops and wants to be served. With the advent of these came instant gratification of the shopping experience, we could sit on the couch, click, and have delivered to you what ever you want. Amazon has been doing this for a long time, now it is here in Australia.
So what is the Amazon Market Place?
Amazon Market place is an e-commerce platform owned and operated by Amazon.com.au that enables individuals and stores to act as third-party sellers to sell new or used products on a fixed-price online marketplace alongside Amazon’s regular offerings. Using Amazon Marketplace, third-party sellers gain access to Amazon’s customer base, and Amazon expands the offerings on its site without having to invest in additional inventory. So using Amazon Market Place as 3rd or 4th sales channel can greatly widen your ability to reach new customers, some that you might not have reached before.
What types of seller’s are there?
There are three main types of sellers on the Amazon Marketplace:
– Fulfilled by merchant (FBM)
– Fulfilled by Amazon (FBA)
There are known as 3rd Party sellers ‘3P Sellers’
– Amazon Vendor and Vendor Express
This is a traditional wholesale agreement with Amazon and a Supplier.
FBM Seller
Fulfilled by Merchant is the basic level of seller on the Amazon Market Place. A seller can list a product for sale on Amazon, but the seller has to handle all, customer service and shipping themselves. This model can have the best margins and leverage existing logistics infrastructure, however the businesses will miss out on some of the perks that die-hard Amazon customers rely on like Amazon Prime shipping and flexible returns policy.
FBA Seller
The model that most small to medium-sized retailers should be looking at is FBA. If you are selling your own branded product or distributing unique products this is the go to selling model. This model might cost a little more but you use the Amazon supply chain to deal with customer service, shipping and returns. Vendors send their stock to Amazon fulfilment centers. These Amazon run warehouses pick and pack the items and from there they are priority shipped to the customer, and then the vendors are normally paid with in two weeks. As an added benefit your product will be eligible for Amazon Prime members to get free or very discounted shipping rates and so they shop with confidence.
One of the biggest advantages that vendors have with this model is the ability to have multi-channel fulfilment. That means you could sell items on both the Amazon market place and your own eCommerce web-store, have those items picked, packed and shipped by Amazon. Vendors can lower overheads by not having to find space to store inventory, you can move inventory to other counties and sell in to those countries. This gives the small medium retail store a greater ability to generate more revenue streams than they have ever had before, without the overheads of warehouses, and staffing warehouses.
What do you need to be aware of?
Amazon’s “no questions asked” return policy, this is known as the A-Z Guarantee, and it apples to all FBA sellers, it is non-negotiable. You should factor in a 3-5% return rate. The 2nd more important factor is the cost. Unsold units stored with Amazon can be charge for storage after six months. Also be aware of what size your inventory is, Amazon only has a finite number of sizes that your items are for storing, these are generic sizes. In Australia we are yet to see this pricing but they are available in the US Click here this will give you an idea of the sizing Amazon uses.
Where to next?
The Amazon market place is a big complex system, but it’s advantages are amazing for any business. It is time to embrace the Amazon Market Place and not be scared of what it is, or what it might do. Because of it’s complexity it does take a little time getting used to how it works and how to be competitive in the market place, we have been lucky that while living and working the United States we worked with small businesses on their Amazon Market places, setting it all up and getting it running, as well as maintaining the Market Place for two years. The amount of daily sales it was turning over in a short time was staggering, as they were able to reach far more customers than they ever had before.
We do recommend using somebody like us that has used the whole Amazon Market Place before and get in early. As Amazon Partners we can always help if you want to get more information feel free to contact us here