Amazon Prime Air: Drone Delivery Coming to a City Near You

When Amazon was launched, it began as a online bookstore. Outside the span of economic opportunity was the chance of enhancing the buyer experience by widening the customers’ choice. Creating the world’s first online bookstore was recognizing that, in 1995, you couldn’t walk into any bookstore in the world and be able to review or purchase the millions of books in circulation. Even from the beginning, Amazon was focused on creating the best customer experience with a deliberate focus on convenience and the vision of pioneering other technological advancements as the end of the 21st century approached.

I believe it’s fair to say that Jeff Bezos and many others, including myself, believed the 21st century would include the convenience of flying cars, the convenience of getting your annual checkup without having to visit the doctor’s office, or being able to order a ride to anywhere in your city all at the press of a button. In 1995, all of these technological advances were just storylines of The Jetsons and other science fiction. Innovation has now made all but one of those storylines a reality – but I’m sure Elon Musk is working on getting us those flying cars.

Amazon has pioneered a number of technological innovations through their now-extensive product lines. From its conception, the company was focused on making every book available for purchase online, but their focus has now evolved into “selling everything to everyone.” Over the last 16 years they have come closer and closer to that goal. Their product lines include:

Amazon Fresh (currently in beta), where they sell fresh produce.
Amazon Prime, which provides video and music content instantly to customers via their smart devices.
Amazon Fashion, which launched last fall.
Amazon Fulfillment.
Amazon Marketplace, which provides customers with the opportunity to become entrepreneurs while utilizing the company’s logistics and distribution infrastructure.
Amazon Kindle, which I believe was the predecessor of all other tablet devices.
Amazon Web Services, which was a business born out of Amazon’s necessity to create a sustainable infrastructure for their online operations. They did it so efficiently that they had extra capacity to support the infrastructure of other companies, some of which could be considered their competitors.

Their latest and possibly most ambitious endeavor, Amazon Prime Air, will revolutionize ecommerce as well as logistics and distribution. Amazon Prime Air extends the products that the company can sell. With a vision of leading innovation in Unmanned Aerial Vehicle (UAV) delivery, Amazon Prime Air will enhance all of their other product lines by allowing their customers to get the goods they order much faster, effectively enhancing the Amazon customer experience. Skeptics (including myself) have wondered how big is the customer base that would use such a service and why would anyone ask for a drone to come anywhere near their house. Drones definitely get a bad rap, and rightfully so, but most of those concerns are out of place within the APA discussion as these UAVs will not have missiles or cameras attached to them. So the real question is, does this product line and technology have a customer base or serve any real need outside of its “coolness” factor? Well, let’s take a look at what the data says:

Amazon has been working on UAV technology for some time but it wasn’t until November of last year that the Federal Aviation Association (FAA) announced a plan to create a standard for the commercial use of Unmanned Aircraft Systems (UAS). It is obvious that Amazon has to go on a public relations blitz to inject the acronym “U.A.V.” into the public discourse in the place of “drone” in regards to APA as it will enhance the public’s perception once they launch the platform. And according to the FAA’s UAS commercial integration plan, they have plenty of time.

Here is the FAA UAS integration timeline. It is broken into 3 phases:

The first phase, Accommodation, extends into 2015. During this time, I believe Amazon will work to attain the Certificate of Airworthiness (COA). The second phase, Integration, extends into 2020, and in this phase I believe Amazon will mostly focus on beta testing in select markets. The third and final phase, Evolution, extends past 2021; Amazon would have not only developed a UAV ready to interact with the public but also a UAS that incorporates the various aspects of storage, fulfillment and distribution. At this point, they can expect that there will be many competitors who would also utilize UAVs as a form of logistics such as Fedex, UPS, other online retailers, and big box stores such as Walmart and Target. So Amazon’s main focus at this point should be creating a UAV/UAS that will be the safest and most reliable, and not only meet FAA standards but exceed them with the goal of Amazon Prime Air becoming synonymous with UAV delivery. The FAA has made it clear that it is not a matter of if but when, and if Amazon follows through with its plan, it could pioneer a completely new form of delivery.

