What is Fulfillment by Amazon?

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Hello everyone. Welcome once again to this special training

program of Learn Vern, where we are learning “How to sell effectively on

E-Commerce?”

Well, yes.

In this short module friends, we are going to learn a few important terms and topics that are going to help you in this e-commerce journey.

I am going to discuss one more important topic of this special takeaway. The main topic is “What is fulfillment by amazon?”

Look, in the past few modules we learned practically how to create a seller account on amazon and make our product live, we saw one more thing there that is fulfillment.

This means do you want to give your product entirely to amazon, in which they pick up your product, pack it, and deliver it to your customer?

So, what is the actual meaning of fulfillment by amazon?

Try to understand the meaning of fulfillment first. Fulfillment means you are only packing the product, and providing services, if the product is returned, you have to provide all the return services as well, and many other things are involved.

You are selling the product to your customer but fulfillment actually means that you have to consider every factor and deliver your product without any errors to your customer. That is true fulfillment. (Clear?)

If you want to give this job of fulfillment to amazon entirely, then amazon has a special service for that which is FBA.

The FBA that is fulfilled by amazon service was launched in August 2006. This created a heavy impact on the market, friends. The profits of amazon increased rapidly.

Just imagine. There might be some wholesalers and retailers that won’t have their own warehouses. So, amazon understood the problem and started making warehouses and provided you with the benefits like picking, packing, and shipping your orders.

Yes, they use different kinds of techniques for shipments. They use smart tricks for storage too so that all the products are stored according to the product category accurately. And to deliver the product to the customer in time. Yes, friends. And they charge for this. okay.

So, friends, let’s understand the flow of how it works. Look, the first one is “You send us your product selection”. This means if you are registered with FBA. Suppose you decide that no, I can’t take the responsibility of delivering the product to the customer myself because it is very tricky and costly as you have to manage to deliver the product as well if the product is returned, then manage that too, and manage customer satisfaction, this is quite a tricky task.

If you are doing this for the first time and you want to try it out yourself, try it out. If you adjust and manage, then well and good. But, if you are0 facing issues while managing, then I would highly recommend you to register with FBA.

Now, how does the FBA work? What is the first step? So, the first step is you have to deliver all your products to the nearby FBA. You can search the FBA’s website and find out your nearest location.

Then, once they receive your product, they stock it. Now, whenever the customer orders your product, they will pack and ship the product to that customer. They also handle customer service. However, whenever the customer feels like, no I want to return this product, then amazon manages the return as well.

Hence, FBA by amazon is helping you out through these 6 simple steps. This is a very good way to satisfy your customers with 24 by 7 customer service and they handle the process effectively.

Now, look here. Previously, I explained through this diagram how cloudtail purchases the product, takes the data, buys the items from the manufacturer and delivers it to the customer. Cloudtail is Amazon's tie-up brand. Cloudtail keeps all its products with the FBA and it is Amazon's brand. Amazon helps in reaching the customer. Therefore, you might have noticed that it is always written as sold by cloudtail and fulfilled by amazon. (Remember?)

So, you will see it sold by cloudtail. We discussed all about cloudtail in the last session. In case, if you missed it, then please do watch that session first.

After the job of cloudtail is done, FBA comes into action for delivering the product to the customer effectively and satisfying them. “Fulfillment by amazon” helps there. Even if amazon itself is selling something, it adds “fulfilled by amazon” there. Amazon keeps all of its own products also with FBA that is “fulfillment by amazon” and then FBA distributes the product all around the world, all over India. They tap almost all the cities.

Now, let’s have a look at the benefits you get by joining with fulfillment.

The first benefit is if your order is worth more than 499 rupees, it qualifies for free delivery. Fulfillment by Amazon also offers a COD service that is cash on delivery. Yes, Amazon handles all customer service, plus, the customer can get a free replacement too. Then Amazon takes the responsibility of storing, packing, and dispatching all the products.

So, you can consider it like FBA is amongst your business partner only, that is helping you in growing your business by delivering your product to the customer in an effective manner.

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Friends, you get all the solutions to your problems in fulfillment. You have to pay some fees too.

What is that fee? For the same, We will see the example right away.

Let’s have a look at the “FBA fee structure” once on the screen.

You can see the fee structure on your screen, friends.

“Fee structure for standard size items”. The “pick and pack” fee of any standard size product is “10 rupees” per unit. The “storage fee” “per cubic feet per month” is “20 rupees”. The cost is based on the size. Then, the “shipping fee” or the “weight handling fee” is as per the table down below. You can see it on your screen, right?

