Avalanche Industries was one of 50 sellers selected to participate in the launch of Amazon’s FBA On Site program. Launched at the end of 2017, it allows third party sellers to treat their own warehouses as Amazon fulfillment centers. So when consumers are shopping the site, the seller still has the “Fulfilled by Amazon” tag, even though they are shipping from their own locations.
Amazon sent a representative to Selbyville to bring our warehouse and programs up to code with what Amazon considers FBA. This includes designated areas for certain kinds of inventory, storage parameters, and the use of the Amazon shipping database. While these changes in shipping are something to which Avalanche will have to adjust, the payoff is immense.
HOW DOES IT WORK
Jamie Nissen is Avalanche’s on stop shop for FBA On Site. Dima Fedarkevich provides Jamie with a list of items falling into the Small-Oversize, Medium-Oversize, and Large-Oversize categories. These are items where the fulfillment cost is too high on the product to send into Amazon, making it more profitable to list for sale from Selbyville.
These items are listed on Amazon’s database on our account. It’s very similar to listing products on our Seller Central account. Everything is scanned in, provided with a location, and then we pop up as an option on Amazon. Once a customer choses to buy the product from us, it generates a pick list. Each morning Jamie takes the list and picks the items from our On Site warehouse. She packages them and sets them on a pallet to be shipped. We currently have 433 products listed for sale. We’ve made 9 sales for a total of $318.60. Our most popular item is the Lucky Bums Bodyboard.
CUTTING OUT THE EXCESS
This new program really cuts everyone a break. Amazon is feeling the relief already with sellers sending less inventory to their fulfillment centers. Within the past year alone, we’ve seen an increase in inventory regulations due to the congestion of fulfillment centers in the form of increased storage fees and maximum inventory limit. Amazon just has too much product and not enough space. With the FBA On Site program, it gives large sellers like Avalanche an incentive to keep their inventory in their location, allowing Amazon to cut down on the overcrowding.
While Avalanche has seen a significant increase in inventory stored in Selbyville, we’re not feeling the weight of it as much. The biggest benefit is that we don’t have to pay storage fees for our inventory in our own location. With the recent increase of $0.05 per cubic foot of inventory a month, we saw anywhere between a 2% and 12% increase on product level for monthly fees. It may not seem like a big jump, but when you have 30,000 products in stock, the number jumps up quickly. FBA On Site cuts the storage fee expense out completely for those units.
Even the consumer will eventually feel like savings of FBA On Site. Minimizing the amount of locations that a product has to visit or the number of people that have to handle it cuts down an item’s cost. A product ships from a manufacturer to us, who then ships to Amazon, who ships it to the customer, each time incurring a shipping cost and a labor cost. Cutting out one step entirely will bring down the cost of shipping for the consumer. This gives us room to increase margin or a more efficient way to sell through stale inventory. Plus, we get happy customers that leave positive reviews!
REAPING THE BENEFITS
The FBA On Site program doesn’t just save us money on on storage fees, but it opens up new purchasing possibilities. It gives us the opportunity to buy items that would have otherwise been unprofitable because of fulfillment fees, like large totes and bodyboards, and sell them for a profit. With the program open to so few sellers at this point, the competition on oversized items is minimal, giving us an exclusive by default.
Not only do the dollars add up, but the program may significantly reduce the headache of shipping the products. Under FBA On Site, Amazon will pick packages up from a seller’s location and then fulfill them. They choose the best shipping option for the product using its own logistical network. Sellers have already reported paying 70-85% less for their shipping costs under the new set up.
Combining FBA On Site with our MFN account, Seller Fulfilled Prime, and all other channels is going to be a huge learning experience for the whole Avalanche team. More avenues are going to require more time and effort, but we’re already starting to see the payoff of our multichannels, making 2018 look like a very promising year for Avalanche.