Google Trends

The day after Amazon Prime Air was announced on the show 60 Minutes happened to be the largest consumer holiday of the year, “Cyber Monday.” It was also the first time that Cyber Monday surpassed Black Friday in sales. Utilizing the Google Trends tool I was able to gauge consumer interest. Google Trends is a research tool that allows users to gain insight on Google search data by comparing search phrases. In this graph “Cyber Monday” was at 100pts with “Amazon Prime Air” and “Amazon drone” representing 75 and 74 points respectively. So for every 4 people that searched for Cyber Monday deals, 3 searched for Amazon Prime Air. I believe it is fair to say that for every 4 people who made a purchase on Cyber Monday, 3 would have been a customer of Amazon Prime Air!

The data shows that there is some consumer interest, but whether this is a true reflection of real opportunity is to be confirmed. Regardless, a showing of 3 out of 4 consumers definitely leans towards further investigation. The opportunity and economics of this new business line must be examined. Amazon Prime Air’s current prototype has a max payload of 5 lbs or less, which qualifies 86% of their shipments as eligible for Amazon Prime Air. According to resources, their free shipping policy on select orders cost the company about $6 billion just last year and with FedEx and UPS (their shipping partners) increasing the rate by 4.5% they can anticipate that this cost will go up and continue to increase over time. The data available on the Amazon Prime Air R&D budget is not publicly available so I had to get creative and also make a few assumptions. I deduced the opportunity cost by multiplying 86% of their daily shipping count which at its peak represents 13.5MM by the lowest ‘one-day shipping’ rate which is the closest service to Amazon Prime Air and then the highest ‘one day shipping rate’ and captured an amount totaling $52-103 billion. I then took this a step further, considering Amazon’s customer-centric philosophy and their current business model of low margins. Even at a 2% margin they would still net $1-2 billion dollars. The opportunity is large enough that Amazon will either be a huge customer of UAV delivery or a huge provider of UAV delivery.

So far I’ve covered the vision, strategy, and the why (albeit briefly), and now for the execution of the most innovative product of the 21st century – so innovative that the government is still trying to determine the regulations.

Amazon Prime Air is the name of Amazon’s unmanned aircraft system. The system will be developed by framing every possible user story with the consideration of their customers, the public, their employees at the fulfillment centers, the deployment, the UAV hub and most importantly, the unmanned aircraft vehicle.

At their current capacity of 96 fulfillment centers around the world, they do not meet the 10-mile distance requirement for the UAV prototypes, so as part of their strategy they would need to continue the development of fulfillment centers as part of the unmanned aircraft system.

UAV MVP

Amazon’s primary focus should be creating a safe UAV, so discussing and developing user stories with the engineering team will be prioritized by safety, security, and reliability. They should also focus on defining and exploring specs utilizing current FAA requirements such as sense and avoid, control and communications and the others as detailed.

The current roadmap details the definition and exploration to meet FAA requirements within the next two months, exploring SAA technologies such as electro-optic, infrared, and radar, with the second phase focusing on building and testing of the UAV through the rest of the year. The last phase, focusing on developing the rest of the Amazon Prime Air system, will extend into 2015 calendar year.

Launching Amazon Prime Air will not be an easy task, as can be expected for such an ambitious endeavor, but I believe even with this brief analysis of the project, Amazon could lead in the innovation of UAV delivery.

Running Your Own Amazon Business From Home

Long before the internet, retail was well established as one of the most competitive industries to enter. The internet has given new entrepreneurs the ability to launch their business with more ease, but it can still be difficult to find a foothold.

Even though there are tens of thousands of retail websites online, a few major brands continue to dominate, much like traditional high street retail. By some distance, Amazon is the largest online retailer of all.

