I haven’t sent in a FBA shipment in some time due to other priorities.  However, I recently received the latest FBA newsletter and found out that Amazon is now offering to label items for you.  That’s pretty sweet!  That has been a desire of mine for a long time.  The biggest hassle with FBA has always been printing out all those damn labels and sticking them to each and every book.  It turns a 1 hour job into a 3 hour job.  I’ve sent in some shipments that literally took me 8+ hours to process when they could have been much, much less.

It looks like they’re charging 20 cents/item which doesn’t seem to be too bad.  I typically had 200 books in a shipment.  If I were to choose to have Amazon label them all for me, I’d be out $40.  In my opinion, that would be a small price to pay to shave half the time out of processing.  This definitely wouldn’t be for the penny books though.  With the recent fee hike, that really hurt much of the low-price, commodity books being sold via FBA.  Taking another 20 cents from the already paper-thin margins wouldn’t be feasible.

Here’s the breakdown of the service:

• They will label just about anything that qualifies for FBA however it has to have a scannable barcode.  This means NO pre-1970 books folks.  If you do have these items, you’ll have to label them yourself however they’ll have to be in a different shipment.  There’s no mixing and matching labeling service items with self-service labeling.
• You’ll be allowed to use the labeling service on a per-shipment basis.

It looks to be a pretty straightforward process.  You tell them which items you want them to label and you pay 20 cents/pop.  Are you going to use this service?  If so, I hope you’ve figured this new expense into your total expenses.  This would be a PERFECT reason to use a service like eBizControl to keep track of all these little expenses.   Feel free to sign up for the mailing list or check out the site and get registered for the beta once it’s available.

Amazon’s FBA service has become hugely popular as of late and rightfully so.  You can’t beat someone else shipping orders for you, accepting returns and dealing with irate customers!  It’s a great service that many have chosen to take advantage of.  However, there are some sellers that either haven’t started yet or are still a little unsure on exactly how it works and exactly what to send to Amazon for fulfillment.  Why are sellers unsure of what to send?  The fees!  Amazon has become known as the place to sell used items.  One of the reasons why is due to the free listing.  Unlike eBay who charges your every time an item gets listed, Amazon only charges you if your item sells.  This means there is absolutely no risk to you if nothing sells.  However, with the introduction of FBA, Amazon also brought forth the inventory fees and rightfully so.  Your stuff takes up warehouse space and incurs labor costs to manage it.  This is why Amazon introduced the monthly storage fee and more recently, the long-term storage fee.  These fees are incurred the moment your book gets listed regardless if it sells or not.  Oh no!

The monthly storage fee is a fee that’s charged on a monthly basis based on the size of your item. To be more specific, it is based on the size in cubic feet and currently it is 45 cents per cubic foot. This fee begins to incur the moment your item is scanned in at Amazon and the total cubic feet of all your inventory is tallied up every day and then tacked on to your total monthly charge. Refer to the link above for more information.  The recent long-term storage fee was introduced because presumably too many sellers were leaving their stale inventory in Amazon’s warehouses and the FBA program was unexpectedly much more popular than what Amazon had intended.  This fee is a whopping $45 per cubic foot!  This fee doesn’t start to incur until your item has been at Amazon for longer than a year and you have multiple copies.  Due to these inventory fees, sellers have become a little more choosy about what they decide to list for sale via FBA.

With the thought of potentially shelling out hard-earned cash without selling anything in return, how do you decide what to send to Amazon to try your hand?  Here are the 2 criteria you need to look out for.

1. High Demand

If you’re in a position where you are charged a fee based on time to sell you better send items that sell and sell quick!  The less time they spend in the warehouse the less money you have to pay.  How do we do this?  I’m glad you asked!  The answer is the Amazon sales rank or “bestsellers rank” as they’re calling it now.  Without going into the technicalities of this, this number is simply a measurement of how well a particular book is selling relative to all other books on Amazon.

