More ecommerce sellers than ever use Amazon’s popular fulfillment service, Fulfillment by Amazon (FBA). They help sellers reach a larger audience and help improve seller ratings with fast shipping and better customer experiences. They handle many of the time-consuming tasks related with online selling.
With so many sellers using this service, how can you get a leg up on the competition? Let’s first take a quick look at how FBA works, and then get into some useful tips on how to increase your FBA sales.
How Does FBA Work?
Fulfillment by Amazon makes order fulfillment easy for Amazon sellers. It is a simple concept: FBA sellers store inventory in fulfillment centers run by Amazon. Amazon employees pick, package, and ship products to the customer when a purchase is made. Additionally, Amazon handles customer service issues for lost packages, mishandled products, and returns.
Actionable Tips to Help Increase FBA Sales
Scaling ecommerce businesses of any kind can be difficult, and FBA is no different. Here are some tips to help grow your FBA business smoothly:
#1 – Track Your Numbers
One of the most important things you can do is to determine whether it is cost effective to use the FBA service. Are you making enough of a profit after expenses and fees to make it worth it? The easiest way to determine this is by tracking the adjusted gross margin of your products. For FBA sales, it’s good to aim for an adjusted gross margin of 15 to 20 percent, the typical amount for FBA sales.
How to Calculate Adjusted Gross Margin
To calculate your adjusted gross margin, you must track all your expenses and use the following formula:
(sale price – (purchase price + all other expenses)) ÷ sale price = adjusted gross income
- The sale price should be what you sold your product for.
- The purchase price is the amount that you paid for the product.
- All other expenses will differ for each customer. This should include shipping costs for receiving the products to the FBA warehouse, the fees for storing the products, and the shipping costs for fulfilling the order, and any fees being charged on the specific sales channel.
Without tracking the adjusted gross margin, you can’t determine the accurate performance of your business. FBA is a great service but does cost money. If your margins are slim, it may not be worth it to use it.
#2 – Have a Passion for Your Products
It is no longer enough to simply find profitable products to sell. These days, customers buy the products that they connect with, which means you need to connect with the products too. Being passionate about the items you sell will give you a leg up in the industry – especially long-term.
Selling in niche markets can help build a passionate brand to connect with customers. With more focused marketing campaigns, you can target a specific audience and create content about the products you sell. It is also easier to find influencers to help you build brand awareness.
- Searching for a niche product is hard. Check out our guide to the top ecommerce niches of 2018. Don’t like any of those options? Use Google Trends to find an ecommerce niche you can get passionate about.
- Research the industry and stay up-to-date on trends. We’ve put together a list of the top ecommerce trend publications and blogs to get you started.
With FBA, the passion you have for products can help encourage and nurture relationships with potential and existing customers. That translates into more sales and business growth.
#3 – Use a Repricer
As your FBA business grows, you may have hundreds (or even thousands!) of SKUs to manage. That’s a lot for any ecommerce business owner to stay on top of. Pricing can get incredibly difficult the more SKUs you have in your catalog. With FBA, it’s important to stay competitive with pricing to be successful. But who has the time to monitor their own, and competitors’, pricing all the time?
With repricing software, you won’t have to spend your time consumed by monitoring and adjusting your prices to stay competitive – it will be done for you automatically.
#4 – Understand Best Seller Rank & the Buy Box
Amazon assigns a Best Seller Rank (BSR) to nearly all of its products. This ranking shows how well a product is selling overall and is updated hourly. It can be found on any product listing within the product details section:
There are a few factors used to calculate a product’s BSR including recent sales, historical data, and Amazon’s own predictive algorithm. There isn’t much control over the BSR and it is extremely volatile.
While there isn’t much you can do to optimize your seller rank, there are ways to influence people to buy your product, thus increasing your BSR. Winning the Buy Box is one of those factors that can influence people to buy your product. 82% of Amazon’s sales happen via the Buy Box. If you aren’t winning the Buy Box, you could be missing out on a ton of sales.
Getting more reviews and rankings will give you a leg up on the competition and help you win the Buy Box. In addition to these factors, have a smart pricing strategy, keep customer service issues to a minimum, and make sure your performance metrics are in good standing. Doing all of these things will have you winning the Buy Box in no time, and possibly increasing your BSR.
#5 – Advertise Effectively
Building your customer base is going to require some advertising. Search engine optimization (SEO) is great for organic searches, but paid advertising is the key to quick results – when it’s done right. In fact, it can significantly reduce your customer acquisition costs in a short amount of time. Amazon sponsored ads are great for day-to-day advertising or for certain seasonal campaigns or new product release.
The most important thing you can do when it comes to paid advertising is test. Without testing areas such as the images and copy in ads, you won’t know what works best and brings more conversions. Keep in mind that people tend to click first based on what they see rather than what they read. Test your images first to see which ones generate the most traffic, then move on to testing your copy.
Final Thoughts on Growing Your FBA Business
Getting started with an FBA business is fairly easy and doesn’t require a huge monetary investment. The challenges that many FBA sellers run into happen as they try to grow their business. That’s why it’s important to be passionate about your products, use the right tools, and continuously track your performance and accurately make adjustments when you need to.
Do you use FBA? What did you like or dislike about it? Do you have any secret tips to grow your FBA business? Let us know!