The simple truth is that very few companies will ever be able to compete with Amazon. So why bother? The best thing that you can do if you want to start an online retail business from home is to get involved with the Amazon brand and turn it to your advantage.

Read on to learn the basics of getting up and running with your own Amazon business. You’ll find out that by treating Amazon as an ally, not a rival, you too can start earning a great living from home.

Why Start An Amazon Business?

Understanding how you should sell products in the retail environment means understanding what customers look for when they buy them.

Of course, every customer looks for the highest quality products at the lowest possible prices. If you can offer something truly innovative, or enter an existing sector with lower prices, you can certainly attract a large amount of interest in your business.

But this interest is only worthwhile if it turns into revenue. Unfortunately, this means a big leap of confidence for your visitors.

Online security is better than ever, but retail trust is about far more than stolen credit cards. In fact, it can take years for potential customers to learn that you offer good products, you package them well, you dispatch them on time and you follow up with great customer service.

Amazon is the biggest online retailer because it is a brand that customers trust. If you’re selling on Amazon, they’ll trust you too.

How Does Selling On Amazon Work?

First, you need to sign up for a seller account with Amazon. There are two types of account available.

The standard Basic Seller Account is free, and offered to those retailers that sell less than 35 items a month. Products can be listed in up to 20 different categories, and you will simply pay a fee for each product sold. A significant limitation, though, is that you can only sell products that are already for sale on Amazon.

As your business grows, you may want to upgrade to a Pro Seller Account. This type of account is charged at £25 per month, but includes the ability to create new products, and sell them across up to 25 different categories.

For more information on the types of account available, visit amazon.co.uk/services

What Can You Sell On Amazon?

As with any retail business, the first step in successful Amazon selling is deciding on your products. Amazon now has categories for just about anything. Generally, you have three types of products that you can sell on Amazon – which one is right for you?

Products That You Make – If you have a great product idea, or even just a talent for creating new things, your products could fill a niche on Amazon. With little or no competition, these kinds of products are potentially lucrative – but it’s incredibly difficult to be original!
Products From Wholesalers – The traditional retail business model, you could source products from wholesalers or manufacturers and sell them with a mark-up on Amazon. But beware – having stock shipped to your home address usually means buying high volumes of stock in advance! If you plan to use this method, consider drop shipping, where stock is dispatched directly from the wholesaler.
Used Goods – From second-hand books to DVDs, many sellers earn a living from reselling used goods. When a customer searches Amazon for a product, they will see your more affordable used version.

The best kind of product for you will depend on your talents, your goals, and the kind of products that you have access too. It’s great advice to simply make a choice – spend less time considering your first products and more time working on promoting your Amazon business.

One Amazon seller, Tedric P, did exactly this. He started out by selling video games and consoles that he would buy from high street retailers that were shutting down their stores. Now, his products cover numerous categories and he is earning 30% more than he was in his full-time job!

Choose Your Preferred Order Fulfilment Method

When you have selected your products, it is time to think about how you will get these products to your customers. Never rush head-first into selling without getting a clear idea of how the entire process will work.

When you start selling on Amazon, you have a range of options for fulfilment. Each has its own advantages and your choice will depend on the kind of products you are selling.

First, you can keep your business in-house and send out products yourself. This adds to your own workload, but in the early days of your work-from-home business is usually the best method. Another great advantage of keeping distribution in-house is that you can retain control of your orders, reduce your costs, and even include promotional materials with your packages.

Alternatively, you could partner with Amazon to have them dispatch orders on your behalf. Fulfilment By Amazon, or FBA, is a service provided by the company that is designed to reduce your workload and improve the experience of customers. If you sign up for FBA, you will be asked to send your inventory of stock to Amazon, who will store it for you. Then, when an order is placed, Amazon take care of sending your products – customers can even combine your products with the rest of their Amazon order, or use services such as Amazon Prime for fast shipping.

