Why You Should Start (or Buy) a Fulfillment by Amazon Business in 2021 Want to get in on the recent shift toward ecommerce? A Fulfillment by Amazon (FBA) business presents a solid pathway.
By Thomas Smale
Opinions expressed by Entrepreneur contributors are their own.
If ever there were a time for ecommerce businesses to prove themselves to the rest of the world, 2020 was it. Beginning a year ago, worldwide concerns about the global health crisis forced small brick-and-mortar businesses to shut their doors (temporarily in some cases; forever in others) and conduct all or a majority of business online. Larger retailers began to face new requirements regarding reduced occupancy and frequent sanitization. A necessity as simple as shopping was suddenly forced into a space only some businesses were familiar with: the Internet.
Many retail businesses met the challenge with impressive dexterity. Well-run ecommerce businesses (whether they already conducted sales online or they shifted at the start of the pandemic) posted record sales, driving an increase in acquisition demand. For many of these ecommerce businesses, Fulfillment by Amazon (FBA) was their secret sauce.
Fulfillment by Amazon is a service that incorporates packing, shipping and customer service into the Amazon seller experience. Instead of selling a product via Amazon and then having to label, mail and answer questions about the product themselves, an online business can rely on Amazon to take care of each step of the process for them. For some business owners, the benefits of selling a product on Amazon — then having the retail giant pack and ship the order for them — are almost limitless.
Related: How to Start Earning a Side Income with Amazon FBA and Shopify
If you're interested in getting in on the recent shift toward ecommerce, FBA may present the perfect pathway. Here's why.
1. Space-saving
FBA saves space (including on your calendar). For many, owning a successful retail business is part of the American dream. What isn't a part of that dream, however, is keeping piles of inventory and packing supplies all over the house or paying hefty prices for warehousing. This is the problem that Amazon sought to solve when it launched FBA: By taking advantage of the service, busy and cluttered retail teams could finally clear up space for what mattered most to them, such as branding, product testing and social media marketing, among other entrepreneurial tasks.
Related: 4 Key Trends for Retail Entrepreneurs in 2021
2. Stable fees
FBA takes the variability out of pricing. Online retailers who pack and ship on their own often pay variable fees for supplies and shipping, depending on what the product is and where it's going. Since sellers using FBA are shipping their products via the Amazon Prime delivery service, shipping fees are predictable. Amazon even offers a fulfillment cost calculator that allows curious potential FBA sellers to compare their current fulfillment expenses with FBA fees before making the leap.
3. Set customer base
Amazon has already established a vast customer base. Some consumers are skeptical of entering payment information or addresses on a website they're unfamiliar with. Others want a space in which they can quickly and easily assess reviews before deciding on a purchase. By using FBA, sellers are not only accessing Amazon's established customer base, they're also allowing customers to consider and complete their purchase in an environment they already trust. This provides an otherwise rare opportunity to promote and scale a business.
4. Freedom
FBA sellers maintain the freedom of entrepreneurship. One may assume delegating packing, shipping and customer service to a third party would come with stringent selling requirements and restrictions. Instead, FBA allows sellers to move at their own pace. Sellers don't need to meet a minimum number of units sold to maintain their use of the program, and those who just want to try out the service can apply FBA to as few of their products as they'd like. Rather than giving up their ecommerce strategy, sellers get to make the choices that are best for their business — all while benefiting from the highly sought-after blue Prime badge.
5. Ecommerce boom
Business is booming. FE International's Technology M&A: 2021 Outlook analysis found that the sale of FBA businesses specifically is a major reason for the past year's shift toward ecommerce acquisition. Both retailers and shoppers have made themselves comfortable in the online world. Technology-driven business solutions are becoming a favorite among small-business owners and corporate entities alike, as workforces shift to permanent work-from-home and virtual fulfillment. At the same time, consumers are becoming accustomed to making their purchases online and waiting for shipping (or opting for curbside pickup). Special-purpose funds and private equity firms are capitalizing on this transformation by acquiring and scaling profitable FBA businesses.
Related: The Pandemic Economy Has Made Ecommerce More Indispensable Than Ever
Of course, no brand-new venture (or major shift in an existing one) is a walk in the park. Those who are most successful with FBA have a decent understanding of Amazon overall: how the algorithm works, how to work the seller dashboard, and what competition may look like on the site itself. Still, 2020 proved that ecommerce is a major part of our economy that's here to stay — with or without the global health crisis that shoved it into the spotlight.
Whether you're an individual looking to start your first retail business or a seasoned entrepreneur interested in capitalizing on a once-in-a-lifetime shift to ecommerce, FBA is a "primed" and ready pathway to scalability and opportunity. As our market analysis shows, there's never been a better time to start than now.