If you want to ship your product locally, then for the first 500 grams, the cost is 29 rupees. For regional, the cost is 40 rupees and for national, it is 61 rupees. You can have a look at the entire fee structure in this table format.

Let’s understand this through an example. For instance, let’s take a product. We took this camera lens. Now, on the left-hand side, you can see the dimensions along with the pricing. The cost is 18 thousand 900.

Now, when you break down the charges, you can see it on the right-hand side. So, step 1 is the “referral fee”. You can check the referral fee percentage for FBA in the seller account. For example, as we are selling a lens here, the referral fee for this product category is 7%. So, 7% of 18,900 is one thousand 323 rupees. (1323).

Then, what is the closing fee? 35. What is the product type? It is standard. Then, what are the shipping fees and other fees? 40 rupees. So, 1323 plus 35 plus 40 is equal to 1 thousand 3 hundred and ninety-eight rupees. (1398) that is 7.4% excluding all the taxes.

The taxes are yet to be included. And even without the taxes, we have to pay 7.4% extra, so this is the extra amount that amazon is asking.  Plus you have to pay the taxes, this product will reach the customer costing around 18 to 20 thousand.

18 thousand was already the cost, so it will reach the customer for approximately rupees 19 to 20 thousands.

Now, obviously, there are some merits plus demerits in fulfillment by amazon. Everything has a dark side too. And I have included it in this PPT.

What are the good facts and the bad facts? Let’s discuss this.

Let’s start with the good facts. You must know what are the good facts and bad facts too.

Look, you can get all the information on the internet, I agree. But not many people talk about it. Everyone will tell you the good side but I think you should have the dark side too so that you can be prepared for everything that comes your way. You should be aware of both the pros and cons that benefit you and can sometimes bring the drawbacks as well.

So, pay attention here. I have gathered all the information for you here. and look, for those of you who have all registered to FBA, I am not demotivating any of you, I am sharing this PPT for the sole purpose of education. So, look at this from an educational point of view.

Let’s jump to the benefits. (Shall we?)

If your product is fulfilled by Amazon, then your product is included in the “prime” batch, friends. Yes, “prime product”. I am sure you might have noticed that under almost every amazon product, “prime” is showcased like this. Prime offers, one-day delivery, and 2-day delivery. Basically, prime products are delivered faster to the customers.

If you are shipping your product by fulfillment by amazon, FBA, then your product is also included in the prime category. (Clear?)

Then the next benefit is “the seller can create coupons in special events”. Okay.

Now, look, there are many events in a year like Christmas, Diwali, Holi, end of the season sale, summer sale, winter sale, and many more. There are many events and you can offer a special discount at that time on your product.

Yes, you can offer special discounts and no, not everyone has the freedom to do that. It is only for those who are getting their product shipped through fulfillment by amazon. They have this special benefit.

Then the other benefit of FBA is for you to have “higher chances of visibility”.

Now, look, you already know by now, that fulfillment by amazon is amazon’s own brand. Them cloudtail is also amazon’s brand. Hence, amazon will give first priority to its brand. (Right?)

As the FBA ranks in higher visibility, it attracts other sellers also to join the FBA. So, their main priority is that the people that are using their FBA service should rank higher in the searches.

For instance, let’s say someone searched for mobile, the products that are fulfilled by amazon only will have higher visibility here.

But, if someone is not selling through FBA, selling on their own, shipping on their own or using any other technique, they will have visibility below them. Okay.

So, the visibility of the product may be higher. There are chances that your product might display on the very first page and on top. So, the higher chance of visibility is very advantageous.

Then, “buy box”. For those of you who don’t know, while ordering a product, you might have seen these 2 buttons. “Add to cart” and “buy now”. What is the meaning of buy box here?

Well friends, sometimes you can see an option to choose other sellers. Those who are not involved in FBA, and when you open their product, you will see an option to view the list of sellers to compare the prices. But, when you ship your product through FBA, amazon will never show other sellers on their page.

You will only see the option of “add to cart” and “buy now” if you are selling through FBA. And other sellers might be shown in the suggested section below. Because Amazon wants to prioritize the products that are FBA registered and sell them faster.

And if you are not shipping your product through FBA, then it will show the list of all the other available sellers. See other sellers for your reference. The customer might see a button like this. And they can view other sellers along with your product.

So, this is the importance of the FBA.

So, see you right there with the next topic in our next session.

Thank you very much.