Finally, you may be able to reach an agreement with your wholesaler or manufacturer if you have one. Using a process called drop shipping, you can concentrate your attention on promoting products and delivering great customer service. All you need to do is notify the wholesaler or manufacturer when an order has been placed, and they will take care of sending it on your behalf. A drop shipping agreement is also a great way to secure arrangements with wholesalers without buying large quantities of stock in advance.

How To Make Your Amazon Business A Success

Starting your Amazon retail business is easy. Making it successful is not! As with any retail venture, promotion is everything. Amazon includes a number of features to help you promote your products, but there is a lot that you will need to do for yourself. Here are three tips to get you started:

1. Consider How You Write Product Listings

A product description is a difficult thing to write. It must convey useful information while persuading, enticing and attracting your potential customers. As you write, ask yourself what your customers would want to know, and how the product can help them. Does it make them look great? Does it save them time? Write benefits-driven product listings that persuade customers to take action.

2. Encourage Activity Around Your Listings

Take a look at any product available on Amazon and you will see product ratings and reviews. These are vital assets for your work-from-home business.

Ideally, your products will be so good, and your service so amazing, that customers will naturally flock to Amazon to leave a message. But don’t rely on that – always be proactive.

You could email your existing customers to ask for their reviews. You could offer freebies to established bloggers within your sector to encourage them to link to your product and review it. You could even get your friends and family to post reviews themselves. Every review lends credibility to your listing but, more importantly, can lead you to the holy grail of Amazon – The Buy Box.

3. Get In The Buy Box

The real results from Amazon selling come from getting yourself into the Buy Box. This is a complex, almost impossible task, but one that you should always strive for.

The Amazon Buy Box is the big ‘Add To Cart’ button that appears on the right hand side of every product listing. For the average user, it is the only place that they will click when they decide that they are ready to buy. If you sell a product that Amazon themselves offer, they will always remain in the Buy Box. But if you don’t, you should work hard to get yourself there.

Amazon uses a complex algorithm to decide which companies are in the Buy Box, and the details of this have never been revealed. Essentially, there is only one trick – to be the best retailer possible.

Give great service. Send shipments instantly. Use Fulfilment By Amazon so that Amazon can be confident that products will be dispatched correctly. Reduce your prices and be the most competitive seller on the site. By doing all of these things, there is a chance that you could find yourself in this lucrative and in-demand position.

The Secret Of Online Retail With Amazon

All too often, people venture online to find out big secrets about their chosen work-at-home profession. The reality is, though, that there is only one thing that you need to do to create a successful Amazon retail business: do everything that you would do if you opened a high street store.

I opened this article by saying that high street retail was competitive. The internet is exactly the same, if not more competitive. So be discerning with your products, be proactive with your promotion and be unrivalled in your sector. If you can do all of those things, a successful Amazon business is just a matter of time.

12 Points of Comparison – eBay and Amazon

Think of any situation, and there are likely pros and cons. The same is true when deciding whether to expand your sales to Amazon. The fact is, neither eBay nor Amazon can claim to be the best across the board nowadays.

Many eBay sellers have wondered if it’s really worth selling on Amazon. Some feel there are too many rules and it wouldn’t be worth the effort. Some have asked for a point by point comparison between the two sites. Here are a dozen points of comparison that may help sellers make a decision.

1. Fees
2. Format (Auction vs. Fixed-price)
3. Community
4. Stability
5. Feedback
6. Branding
7. Photos
8. Taxes
9. Average Sale Price
10. Payment Methods
11. Return Policy
12. Shipping

1. Fees

Most sellers agree that fees between the two sites are almost a wash. Especially when you consider that you pay for every item to be listed on eBay whether it sells or not. When you consider unsold items, time spent relisting items, and time spent dealing with unpaid items, my opinion is Amazon comes out ahead.

Amazon collects the payment for the seller, and deposits the funds into your checking account. There are no fees for this, while PayPal fees are substantial. If eBay moves to a PayPal only model in the U.S., they can increase fees for collecting payment at will.