The sales rank is a great way to guesstimate how fast your item will sell.  Personally, I choose a sales rank of 1,000,000 or under to send to FBA.  Others have told me they use 500,000 that aren’t quite as daring but I like to live on the edge.  By taking the sales rank this high you will get some books that never sell and decide to sit in the warehouse forever.  These have to be returned to you or destroyed if you don’t want them incurring the dreaded long-term storage fee.

2. Low Lose Weight Exercise/price ratio

This is an important piece to take into consideration also.  Some people will tell you to only send lightweight books like mass market paperbacks and be done with it.  I choose to explore all opportunities for profit and actually dive into the numbers to see the potential of sending 1,2 even 4 pound books to Amazon.  The Lose Weight Exercise is irrelevant if the price that you can get is high enough.  To figure out this ratio, here’s a quick calculation that you can do. Disclaimer: All prices shown will be for media items.  If you want more pricing information you can visit Amazon’s FBA pricing page. Let’s say you’ve got a book with a sales rank of 50,000 that weighs 3lbs.  This is a pretty good sales rank and I’d estimate it would sell within 1 week barring any unforeseen circumstances.  My strategy is to list this book and match the lowest FBA offer which, at the time, is $10.00.  I say, at the time, because by the time that item gets to Amazon and listed it may be $9.75 depending on how volatile the pricing is.  Just remember the price 9/10 times will always go down.  Remember to take that into consideration.

We’ve now got a few pieces of key information.  We’ve got our expected sale price ($9.75), our expected time to sell the item (1 week), our current sales rank (50,000) and our Lose Weight Exercise (3lbs).  We’re now ready to calculate our potential fees.  Let’s list them out.

Expected storage fee: $0.45 / 4 = $0.12 for 1 week’s worth of time

Pick/Pack Fee: $0.60 flat fee

Weight Handling: $0.40 x 3 = $1.20 for our 3lb book

Commission: $9.75 x .15 = $1.46 flat commission

Variable Closing Fee: $1.35 flat fee

Our fees end up adding up to $4.73 giving us a profit of $5.02.  To get a feel for the profit if you decided to list it yourself you could run similar numbers.  Amazon has an excellent FBA price calculator that allows you to run various scenarios with ease.

I hope this has helped you in deciding what to send to FBA.  This was one of my questions whenever I first started with FBA back in March of 2009 and through the years I’ve learned the hard way what not to send.

Standard Podcast Play Now | Play in Popup | Download (477)

This is a guest post by Mike Gibson.  Mike is a successful online bookseller that has an excellent blog at ambooked.com.  I highly recommend checking it out.

- Adam

Imagine that you’re an online bookseller. You have a profitable business going but no employees. You have a few thousand books and you sell a few each day, seven days a week. Life is good – you have
created a profitable business working from home!

Then one day you decide to take a week vacation. You log into Amazon and Half.com and put your listings on “vacation” setting. You also remove your books from eBay. You’re having a good time on
vacation but in the back of your mind you know that you are not making any money. Worse than that, you fear that potential customers are buying books that are usually in your inventory from competitors.
You try to decide when to end your “vacation” settings – when you return or two business days before returning? Do you really want to get back and have to ship a dozen books as soon as you walk in the
door?x

This was my experience two years ago. My long term goal was and is to build a business and travel – A LOT. I realized that this may not be possible with selling books online. Did I just waste almost two years
learning everything I could about selling books online, finding sources of inventory, and investing in supplies and inventory?

About a year and a half ago I started experimenting with Amazon FBA (Fulfillment by Amazon). I have found that not only has FBA made my business more profitable – it has also made it less time
consuming, easier, and most importantly, given me more freedom.

With FBA, Amazon stores and ships my inventory for me. I do not need to be chained to my house anymore to ship orders or even to answer customer emails (Amazon does this for me).

A few months ago I decided to experiment with FBA remotely. I found a huge book sale across the country in a city where my brother lives. I packed my laptop and my wife and I hopped on a plane. I
spent parts of 2 days at the book sale and the rest of the week I had fun. Before I returned home I bought some boxes, borrowed my brother’s printer, and shipped hundreds of books to Amazon.

