Welcome to Basilio Inc. ‘s Build. Grow. Exit Big: Your Guide to Selling on Amazon. If you’re contemplating launching your own business as an Amazon seller, stay with us, as we will cover all the vital aspects of building a successful and profitable business on Amazon.
It’s a general truth that Amazon is nowadays considered the world’s largest e-commerce platform. As of 2018, Amazon boasted $233 billion in revenue, with over 5 million third-party sellers operating across Amazon’s 12 worldwide marketplaces. There’s no doubt that setting up a business on Amazon can yield significant profits. However, if you truly aim to succeed on this platform, you should ensure that you are doing everything by the book.
This is precisely why our team, led by Jerome Basilio, has created this comprehensive guide. It will help you grasp every minor aspect required for building a successful business on Amazon.
Order Management
Let’s delve into the important aspects of Order Management and Fulfillment:
Fulfillment Options
- What are the available options for fulfilling your Amazon orders?
- Which fulfillment options align best with your growth potential as an online seller?
- What are the tradeoffs associated with each option?
Handling Customer Returns
- How should you prepare your business to effectively manage customer returns?
Let’s begin by examining the major types of order fulfillment commonly used by Amazon sellers
In this chapter, we will explore the different fulfillment options that sellers can choose from for fulfilling their Amazon orders.
We will also discuss the logistics involved in handling customer returns on Amazon.
Self-Fulfilled: Self-fulfillment is a common option where sellers fulfill individual orders on their own. Initially, small-scale sellers may manage the fulfillment process from their homes, packing and shipping orders individually. However, as the business grows, this approach may become challenging to handle efficiently. Scaling up requires investing in shipping optimization services like Shipstation, Ordoro, or Shipwire, as well as potentially hiring dedicated staff to manage order fulfillment. As the volume of orders increases further, additional challenges may arise, such as the need for warehouse space, overhead costs, and the implementation of order fulfillment software like Skubana, Sellercloud, Brightpearl, or SolidCommerce. With growth, the number of returns may also increase, necessitating designated personnel to handle return-related tasks.
It’s crucial for sellers to strike a balance between operational issues related to order fulfillment and focusing on strategic aspects of their business, such as sourcing opportunities and optimizing product selection for customers.
Fulfillment by Amazon (FBA): Fulfillment by Amazon (FBA) offers a powerful alternative to self-fulfillment for Amazon orders. Amazon sellers have the unique opportunity to leverage Amazon’s cost-effective and world-class fulfillment services through FBA. With FBA, sellers send their products in bulk to Amazon’s fulfillment centers, where Amazon takes care of individual order fulfillment. These fulfilled orders are then displayed on Amazon.com as eligible for Prime Shipping and Super Saver Shipping, which significantly improves customer conversion and sales on Amazon. Additionally, Amazon handles order confirmation and parts of the customer returns process for FBA products, ensuring a streamlined and standardized experience for both customers and sellers.
Amazon’s extensive fulfillment capacity enables them to efficiently handle fluctuations in order fulfillment needs for any Amazon seller. When considering the overhead costs associated with running their own warehouse, the total cost of using FBA for order fulfillment often proves to be more cost-effective or on par with alternative options. Amazon benefits from industry-leading shipping rates with major carriers and the economies of scale resulting from operating large warehouse facilities. While sellers are responsible for preparing their inventory for FBA (including product stickering or bagging if required), these processes require less time and effort compared to individual order fulfillment.
It’s important to note that FBA products have special requirements. All products shipped to FBA must have a unique label, such as a UPC or custom product-specific barcode provided by Amazon. Certain types of products, such as liquids and hazmat items, have restrictions on shipping to FBA, and specific packaging requirements exist for categories like Apparel, Grocery, and Health & Beauty.
Many sellers have successfully grown their businesses to large daily order volumes using FBA without the need for a dedicated warehouse. This allows sellers to focus on core activities such as sourcing inventory, securing lower prices, and expanding product selection for their customers.
To create FBA shipments and send them to Amazon’s Fulfillment Centers, you can access the “INVENTORY MANAGE FBA INVENTORY” section in Seller Central. You can find helpful videos on creating shipments by typing “Shipment Creation Workflow” into Seller Central’s HELP bar or by searching for “Selling on Amazon” followed by “Shipment Creation Workflow” on Amazon.com.
