As brands, we fall under Amazon’s selling temptation, especially since it’s the biggest worldwide online merchant. Amazon processes around 1.2 million orders daily, and dedicated Prime members spend, on average, $1,000 a year. Out of all of the website merchants, Amazon does not have any plans to slow down, and for brands, it’s a good idea to advance onto their platform. When deciding to jump on board and sell through Amazon, do we ship FBM (Fulfillment By Merchant), FBA (Fulfillment By Amazon), or 3PL (Third-Party Logistics) when shipping? And yet another question, how do we price our products to fit around fulfillment and storage? This guide is to help the entire Amazon fulfillment process for brands.
THE PSYCHOLOGY BEHIND AMAZON PRICING
Once merely a book retailer in 1994 is now one of the largest e-commerce businesses known to mankind. With rapid growth, Amazon is now worth $1648.78 billion at the beginning of 2022. But Amazon is nothing without its loyal merchants selling through the platform — for example, 56% of paid units were sold by third-party sellers in the final quarter of 2021. With or without third-party and one-party sellers, how did Amazon create this selling craze? They implemented their pricing psychology.
Amazon Pricing Psychology:
- The .99 Rule. When scrolling through Amazon and other retailers, it’s rare to see even number selling prices. It’s rarely $4 for a box of band-aids but ordinary for $3.99 a box. Our mind automatically associates $3.99 to be a lower price than $4.00, but in reality, they are almost the same price. Amazon is the king of this subtle marketing trick.
- Comparative Pricing – A common cross-reference for comparing is real estate. Before a realtor shows their client the optimal house for their needs, the realtor may show one or two unsuitable houses. Why? It’s better in comparison. Amazon uses the same method with pricing because why pay $35 for a non-stick frying pan from other retailers when you can pay $28.99 with Amazon Prime?
- Amazon Prime – The best way Amazon grew its loyal customer base was by starting the Prime subscription that offers discounts, top-notch customer service, and auto-renewable subscriptions for certain products. Amazon Prime users are always believing they have the best deal.
- Lightning Promotions – Amazon consumers love a good deal. That’s why when Amazon offers lightning deals with their countdown, customers leap in and buy.
This is all great, but how do we ship through Amazon?
FBA, FBM, OR HYBRID?
For brands, it’s beneficial to know the differences between fulfillment, which term carries responsibility, and what can benefit their company the most. Let’s explore the three most-used fulfillments:
- FBA (Fulfillment By Amazon): FBA is the outsourced option provided by Amazon is where they do most of the heavy-lifting work. This method comes with applicable fees and downfalls. A 3PL can support FBA needs with dropshipping.
- FBM (Fulfillment By Merchant): FBM is the in-house method for storing, shipping, distribution, and all of the above provided by the merchant. Assuming most brands want a ‘Prime’ badge next to their order, they may want to consider working with a 3PL who can help them achieve 2-day nationwide shipping and an easy returns (reverse logistics) process.
- Hybrid Solution: Some companies rely on a hybrid solution between these three forms of fulfillment. Hybrid solutions may support the company’s weaknesses and strengths during the shipping process. Utilizing Amazon FBA with high-selling SKUs and an Amazon FMB method for lower volume SKUs.
HOW A 3PL CAN SUPPORT YOUR AMAZON ORDERS
- Expertise. When a problem occurs, our 3PL professionals are vetted with years of expertise to handle any fulfillment dilemma.
- Better Control. With 3PLs, you can create a closer relationship with fulfillment professionals and managers regarding overproduction. Our experts will manage growth, storage, and recalls with personal attention to your products.
- Customization. 3PLs offer customization and flexibility to the client’s needs with the additional offer of personal kitting services.