A Guide On Amazon FBA

This guide on Amazon FBA was created by Hailey Hall, a senior business marketing student at the University of Montana. In this guide, I will provide you with information surrounding Amazon FBA, including what it is, how to get started with it, disadvantages, marketing tips and tricks, opportunities, and how it will grow in the coming years.

What is Amazon FBA?

Let’s start with the basics about what Amazon FBA or fulfillment by Amazon is. Amazon FBA is where businesses can send their products to Amazon, and Amazon will store the product. When someone buys the product Amazon will then pack and ship the item. They will take care of returns, refunds, and most customer-service aspects. Of course, this service is not free; Amazon charges storage and fulfillment fees.

Why is Amazon FBA important?

Utilizing Amazon FBA is a great way to increase the visibility of your product and potentially make more money. Amazon has more than 200 million customers and around 95 million Prime users. Amazon customers are loyal and spend a lot of money on Amazon, which means that Amazon FBA allows businesses to reach millions of consumers.

Advantages of Amazon FBA

Amazon FBA is a great way to grow a business because of all of Amazon’s customers. Amazon is leading the industry in terms of fulfillment because they know what they are doing. The more successful the business, the more time is needed to package and ship, whereas Amazon FBA allows businesses to outsource that process. Amazon also has access to discounted shipping rates, which enables them to give these discounts to companies that utilize Amazon FBA. Customers also get the advantage of free two-day shipping through Amazon Prime on all Amazon FBA products. That instantaneous Prime status that comes with using Amazon FBA is unparallel. Amazon handles customer service, meaning they help with customer inquiries and returns. They have 24/7 support, and customers feel comfortable when ordering through Amazon. Using Amazon FBA also means that you will have more time to focus on other parts of the business. It gives you time to grow your business, whether that’s through marketing or product development. All of these things need your focus for your business to be profitable.

Don’t fear..embrace

Many business owners feel threatened by Amazon, and that is a valid fear, but it also proves as an opportunity to use Amazon’s dominance in your favor. In a world where it can be argued that retail is dying, brick and mortar stores need to find other ways to profit. Amazon FBA is one way to do this.

Disadvantages of Amazon FBA

There are a lot of advantages to using Amazon FBA, but there are some disadvantages as well. Since businesses have to pay storage and fulfillment fees, they must ensure their products are still profitable with these added charges. It’s also crucial that they understand the speed in which their inventory moves so that they can reduce storage fees. If products sit in the warehouse for more than six months, it’s relatively expensive because Amazon wants to sell products, not store them for businesses.

Another disadvantage is that because of Amazon’s fantastic customer service; they make returns and refunds very easy for their customers, which means that sellers may see an influx in returns. Amazon has guidelines for how businesses should prepare and ship their products to them. This system can be challenging to figure out at first, which is a challenge that sellers face when first starting. It can also be difficult to track inventory through Amazon FBA, so businesses need to make sure they stay vigilant about it. Another challenge is that companies need to decide how they handle sales tax since Amazon delivers to all states. If you are a control freak, Amazon FBA may not be the right choice. It can be scary giving up aspects of control in a business you worked so hard for.

A fundamental overview of how to start an Amazon FBA business

Before really starting your business, it’s essential to decide what you are passionate about and what product you could make that will feel a need someone has. Do some product and marketing research to find out whether or not the product you want to sell can make any money. Then you will want to establish your sourcing, so basically determining where you are going to make these products. You will then want to develop your brand. Finally, it’s time to create an Amazon Seller account. You will be given a choice between an individual or a professional account. The individual account is free but has some limitations, whereas the professional account has a monthly fee, but there is a lot more included. If you already have a business and just want to start selling through the Amazon FBA program, then you should skip right to the last step of making an account. Once the account is created, there is a lot to do, and I will cover that below.

Check this site out for more info on starting an Amazon FBA business: https://makeawebsitehub.com/start-amazon-fba-business/

Amazon SEO

Those who utilize the FBA program must have an understanding of Amazon SEO. Understanding Amazon’s algorithm is vital for success. Companies need to do their keyword research based on the different factors within the algorithm. Amazon puts customers first, so they reviews play a large part in getting product listings in front of more consumers. An excellent way to view Amazon is as a search engine, not just an eCommerce site.