3PL (Third-Party Logistics): In the US, an increasing number of warehouse facilities offer various logistics services to Amazon sellers, including storage, FBA prep, individual order fulfillment, and returns management. Utilizing a third-party logistics provider (3PL) allows sellers to outsource their warehouse needs entirely, eliminating the need for their own facility and staff. While pricing and performance may vary among 3PLs, many are recognizing the significance of FBA in the ecommerce landscape and becoming more competitive in terms of pricing and service quality.
However, sellers using a 3PL are still responsible for ensuring that the provider meets Amazon’s requirements for shipping times and order confirmations. It’s crucial to verify if the 3PL has the capacity to accommodate the seller’s potential order growth and scale accordingly. In the additional resources section of this chapter, we provide the names of several 3PL companies that specialize in offering Amazon-specific services to assist sellers.
Drop-Shippers: Some sellers opt for the drop-ship model, where they don’t physically possess the products but instead rely on suppliers to fulfill orders directly to customers. This approach can be successful if the drop-shipper effectively manages inventory availability, consistently ships orders on time, and promptly confirms shipment on Amazon. However, it is important to exercise caution when selecting drop-shippers, as relying on unreliable ones can lead to shipping delays and potential account suspension or closure on Amazon.
When using drop-shippers to significantly expand product selection, sellers should be aware that these suppliers often work with numerous sellers. This can result in increased competition, price wars, and overall price compression, potentially impacting margins for all sellers utilizing drop-shipped selection.
International Shippers: By enabling the FBA Export feature, Amazon sellers can make certain FBA items eligible for shipping to international customers. If a seller decides to fulfill international orders themselves, it is essential to ensure that these orders are properly labeled with the required export documentation for smooth customs clearance. Companies such as DHL, UPS, and Borderfree can assist sellers with shipping and documentation for individual international orders.
Marketing Materials in Orders Sent to Amazon Customers
Amazon strictly prohibits sellers from electronically advertising to Amazon customers, even if the purpose is to drive them back to the seller’s Amazon store. Sellers are allowed to include paper-based marketing materials such as catalogs or pamphlets in their orders to Amazon customers. If a seller is using self-fulfillment or a third-party logistics provider (3PL), it is relatively straightforward to include catalogs or pamphlets in the boxes shipped to customers.
For FBA orders, sellers must ensure that all marketing materials are physically placed inside each product box prior to shipping it to Amazon. Please note that Amazon does not include such materials in an FBA shipment as part of the picking and packing process. It is crucial to avoid including any materials that encourage customers to provide biased positive feedback for your products, as well as refrain from providing documentation that intentionally promotes external websites. Please note that Amazon occasionally conducts inventory checks (known as a bin check). Failure to comply with these guidelines may lead to the suspension of your account
Please note that sending paper catalogs to customers after the sale is a gray area, and Amazon’s stance on this may vary.
We recommend sellers interested in testing the limits of Amazon’s marketing rules to take the following steps:
- Carefully review the “Amazon Services Business Solutions Agreement” in Seller Central, specifically the section on “Use of Amazon Transaction Information.” This will provide insights into Amazon’s regulations regarding marketing to Amazon customers. Keep in mind that Amazon reserves the right to modify the agreement or its interpretation, so stay updated.
- Contact Seller Support and clearly explain your marketing plan. Request written confirmation from Amazon that you are allowed to proceed as planned. If you receive Amazon’s approval, ensure that you do not make any changes to the marketing plan without consulting Seller Support again.
One approach some sellers have used is including a warranty card in all orders, both sold on and off Amazon. If customers choose to fill out and send back the warranty card, the seller acquires customer contact information outside of what Amazon provides in Seller Central for the initial order.
As long as the seller also provides warranty cards in orders sold outside of Amazon, they can use the customer information obtained through the warranty cards to communicate with customers. It’s important to remember that incorrect or inappropriate marketing to Amazon customers can lead to seller suspension or termination. Exercise caution and adhere to Amazon’s guidelines and policies.
Customer Returns of FBA Orders
Handling returns can be a challenging aspect, even with a well-defined process. While there is comprehensive documentation in Seller Central regarding return procedures, we will focus on key points.
