At a recent conference in New York City, professional Amazon sellers and consultants kept talking about one thing.
The topic that kept popping up: Fulfillment By Amazon, or FBA.
FBA first launched nearly 10 years ago to let businesses use Amazon’s infrastructure to store and ship their goods, but it’s still seen as one of the biggest opportunities for sellers right now, according to several people that Business Insider spoke to, as well as a panel of presenters talking about the “unwritten rules” of Amazon sellers.
Four of the five members of the panel answered a question about the biggest opportunity for sellers in the coming year by pointing to FBA.
“There are very few things in the world where you can say, ‘If I just do this, my business increases 30-to-50%,'” Eric Heller, CEO of Marketplace Ignition, a company that helps businesses sell their goods online, said of FBA during the panel. “It’s a huge opportunity.”
By using FBA to let Amazon handle shipping logistics, sellers can cut their costs and make their goods eligible for Amazon Prime, the company’s $US99-per-year membership program which offers free, two-day shipping on more than 20 million items. The Prime aspect is a big part of what makes FBA so valuable for Amazon.
FBA generally is a hot topic right now in part because Amazon is investing in it heavily as of late as it becomes a bigger part of its business. In its Q4 earnings last year, Amazon said that goods sold through FBA made up more than 40% of its third-party sales. The company also announced last summer that it would be adding six new fulfillment centres and more than 15 “sortation” centres in the coming year, to help it improve shipping efficiency for both its own inventory and FBA goods.
The discussion of FBA at the conference was overwhelmingly positive, which is great news for Amazon.
Why? Because FBA can provide a big boost to one of Amazon’s most important businesses: Prime. The more businesses that use FBA, the more products Amazon can offer through Prime. The more Prime products there are, the more willing people might be to shell out $US99 for a membership. And people with a Prime membership end up spending way more money on the site than other users.
A recent Consumer Intelligence Research Partners survey of 500 Amazon shoppers concluded that Prime members spend more than double what non-members do.
Amazon has spent the last year amping up its digital offerings for Amazon Prime and investing in FBA because it banks on the fact that when it hooks people into its Prime ecosystem, it will make more money from their increased shopping.
“Amazon is investing in FBA right now,” Heller says. “Amazon is using these things to drive up the frequency of purchases from Prime.”
Despite the warm reception it received Tuesday, FBA isn’t all sunshine-and-rainbows for merchants.
Victor Rosenman, CEO of FeedVisor, the company that hosted the conference, told Business Insider that the risks associated with using FBA are that businesses are handing over all their sales data to Amazon, and that if they mis-judge demand and say too much inventory to Amazon for FBA, it can be a very costly mistake.
“It’s like a marriage,” he says. “There are parts that are good and parts that are bad.”
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.