On Amazon having quality pictures, titles, subtitles, descriptions, and responses to consumers questions help in terms of optimizing your listings. Having a very detailed product description based on keyword research is critical to reaching consumers. If you don’t have a quality listing, then it doesn’t make sense to be driving traffic to them. Start with creating incredible listings, and then it may be time to start spending money on advertising. Chris Van Dusen brings up a good point stating that one tip for Amazon SEO is to “Use Amazon’s Keyword Tool to optimize your copy around long-tail keywords that are less competitive.” So, to sum up, Amazon SEO, there are currently some limits on what can be done, but really anything a company does to optimize their listings for conversion will help get the attention of Amazon’s search algorithm.

Amazon SEO

PPC

Let’s get into the nitty-gritty of marketing techniques to use with Amazon FBA. Amazon utilizes a cost per click advertising system, also known as pay per click. This is similar to Google’s system. So basically, you make an advertisement, and Amazon puts it in search results based on the keywords chosen, and then when someone clicks on the advertisement, you are charged for it. Utilizing tools to help identify high-value keywords to bid on is essential. Amazon does recommend bid prices to try and streamline the process, but it’s still necessary to do outside research. Advertisements appear in a variety of places on Amazon. There are headline ads that are at the top of the search results page; advertisements also appear as under “sponsored products related to this item,” and finally, there is the related to section with advertisements. It’s also possible for pay per click advertisements to be featured on banner ads on other sites.

Shows which results are organic versus paid when searching for "water bottle" on Amazon.
The green box identifies organic results and the red are paid for.

Types of campaigns on Amazon

Automatic Amazon FBA pay per click campaigns are probably the most common because they are the simplest. In this type of campaign, the marketer will set a daily budget and then decide what products to advertise. Amazon then chooses the bid and runs the campaign. It’s suggested to do separate campaigns for each different product because the keywords that should be targeted will differ. If the products are similar and have the same keyword, then grouping them is a good idea since otherwise there’s a risk of bidding against yourself. Once the campaign has been running for a while, it’s time to go in and look at what has been working. Optimize the campaign by looking at what keywords Amazon chose to bid on and tell the system the ones that should not be bid on in the future. To look at these items, Amazon provides a search terms report.

A manual campaign is where Amazon FBA users set the keywords on their own. In certain situations such as where there is a high converting exact phrase, this may be a more efficient way of running a campaign. Running an automatic campaign is probably the best way to start, and then once data has been collected, it’s easy to make changes for optimization.

This blog contains a lot more info about the types of campaigns and how to utilize them: https://sampriestley.com/marketing-your-amazon-fba/

The difference between automatic and manual Amazon campaigns. Automatic: sellers select their budget and let Amazon go to work and automatically find keywords. Manual: Sellers handpick keywords they want to bid on to fine tune where their ad spending goes.
The difference between automatic and manual Amazon campaigns

Don’t forget the budget

Those that market on Amazon need to make sure they are aware of the marketing budget they would like to stay within. A budget will help guide the specific pay per click strategy that should be used. Looking at metrics such as impressions, click-through rate, and conversion can be helpful. Looking at these items helps identify which keywords generate the most interest, which words can be taken out in the next campaign and just overall what is and isn’t working.

EBC

A somewhat newer option that sellers should think about using is Enhanced Brand Content. Amazon has an EBC program which has a multitude of options and templates that companies can utilize. To use this service, sellers have to be approved through Amazon’s brand registry process. EBC is an easy way to improve the actual look of listings. It gives sellers the ability to expand their existing listings to make them more editorial in a sense. EBC is a great tool to help in differentiating brands. Another new trend with Amazon marketing has the ability to add demonstrative or 360-degree videos. This allows sellers to explain their products more in-depth so that consumers receive a better purchasing process.

This website has some more information on EBC as well as PPC: https://blog.viral-launch.com/amazon-tips/5-amazon-marketing-tricks/

The Reviews

Let’s dive deeper into the review aspects of Amazon FBA. It’s essential for sellers to have a lot of reviews that are also positive. Amazon users are experts when it comes to finding the product with the most positive reviews, and they also look at the negative reviews. This means that not only is it essential to have good reviews, but it’s also just as necessary to minimize the number of poor reviews you have. That isn’t to say that sellers should have no negative reviews because buyers are smart, and when the reviews seem too good to be true, that is a turn off as well. When making a purchase decision, people want to have all of the information, and a critical aspect of that is social proof. The more positive reviews a seller has, the better they will rank within Amazon.