For returns of FBA orders, Amazon applies its own return policies:
30-Day Return Window: Customers have 30 days from the shipment date to file a return for FBA products.
Free Return Shipping: If a customer claims any kind of defect in the product, they are eligible for free return shipping to Amazon’s fulfillment centers. Depending on the product category, the return shipping cost may be passed onto the FBA seller.
Amazon’s Discretion on Returns: As outlined in the FBA agreement, Amazon retains discretion in classifying returned products. This can sometimes lead to frustrations for FBA sellers who receive used or damaged items as returns, even though the original condition was new. Amazon may make concessions to customers, even if the returned product does not meet the stated return policy requirements.
Limited Inspection of Returned Items: Amazon does not thoroughly inspect returned FBA products to identify instances of customer tampering or fraudulent returns. There have been cases where customers returned empty boxes and received refunds.
Returns vs. Replacements
In the case of FBA orders, if a customer is dissatisfied with a product, the only available option is to return it. Partial concessions or replacements are rarely made for FBA orders. The product is refunded, and the customer may need to purchase a replacement from another seller or choose not to repurchase the item at all, using the refunded amount.
While these return policy conditions may seem lenient, Amazon’s focus is on keeping customers satisfied. Amazon views customer satisfaction as essential for fostering repeat business. Despite the potential for customer fraud in the returns process, Amazon considers it a cost of doing business and expects FBA sellers to absorb it as part of the overall cost of using FBA.
As a result, FBA sellers may experience higher return rates compared to non-FBA orders and a potentially higher incidence of customer fraud. However, it is worth noting that FBA products generally sell faster than non-FBA orders, which can offset these challenges.
Please refer to the specific return procedures and guidelines provided by Amazon for comprehensive information on handling returns for FBA orders.
Customer Returns of Non-FBA Orders
When it comes to returns of orders not fulfilled by Amazon (non-FBA orders), sellers have more control over the return policy. It is important for sellers to clearly document their return policy on their Amazon homepage, enabling customers to review it before placing an order.
Here are some key considerations for handling returns of non-FBA orders
Partial Compensation: Sellers have the discretion to provide partial compensation to buyers for issues with their orders, in addition to refunding the basic order costs. This can include compensating buyers for scuffs, missing parts, or other order-related issues.
Return Shipping and RMA: In the case of a defective item, sellers may choose to cover the cost of return shipping or require buyers to request a Return Merchandise Authorization (RMA) number before sending the return back to the seller.
Monetary Concessions: If a buyer is disappointed in receiving the wrong color of an item but is willing to keep it, sellers can choose to make a monetary concession to the buyer as a resolution.
Concessions and Amazon Debits: When a concession is issued, the full amount of the concession will be debited from the seller’s account by Amazon.
Concessions for Customer Satisfaction: Issuing concessions can help keep customers happy, as they do not contribute to the refund percentage in seller performance metrics. If one or more products in an order are fully refunded, the order is counted as a refunded order and included in the seller’s Refund Rate.
Refunds through “Manage Orders”: To issue a refund for an order, sellers can use the “Manage Orders” tool under the “Orders” tab in Seller Central. They have the flexibility to issue full or partial refunds based on the specific circumstances of the return.
It’s important for sellers to maintain clear communication with buyers throughout the return process and ensure that refunds or concessions are provided promptly and in line with their stated return policy. Please refer to the Seller Central documentation for detailed instructions and guidelines on managing returns and issuing refunds for non-FBA orders.
Experienced Seller Suggestion
Based on our experience, it is common for packaging to be missing or damaged on returned items. To mitigate this issue and maximize the potential for resale, we highly recommend that sellers keep extra boxes and packaging materials to restore returned products.
Additionally, if sellers have spare parts from damaged or unsellable products, those parts can be utilized to repair any damaged items that are returned. Rather than discarding products that cannot be resold, we strongly encourage sellers to retain these spare parts, as they can prove valuable in refurbishing returned items.
By maintaining a supply of spare packaging materials and parts, sellers can enhance their ability to restore returned products to a sellable condition, minimize losses, and optimize the potential for future sales.Remember, efficient handling of returns and product restoration contributes to a positive customer experience and can help maintain customer satisfaction and loyalty.
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