FBA and Prime: Why Should You Care?

By Simon Kelly | 16 Mar 2018

Fulfilment by Amazon launched last month and Prime is on its way. How will this shake up the retail sector and what do you need to know to stay on top?

It’s exciting times for marketplaces in Australia. Fulfilment by Amazon (FBA) launched last month, and Prime will be available mid-2018. Since Amazon’s arrival in Australia, retailers have been scrutinising every move, wondering if, and when Amazon’s full impact will be felt. It was no secret that FBA and Prime were part of Amazon’s next phase of growth in Australia. Now that the wheels have been set in motion, what’s your strategy?

What does it all mean?

Prime

Prime is Amazon’s paid loyalty program and according to recent estimates, there are 90 million Prime subscribers in the US alone, 17 million members in Germany and 8 million in the UK. While Prime Video and Prime Twitch are already available in Australia (for games and video streaming), it’s Amazon Prime’s delivery and shopping options that are causing the most buzz here. Members will be eligible for free one- or two-day shipping on most items as well as plenty of other perks.

FBA

Businesses that wish to ship through FBA send their products to Amazon’s fulfilment centre (for a storage fee) and Amazon will pick, pack and ship the product on behalf of the seller. For the consumer, orders above $49 will qualify for free delivery (with guaranteed one- and two-day delivery available in select areas on select products). For sellers, the advantage of FBA (apart from access to one of the most advanced fulfilment operations in the world!) is that Amazon will handle all customer service, including returns. To find out more details about FBA and calculate your potential costs versus revenue, check out the Fulfilment by Amazon Revenue Calculator.

There is a relationship between Prime and FBA—for products to become Prime eligible, they also need to be fulfilled by Amazon. While Seller Fulfilled Prime may be rolled out in Australia at a later date, to initially leverage Prime, you need to be prepared for FBA.

Why should you get on board?

Amazon is all about the customer experience. Almost every program it offers relates back to improving the customer journey, namely price, selection and convenience. Amazon knows that FBA will improve the customer experience which is why using FBA also increases a seller’s chance of Buy Box placement. This, in turn, will increase conversions. It has been reported that nearly 90% of Amazon sales occur through the Buy Box.

For Amazon customers, Prime and FBA eliminates uncertainty about shipping costs, shipping times, returns and customer service. These challenges play a huge role in shopping cart abandonment. This next phase of Amazon is essentially removing obstacles for both consumer and seller, which will improve the user experience and consequently improve sales and loyalty across the board.

Now is the perfect time to include FBA as part of your strategy. Amazon is running an introductory promotion giving sellers access to free storage and removals if they sign up from now until 31 August 2018 (with volume limits and other conditions and eligibility requirements that apply).

We know that keeping on top of all the recent changes is a challenge. For more about what you need to know about FBA and Prime, their impact, and how you can adapt, sign up to ChannelAdvisor’s exclusive webinar with Power Retail on 28 March 2018.

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