I flew back home at the end of the week without taking any inventory with me. I realized that two great things resulted: 1) while I was away I was selling books each day and making money, and 2) the books I
acquired while away later sold for more than enough to cover my travel expenses!

For me, FBA has changed my entire business for the better – I have nearly all my inventory in FBA now. Of course there are negatives to FBA – it can take awhile to learn, the fees are higher, and sales
rankings are more important than anything (even price). If you are interested in selling only antique or collectible books FBA will probably not be profitable. If your goals are like mine – building a profitable
business and being able to travel – FBA may be worth looking into.

Standard Podcast Play Now | Play in Popup | Download (417)

You may have heard the rumblings of a brand new fee introduced by Amazon lately for their FBA program.  If not, I’m sorry to be the first one to bring you this news.  Effective August 15, 2011, Amazon will begin charging $45 per cubic ft for all your inventory per year.  That’s right.  I didn’t forget to exclude a decimal.  That’s 45 bucks per year.  A lot of people are up in arms about this particularly because FBA is known for their already very low industry standard storage fees.  However, I believe that Amazon has announced this new fee the wrong way and have not explained everything clearly.  Let me tell you why.

I immediately got emails about this from people a couple days after it was announced.  People were concerned, irritated and immediately thinking of ways of getting out of this long-term storage fee.  At first, I did the same…at first.  I took a look at my ever-growing inventory with Amazon and thought I was going to literally have to hand out thousands of dollars if my books hit the year mark.  That is until I started to read the “fine print”.  It turns out this fee is only directed to sellers with multiple quantities of an ASIN.  This most likely means the mega sellers or smaller book remainder sellers neither of which are me.   If you read a sentence or two into the description of the inventory storage fee you’ll see this line “Each seller may maintain a single Unit of each ASIN in its inventory, which will be exempted from the annual Long-Term Storage Fee".  This means sellers that typically only have 1 item per ASIN are in the clear.  Yay!  I’ve never had a business model to where I have multiple quantities so after I wiped the sweat from my brow and I relaxed.

Just because I was in the clear didn’t mean I was going to let this announcement to the wayside.  I’d been neglecting my FBA inventory for years.  When Amazon does everything for you and you’ve got a reliable pricing engine to keep your books competitive, you tend to even forget the books are there and just expect that bi weekly bank disbursement.  I got way too used to everything.  This announcement made me take a more proactive approach with my inventory and make some changes.  I thought these changes were very beneficial so I’d thought I’d share.

Being an analytical thinker I immediately started thinking “what would I do if I had to pay this yearly fee?” and started to run some numbers.  I’ve honed my FBA skills over the years in an attempt to only send salable books to Amazon but the market is constantly changing so I’m positive I’ve got some inventory that will never sell that’s only eating up storage fees.  It is my goal now to sell every book I have within 1 year or less.  How am I gonna make this happen?  I don’t want to simply have Amazon destroy them right away because they still might sell.   I got it!  I’m going to liquidate this aged inventory by drastically cutting the price down and selling it on eBay!  If you caught my previous post about using FBA’s multi-channel fulfillment program and making more money on eBay, please check it out now.  By using the increased profit I can get from eBay I can significantly reduce the price on my books and still squeak out a profit.  I wanted to make exactly a $2 profit if a book sold.

Here are the steps I took in an attempt to make that happen.  I realize these are pretty vague steps but because I personally use Monsoon I know a lot of you still use Amazon’s builtin reports.  I hope this still can apply.

1. Download your Amazon FBA Inventory Age report.  This repot will give you every book that you have at Amazon and how long it’s been in their fulfillment centers.

2. Open this report up in Microsoft Excel, OpenOffice or another spreadsheet application and filter all the results for age > 300 days.  You should now have a list of SKUs that are approaching (or already over) the one year mark.

3. The next step you need to take is to get each SKU’s price and Lose Weight Exercise.  I used Monsoon’s great inventory filtering and reporting abilities to do this.  What you’re looking for is a spreadsheet that ultimately has 3 columns; SKU, Lose Weight Exercise and current price.  I’m sure you’d be able to get this information from the Amazon reports and a skilled spreadsheet/database guy if you’re unfamiliar.

