We mentioned that Amazon is poised for another big year, and therefore it is a good option if you are investing in stock. However, one of the major reasons the stock is rising has to do with its business development and infrastructure, which coincidentally could be a good investment for your own business development. If you are a budding entrepreneur, own an established company and want to move business to the next level, or merely want to make a wise investment, here is what you need to know about Amazon’s Fulfillment By Amazon (FBA) program.
On a stock investment perspective, FBA is set to advance Amazon’s business logistics and increase the value of the company exponentially as it directly impacts the growth of one of its other programs – that’s smart thinking Amazon! In an article for Business Insider, Julian D’Onfro writes that one of the biggest incentives for Amazon increasing their FBA campaign right now is to leverage Amazon Prime. If Prime subscriptions increase, since “Prime members spen[d] more than double what nonmembers” do, Amazon stands to benefit significantly by offering more products through Prime and encouraging more Prime subscriptions.
So What is FBA?
Although FBA is a hot topic this year, it was actually launched almost 10 years ago. It is merely picking up steam now because it is being very well marketed as it becomes a bigger part of Amazon’s overall business development plans. The general idea behind the FBA Multi-Channel Fulfillment program is that ecommerce business owners can sell directly on Amazon through a Sell on Amazon account, taking advantage of the traffic and amount of business that funnels through the world’s leading ecommerce site. At the same time they can also sell on other platforms, or even better build their own ecommerce site, allowing them to sell through multiple mediums and in doing so reach more customers and increase sales. Ultimately, the program is designed to allow ecommerce business owners the opportunity to build up their brands and in general run their businesses independently, while also taking advantage of the exceedingly large Amazon infrastructure.
How will this Help Grow Business?
This not only allows these small business owners to cut their costs for shipping, but also allows them to offer customers free and two day shipping, as Amazon and Amazon Prime offer, so that they can increase their sales. Furthermore, the exceptionally wide reach of Amazon’s infrastructure allows a small business owner to be able to scale their business operations, as they can store their products in the Amazon Fulfillment warehouses, and therefore increase their inventory beyond the limited space that working out of a home office provides. Ultimately, the business arrangement really means being able to sell more product to more people with a faster and well trusted delivery method, giving customers more incentive to buy. As if that wasn’t enough, Amazon also handles the customer support and returns, freeing up the business owner to focus purely on product manufacturing or procurement, and expanding their brand.
What’s the Catch?
The catch, if you can call it one, is that such a spectacular service comes with a price. But that’s pretty obvious, otherwise it would just be too good to be true wouldn’t it? But that’s why they call it a business investment and not a hand-out. The business owner needs to pay for Amazon to store their products, and then pay for the processing and shipping as it occurs in a sort of pay-as-you-go model. The more you sell, the more you will pay; however, the more revenue you will also accrue. It comes down to whether paying for access to such a wide network and hassle free processing and shipping service helps you to increase your sales and scale your business; if so, it is likely a good return on investment.