Advantage: Tie

2. Format (Auction vs. Fixed-price)

eBay popularized the auction format listing. Amazon failed at auctions and only offers fixed-price listings. Which is best?

For collectibles, auctions are the best way to get market value. eBay is better if you are running an antique store online and want the best prices, and shoppers looking for unique items.

But most businesses, do not deal in collectibles, they sell “practicals,” commodity items that people want to buy and get on with their day. Buyers can readily find these items, and buy online for convenience. It’s easy to set a fixed-price for these items.

While Amazon is the fixed-price king, eBay is moving in that direction by downplaying auctions and encouraging fixed-price listings. The advantage is in the buyers. The Amazon buyer is more affluent, and pays a higher average price for products.

Advantage: Auctions: eBay

Advantage: Fixed-price: Amazon

3. Community

eBay sellers are very involved with eBay buyers. The transactions can be extremely interactive. Amazon buyers and sellers rarely interact. The Amazon buyer tends to expect high customer service and they don’t expect to have to ask if an item has shipped.

Because of the higher interaction with customers, eBay sellers have to spend more time per transaction. Amazon transactions take less time.

Advantage: Amazon

4. Stability

Online retailers rely on the stability of their chosen platforms to operate smoothly. Changes cost time. Sellers have developed systems that allow them to list, sell, and deliver items. When rules change, or things don’t work, the systems break down and profit is lost.

Amazon has had very few major changes in the past few years. Even though there are some restrictions, they generally stay the same, and are enforced consistently. When changes have been made, they tend to stick and sellers can adjust.

eBay has had major changes over the past year, including Feedback, fees, digitally delivered items, search results, Detailed Seller Ratings, eBay’s affiliate program, and more are to be expected. Sellers have been greatly affected in real and perceived ways. Some changes have been rolled out, only to be reversed causing even more consternation among sellers.

Advantage: Amazon

5. Feedback

Both eBay and Amazon have a feedback system allowing buyers and sellers to record their impression of a transaction. Both sites allow buyers to leave negative comments for sellers. Both sites allow sellers to leave only positive comments for buyers.

The eBay culture has given much more weight to feedback than their Amazon counterpart. Amazon buyers can see the seller’s feedback score, but tend to overlook it more readily than eBay buyers. Amazon’s A-z Guarantee may have a bearing on this by making the buyer feel more protected when purchasing an item.

Amazon does not “disadvantage” sellers, as eBay does, by moving them down in the results when shoppers perform a search. eBay does this by considering the seller’s feedback score and making them less visible to shoppers, rather than letting buyers make the choice themselves.

Advantage (especially for sellers): Amazon

6. Branding

Amazon restricts sellers from reaching out to buyers and marketing to them. Traditionally, this has been an advantage to eBay since eBay allowed sellers to link to a site off eBay from the seller’s About Me page.

Recent changes at eBay have virtually eliminated the ability to use eBay as a lead generating tool for off-eBay business. eBay has all but forbidden any outside links from any eBay pages including custom store pages. The only place a link may appear is on your eBay About Me page. This has effectively neutralized eBay as a “branding tool.”

Advantage: Tie

7. Photos

eBay sellers have always struggled with photos. How to take good photos, how to get the photos to show up on eBay, how many photos. Each item, no matter if it’s exactly the same as another, gets its own photo on eBay.

Amazon is different. An individual product gets one photo, and one description page, and all sellers use the same page.

Generally, the first photo posted on a given product, is the photo everyone will use. Some sellers don’t like the idea of other sellers using their photo. But if “one photo fits all” for a particular product, it’s pretty likely that product is a commodity product. Not many photos are needed.

As an Amazon seller, I absolutely love the fact that I can list 20 items without shooting a single photo. It saves a ton of time.

Amazon buyers will buy an item without a photo. They know that the image they see is generally just representative anyway.