Click here to get more details: https://www.bigcommerce.com/blog/amazon-selling-tips/#optimize-your-amazon-product-page-for-amazon-seo

The relationship between product reviews and ranking
The relationship between product reviews and ranking

Create that content

Another marketing tactic goes back to content creation. Building a strong brand outside of Amazon can help sales through Amazon. Diversify, so you aren’t just an Amazon brand. Writing a blog or creating a YouTube channel allows consumers to understand your brand more thoroughly. Running influencer campaigns can be a good idea. Pay someone to talk about your product, whether that’s on Facebook, Instagram, or YouTube. This goes back to the social proof aspect; consumers want to hear that someone else likes the product before buying it. Inbound marketing tactics may help to bring attention to the product, as well. Using the Amazon FBA program while also utilizing the assistance of Facebook Ads and Google Ads can help drive traffic.

Customer Acquisition

Amazon can also be used as a tool for customer acquisition where sellers encourage customers to make follow up purchases through them directly. This might not always work since Amazon is a platform that so many people are comfortable with; it may be hard to make them switch to a different buying platform. Although if successful, this is one way to increase lifetime value.

Email Campaigns

Another marketing technique that isn’t specific to Amazon FBA but also works well is creating nurture email campaigns. Knowing who is buying products and forming relationships with those consumers is vital in running a successful Amazon FBA business. Sellers should generate an email list of come up with a way to follow up with their customers. Amazon does limit sellers in some ways by not giving out their member’s emails, but they will forward follow-up email to the customers. Amazon FBA users should take advantage of this. It’s an excellent opportunity to form relationships and help get the brand message across. These emails need to be well thought out, meaning that they need to be sent at the right time and have the right tone. These emails should appeal to customers’ needs and not push a selfish motive. Working consumers up the value ladder is the best way to create loyal customers.

An example of an email I received from an Amazon seller after making a purchase.
An example of an email I received from an Amazon seller after making a purchase.

Is the price that important?

Using different pricing strategies is another way to increase traffic to products. Prices on Amazon are constantly changing, so it’s imperative to keep your pricing competitive. There are a lot of factors that go into purchase decisions, but one aspect is pricing, and sometimes, the lower price will be what the consumer chooses. Amazon sellers can use repricing software, which will automatically change prices, or it can be done manually. Typically automating the process works better. Algorithm repricers are advanced tools that help optimize conversions while still leading to higher profits. Daily deals or special discounts help brands get more exposure. Understanding Amazon’s pricing structure is essential to gaining success through Amazon FBA.

1. Competitor changes their price on Amazon 2. Amazon notifies XSellco of the change 3. XSellco calculates the new prices 4. Background safety checks are performed 5. XSellco notifies Amazon of the price change 6. Amazon's Pricing Error System checks the new price 7. New price is updated on Amazon
This is an example of how a certain repricing system works on Amazon.

The future of Amazon and Amazon FBA

The speed at which Amazon has been growing is crazy. Amazon has continually put the customer first, and this is a mindset that has been successful for them. It’s hard to tell what the future holds for Amazon, but I believe that in the next ten years, they will only grow stronger. An aspect that allows Amazon to stand out compared to other companies is their use of the FBA program. In the future, Amazon will likely continue to increase the speed of their deliveries since this is something they are already working on.

The FBA program will also likely continue to grow in the coming years because while Amazon does have its own brand, it still heavily relies on other companies and brands. Since Amazon has millions of products, it would, at this point, be virtually impossible for them to take over the production of these items. One reason Amazon FBA is so successful is that these smaller businesses can come in and appeal to the smallest viable market, which is a great marketing tactic. They can provide value to their target market while utilizing a platform that their consumers are comfortable with. This then helps Amazon because their customers can find exactly what they are looking for. The Amazon FBA program allows Amazon to keep consumers satisfied while increasing profits.

As Amazon FBA continues to grow, so will the competition. It will become even more critical for businesses to understand the ins and outs of Amazon FBA and work on marketing their products effectively.

Andrew Minalto has even more insight on this: https://andrewminalto.com/will-amazon-fba-sellers-survive/

The future of Amazon

Is it worth it?

In general, the advantages outweigh the disadvantages when it comes to Amazon FBA. Amazon has dominance in the eCommerce world, and getting on the bandwagon may be one way to increase success. That being said, if the proper steps are not taken, it is very easy to lose money using Amazon FBA. It’s essential that sellers understand how to effectively market their products to see their awareness and profitability increase. If the above steps are followed, then it is possible to use Amazon FBA in a way that will grow your business.

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