4. Once you’ve got all your inventory on a spreadsheet in this manner, you now need to calculate the price you’ll need to sell your book at to make a $2 profit on eBay.  You’ll need to take into account the eBay Final Value Fee, Paypal Fee, FBA Multi-Channel Weight Fee, FBA Multi-Channel Order Handling Fee, FBA Pick/Pack Fee and finally add your eBay shipping credit to the total.

5. You should now have a spreadsheet with SKU, Lose Weight Exercise, current price and finally your liquidation price.  Now, delist all of those books from Amazon ASAP.  Why?  Because from my calculations if I reduce the price this much on these books I’ll loseWeight Exercise MORE money if the book actually sells on Amazon than if I would simply have it destroyed!  You can make far more money on eBay!  You’ll get a ton of FBA inventory listings looking like this but don’t be alarmed.  This is only because the item is sitting in Amazon’s fulfillment center and not listed on Amazon.  This is what you want because if you’re using multi-channel fulfillment it will still be listed on eBay.

6. So now you’ve got all of your old inventory delisted from Amazon and priced at liquidation prices.  Just for reference, I marked all my books down that were less than a pound to $2, 1-2 pounds at $2.25 and 2+ pounds $2.50.   If you’ve got your multi-channel fulfillment process automated you’ll now just sit back and wait for your eBay customers to bail you out.

Continue to keep an eye out on the inventory age in case they all don’t sell.  If you want, you could continue to drop the price to the point to where you’ll only profit more than the disposal fee but I’m not getting that granular.  For my inventory, if the book hasn’t sold for that long and didn’t even sell at a hugely discounted price I’ll let Amazon destroy it.

I hope that this has helped you by giving you some ideas on how to keep your inventory fresh.  Also, if you’re one of the unfortunate ones that depends on quantity and you’ll be affected by the long-term storage fee I hope this strategy will allow you to save some money.

- Adam

Standard Podcast Play Now | Play in Popup | Download (405)

The following post is a guest post by Chris Green of FBAPower.  Chris has an excellent understanding of the inner workings of Amazon’s FBA program and his FBAPower application is top notch.  I thought this would be a great topic to introduce or reintroduce to some since it’ seems to be so popular.  While you’re at it also be sure to pick up a free copy of Nathan Holmquist’s eBook titled Selling on Amazon’s FBA Program.  This once paid eBook is now being offered for completely free!

Be sure to stick around for the end of the post.  I reveal the strategy that I personally use to fully take advantage of FBA. – Adam

If you have been selling books on Amazon for any period of time, you have likely seen ads or promotions for Amazon’s fulfillment service called Fulfillment By Amazon, or FBA. You may even be selling items where your competition is using FBA. The number of FBA sellers is increasing and it is changing the dynamics of the Amazon marketplace. Understanding how FBA works and how other sellers are using it will help you decide if it’s the right program for some, or all of your inventory.

So what exactly is FBA? How can it help my book selling business? Are there any downsides to FBA? We’ll answer those questions and more.

Fulfillment companies and programs are nothing new, but what makes FBA unique and powerful is that all FBA items are eligible for Amazon’s free (or discounted) shipping programs such as Free Super Saver Shipping (FSSS) on orders over $25, 4-for-3 promotions, and free 2-Day Air shipping for Amazon Prime members. This makes FBA items more appealing to Amazon’s best customers.

How can FBA help my business?  FBA can be described as a win-win-win.

Win #1. Higher prices, higher margins, higher payouts

Since items sold through FBA are eligible for Free Super Saver Shipping and Amazon Prime, FBA sellers actually raise their prices to match their competitor’s total price (price + shipping). So even with the addition of FBA fees, the FBA seller still receives a higher net payout from their Amazon sales because of the higher sale prices. For example, a seller who ships their own orders who sells an item for $10 with $3.99 shipping will show the same as an FBA seller selling the exact same item for $13.99. Actually, the FBA seller will show first because FBA is the tie breaker. The easy example is with penny books. A merchant fulfilled penny book lists for $0.01 + $3.99 shipping. An FBA seller who wants to price match the lowest price will list for $4.00. Amazon sorts the offers page by total price (price + shipping).
Use the Amazon FBA Revenue Calculator to see estimated FBA payouts for your items at certain prices.