Advantage: Amazon

8. Taxes

Marketplace sellers are responsible for the sales tax on any items sold on Amazon.com, and if necessary, they generally add this cost into the price of their items. This is a pain for Amazon sellers who are running a business.

eBay provides a mechanism in the Sell-Your-Item form to collect the taxes in addition to the sale price. This way the taxes don’t eat into the seller’s profits.

It seems Amazon could add a tool like this to their process quite easily for their Marketplace sellers and I wouldn’t be surprised to see it in the future. But until that happens, I’d say…

Advantage: eBay

9. Average Sale Price

Amazon buyers have been shown to be more affluent, and more willing to spend more on similar items. eBay buyers tend to look for bargains, and are willing to wait through a seven-day auction to save a buck.

As a seller, I’ll pick the buyer that is willing to spend more. I have actually used eBay to source products at rock-bottom prices, then sold for good profit on Amazon. Amazon buyers often don’t even look on eBay, and they ultimately pay more.

Advantage: Amazon

10. Payment Methods

Amazon sellers must use Amazon Payments to accept payment. That’s it. Amazon collects the payment, and deposits it into your bank account twice per month (more often if you choose). They collect and deposit the funds with no fees added. eBay sellers can accept PayPal, money orders, cashier’s checks, or cash (in person).

eBay seems poised to require PayPal payments on all transactions. If that happens, it will significantly affect many sellers. If you sell an item for $500, you may now accept non-PayPal payments and keep most of your money. If PayPal is required, you will fork over 2.9% + $.35 ($14.85) in PayPal fees.

Amazon sellers do not have to send invoices, payment reminders, or track unpaid items. If Amazon cannot collect the payment, you don’t have a sale, and your item is still listed on their site. eBay’s system is simply more work, more time, and ultimately costs more to manage as a seller.

Advantage: Amazon

11. Return Policy

Some eBay sellers fear Amazon because of their obligatory return policy, called the A-z Guarantee. This guarantee allows the buyer to receive a full refund if the item is “materially different” from that described, for up to 90 days. Amazon will usually side with the buyer. Sounds pretty tough.

The eBay seller is free to fight it out with buyers with a dispute resolution. This could ultimately result in negative feedback for the seller. They are not required to offer a refund. If eBay forces sellers to use PayPal for payments though, your funds could be held or you may even receive a charge-back against your account. It’s basically the same difference, but the eBay / PayPal route is a lot messier and time consuming. If you have a buyer that is determined to get a refund, they’ll generally figure a way to get it.

Simply based on the time consuming mess the dispute resolution process is, I’m saying…

Advantage: Amazon

12. Shipping

eBay sellers have long looked at shipping charges as a small revenue stream. They bump up shipping prices and skim a little for themselves to cover shipping supplies, labels, and pixie dust. (Okay, I added the pixie dust.) The fact is, many sellers have turned this legitimate charge into a way to avoid eBay fees.

eBay has now begun penalizing sellers who charge above average shipping amounts by lowering their visibility in the default search results. They are even giving breaks to sellers who offer free shipping, in effect hurting those sellers who cannot afford it.

Amazon gives sellers a “shipping credit”, based on an item’s category. This does not always cover the full shipping amount, but usually does. The amount is fixed by Amazon. You cannot ask for more from the customer, and even if the shipping credit does not cover your shipping costs, you must ship the item. Since the shipping credit is fixed, it can be figured in when setting your price.

Which is better? I like to have control over my shipping. But if a seller is careful, it’s pretty easy to figure in the shipping credit on Amazon and not lose money. Even if there is a loss, it’s minimal.

I have found items I wanted on eBay, only to leave because of the outrageous shipping charges. ($1.99 item + $10.99 shipping for a cell phone cover.) I go straight to Amazon, because I know shipping is standard and I won’t feel ripped off. How many other buyers do the same? I’ll take those buyers…

Advantage: Amazon

Summary

There is no question eBay is best for some items, while Amazon is best for others. But the overlap is incredibly large. The vast majority of items that sell on Amazon will also sell on eBay, and visa versa.

The important thing to remember is the shoppers are different. While you and I may shop on several sites, many Amazon shoppers are very loyal to Amazon and won’t even visit eBay. Some eBayers feel it would be a sin to shop on Amazon. By selling on both sites, you are potentially getting millions of additional eyeballs on your products.

How You Can Share in Amazon’s Global Success and Make Money From Fulfillment by Amazon

Amazon is the sales marketplace that originally started out as a place to sell books. But in the last decade it’s graduated to selling anything and everything… and become one of the biggest brands in the world. Not only that but it’s a famous brand that allows – in fact encourages – entrepreneurs to share in their success by selling products right there on Amazon itself.

Over the last couple of years Amazon have been working on another way you can make money in partnership with them. It’s called Fulfillment by Amazon.

How You Can Share in Amazon’s Global Success and Make Money from Fulfillment by Amazon

Now to me Fulfillment by Amazon sounds like a really exciting way of making money in the 21st century Internet age. Because it is a business model whereby you can just focus on marketing and making sales. Then have Amazon do all the “hard” physical work of stocking, storing and shipping your products to your customers for you.

You know, Amazon are always something of a puzzle to me! They come out with the latest, cutting-edge business models and invest millions in making them successful. There’s no doubt Amazon’s brand image, ordering and distribution systems are absolutely without equal.

Then they let any Tom, Dick or Harriet share them for free. Just why they would let ordinary people take advantage of all this for no up-front cost whatsoever, I don’t know! It seems crazy, it doesn’t seem to make sense at all, but they do it… and it’s almost always a big success.

So I thought it’s high time we came back to Amazon and looked at exactly how Fulfillment by Amazon works, whether it is as good as it sounds… and whether it can make some money for you.

Amazon… did you know?

* Amazon attracts 50 million consumers a month worldwide.

* Amazon has been voted the third favourite UK retailer (after John Lewis and IKEA).

* 1.3 million businesses are selling on Amazon.

* Amazon’s business grew 18% last year… when most businesses were shrinking.

So, what is Fulfillment by Amazon exactly?

The basic concept of Fulfillment by Amazon, like all Amazon’s concepts, is simple… although there are a lot of ins-and-outs which I’ll look at later. With this service you send whatever products you want to sell (your inventory as Amazon like to call it) directly to Amazon. Whether it be books, CDs, clothing, computer accessories, toys, or whatever. They store it in their warehouse for you. Then when orders are received Amazon will pick, pack and ship the product directly to your customers for you.

You can use Fulfillment by Amazon whether you just want to sell a few things on Amazon as a sideline or want to sell thousands of products. You can use it if you are starting a new business or have an existing one that you want to change over to Fulfillment by Amazon.

You can use Fulfillment by Amazon to send out things you are selling on Amazon itself or things you are selling elsewhere. This is what Amazon called Multi Channel Fulfillment. One more thing: if you start using Fulfillment by Amazon you don’t have to have everything fulfilled by Amazon. You can use it for some products and not others.

Pros and cons

So then, let’s have a look at the pros and cons of Fulfillment by Amazon:

Pro. You get to benefit from Amazon’s reputation. Amazon is a brand that’s trusted by customers worldwide. When they order something that is shipped by Amazon they know they will get it. And fast. And they know they can return it if they want to. This can make a massive difference when they are deciding whether to buy from you.

Pro. You can offer faster service. Amazon has state-of-the-art online order processing and fulfillment operations. Chances are they can get your products to your buyers faster than you can.

Pro. Your products can be ranked higher on Amazon. With an Fulfillment by Amazon item your item shows up at the top of the search more often than not. Products from non- Fulfillment by Amazon sellers are listed by total cost (product price plus shipping) but your items are listed by price only. So often you can price your items close to the lowest total price, maybe be the first item in the list and attract more buyers.