Win #2. Less work

FBA sellers sell items 24 hours a day. 7 days a week. Items ship all hours of the day or night including weekends. They ship whether the seller is at home or on vacation. Once an FBA seller prepares their items for the FBA warehouse and sends them to Amazon, they don’t have to do anything else. They can monitor inventory levels and adjust prices as needed from anywhere with an Internet connection.  They don’t have to stock boxes, envelopes, packing materials, or print shipping labels anymore. They also don’t wait around for their UPS driver or go to the post office every day. The time you used to spend fulfilling orders can now be used to source products or on other aspects of your business.

Win #3. Happier Customers

It is estimated that 40-50% of Amazon buyers have never bought from a third party merchant. You can effectively double your customer base by offering your items through FBA. Amazon customers want to buy from FBA sellers. They trust Amazon and they know that their items will ship quickly and if there is ever a problem, Amazon will help (including an extended return policy). When your items are offered for sale through FBA, they will attract these types of Amazon buyers who are willing to pay more to get their items shipped by Amazon. This is an important point to grasp: Amazon customers are willing to pay more for the exact same item if it comes from Amazon or an FBA seller. They do this because they know they will get their item fast and that customer service will be top notch. This is how you leverage FBA status; you use FBA to market your books to these sellers and increase your margins and profits.

How Do I Get My Items To FBA?

Items sent to FBA require a special FBA label. This label has a barcode identifying the item to Amazon. It needs to cover any existing barcodes on your books. You create shipments and process them through your Amazon account. You can send one box, 10 boxes, even a full truckload of books! Bonus: you get to use Amazon’s UPS rates for inbound shipping. Once your shipment of books is received at Amazon’s FBA warehouse, they are received and offered for sale on Amazon.com.

Is The FBA Program Just For Booksellers?

No. Almost any item can be sold on Amazon using FBA. There are some exceptions such as restricted categories.  New FBA sellers should reference the FBA manual.

But What About All The Fees?

Ah yes, the fees. There are fees involved but they are all known ahead of time. This allows you to make informed decisions about what to send to FBA and how to price your items. Remember, your sales price as an FBA seller is going to be higher than a merchant fulfilled seller. This higher price is what covers the additional fees and leads to high net payout using FBA compared to a merchant fulfilled sale.

• Inbound Shipping Fees

This is the cost to get your items to Amazon’s FBA warehouses. You are able to use Amazon’s UPS rates so you get the lowest possible shipping rates.

• Storage Fees

Amazon charges $0.45 per cubic foot from January – September. $0.60 per cubic foot from October – December. This is calculated down to the hundredth of an inch. For reference, most paperback books will have a monthly storage cost of $0.01 per month. That’s eight years for less than $1. So if an item is in storage for a year before it sells, it’s an additional $0.12. You do get the first 30 days free so if you manage your inventory and only send fast moving items to FBA, your storage fees will be zero. You may decide to keep high ranking items that may take a longer time to sell at your location instead of sending them to FBA.

• Pick & Pack Fees

Amazon charges fixed fees for picking and packing your items.

• Weight Based Fees

Amazon will charge a Lose Weight Exercise based fee when shipping your items. Heavier items will cost more to ship, and therefore have higher fees. Item Lose Weight Exercise is known ahead of time so sellers should price their items with these fees in mind.

• Item Removal/Destroy Fees

If you want Amazon to return an item to you (or destroy the item), they will charge you $0.60/item. You would probably want to have customer returns returned to you for inspection (they can often be resold).

You can find a complete list of fees when using Amazon FBA here.

Can My FBA Items Only Be Sold On Amazon?