Pro. Your customers can get free delivery. Using Fulfillment by Amazon will mean your customers get free delivery on your products… using Super Saver Delivery or Amazon Prime. That can give you a big advantage over sellers who don’t use Fulfillment by Amazon.

Pro. Lower overheads. You’ll need to do the figures but, in most cases, there can be good cost savings. With FBA you won’t need premises for storage, staff to do picking/shipping and associated admin. It might even mean you can drop your prices, sell more goods and yet still make more profit.

Pro. You can be MUCH more productive. I think this is the biggest potential benefit. When you use FBA you won’t need to spend time sorting, warehousing, picking and packing goods. Amazon do it for you. They can also handle customer services, returns, etc.

This means you can spend almost all your time actually marketing and selling – things that make you money. And because you can spend more time doing that you should, at least in theory, be able to make more money.

Now, although Amazon will tell you there aren’t any disadvantages to FBA I think there are a few you need to bear in mind:

Con. It’s not so good for products that take a long time to sell or which are unproven sellers. Because you have to pay a monthly storage fee for as long as Amazon have your products.

Con. Using FBA might make it difficult to compete with other sellers, especially those also using FBA.

Because how are you going to differentiate your product and your service from theirs?

Con. This is what I think is the main drawback of Fulfillment by Amazon. Your business is almost totally reliant on Amazon.

What if something goes wrong… for example their systems fail and they don’t fulfill your orders or lose your stock? Or if they put up their prices?

And what if, after getting your product in an Amazon box, the buyer just decides to go back and buy from Amazon next time?

Getting started with Fulfillment by Amazon

So let’s have a look at how you can get started using Fulfillment by Amazon.

At this point I should say that there’s tons of detailed information on how it all works at the Amazon website. But that’s really hard going and a lot of it is difficult to follow. So here I’m going to try to give you a simple, user-friendly summary of Fulfillment by Amazon.

First of all Fulfillment by Amazon is not separate to the other methods of using Amazon. It is fully integrated with them. You just set up to sell on Amazon Marketplace in the usual way then choose to FBA the products you want to.

It’s very easy to get started with Amazon Marketplace. You don’t need to register in advance. You can open a seller account when you list your first product. To register as a seller you will need a business name, an address, a display name (which can be your business name or something else), a credit card and a telephone contact number. That’s all you need to get started. Go to http://www.amazon.co.uk, scroll down the page to ‘Make Money With Us’ and then ‘Sell On Amazon’ to get started.

Amazon offers two ways of selling – informally called ‘selling a little’ or ‘selling a lot’.

Basically ‘a little’ is for occasional and hobby sellers who expect to sell less than 35 items a month. It costs 86p plus a referral fee for each sale and you can’t sell in all the Amazon categories. Selling ‘a lot’ is for businesses who expect to sell more than 35 items a month. You pay a £28.75 monthly fixed fee and a referral fee. You can sell in all the Amazon product categories. The ‘selling a little’ option isn’t really for use with Fulfillment by Amazon.

To use Fulfillment by Amazon fully you will also really need to become what Amazon call a Pro Merchant Seller. Pro Merchants have access to volume selling and bulk listing tools. There is a web interface that allows you to more easily manage your product descriptions, inventory and orders. You will also be able to export and import information to and from your account. Normally the Pro Merchant option will work out much cheaper and therefore will allow you to work on tighter margins and make money from products and sales those who sell just “a little” can’t.

If you are already selling on Amazon all you need to do is convert to a business account and ask them to enrol you in Fulfillment by Amazon. It doesn’t cost anything to sign up so you can just try it and see how you get on.

Tip. When you sign up to Fulfilment by Amazon with Amazon.co.uk you can only sell things within the UK. Which strikes me as a bit odd, seeing as how the Internet is supposed to be a global way of doing business. You can sell using Fulfillment by Amazon in some of the other countries Amazon operates in – Germany, France, USA and Japan – but you need to sign up with them separately. Initially you probably wouldn’t want to do this but it could be a way of expanding in future