No way! While Amazon will likely be your higher volume sales channel, you can still list on other sites such as Abe and Alibris and fulfill those orders with your FBA inventory. This is called Basic Fulfillment. A half pound book will cost you $2.95 to have Amazon pick, pack, and ship this item for you anywhere in the country.

Can I Still Ship Internationally?

Yes. You can sign up for international shipping in your Amazon account. You upload an image of your signature and Amazon takes care of the rest. International customers pay for their own shipping and since Amazon does the actual shipping, they will deduct this charge from your transaction payout (it zeros out). International customers from every country that Amazon ships to will be able to order your products.

Downsides of FBA

FBA has the power to transform your business overnight, but it is important to know how it all works and the potential risks involved when handing over a significant portion of your business process to another company.

Lose Control Over Your Order Processing

You are handing over all aspects of order processing to Amazon. You are trusting them to store, pick, pack, and ship your items. This can be a scary thought for some sellers who take great pride in providing their customers with a high quality shipping process. You may decide to only send certain books to FBA and keep higher valued books or books that would require special packaging at your location to ship yourself.

Hand Over Customer Service To Amazon

Amazon will handle all customer service issues on your FBA orders. This means that you loseWeight Exercise control of the returns process (a customer can return an item without approval from you, the seller). It is possible (although unlikely) that a buyer abuses this liberal return policy at the expense of your inventory. If you suspect anything like this, report it to Amazon. They monitor excessive customer returns as well as A-Z claims.

Possibility Of Loss Or Damage To Your Products

It is possible that your items are lost or damaged either by UPS on the way to Amazon or by Amazon themselves, but that same risk is there for every item dropped off at the post office. Amazon will reimburse sellers for lost or damaged items automatically. It is important to monitor your inbound items as they are received. Amazon will send an email if there are any problems receiving your items.

Summary

FBA is a very powerful program and if used correctly, can greatly improve your margins, profits, and efficiency. It can give you back your time to focus on other parts of your business such as sourcing products or just spending more time with your family. Read as much as you can about FBA, network with other FBA sellers, and experiment with some items to see if it’s right of you.

Additional Online FBA Resources:

Amazon FBA Homepage:
http://www.amazonservices.com/content/fulfillment-by-amazon.htm

FBA Warehouse Tour
http://g-ecx.images-amazon.com/images/G/01/fba-tour/FBA-FC-Tour._V216203492_.html

Amazon Seller Community (FBA)
http://www.amazonsellercommunity.com/forums/forum.jspa?forumID=29

Addendum:  How Adam Uses FBA

———————————–

I have been using Amazon’s FBA service for going on a year and a half now.  It was a game changer for me the minute I sent in my first box of books.  Little did I know it would become a regular part of my receiving process.  Many different people use FBA in different ways.  In this short snippet I’d like to share to you how I personally take advantage of FBA.

I receive unscanned books to my warehouse on a regular basis and have a process by which books can go into a number of different directions.  The books that go to FBA always have a sales rank of under one million.  I’d rather not go to the work of creating FBA shipments with very low demand books that may never sell.  The storage fees may also be pretty low but throw enough 5M+ sales rank books up there and you’ll eventually feel that monthly fee.

The second criteria I use is profit.  I’ve decided to use a profit floor of 75 cents.  This means if the book is in at least good condition and I think I can make 75 cents or more profit on a book and it’s sales rank is under a million it goes to FBA.  There is one caveat though; the Lose Weight Exercise.  As you know Amazon charges a Lose Weight Exercise fee for shipment.  Also, don’t forget about what you’re going to pay to get that 7lb monster book to Amazon in the first place!  Here’s a snippet of the code from a custom receiving application I developed.  Don’t get too confused with the major tech factor here.  It’s simply seeing if a book’s lowest FBA competitor is above or equal to a particular price and under a particular Lose Weight Exercise then let me know if it’s FBA bound or not.  If it doesn’t meet of of the criteria it’s not going FBA.  I still account for other expenses like cost to ship to Amazon and packaging material.

This is just how I use FBA.  Your mileage may vary.  Let me know in the comments how you’re using FBA!