Next lesson is a deeper dive into all this, so this lesson is for more of an “umbrella”/overview idea of what, exactly, we are talking about here:
I’m assuming I can skip a basic explanation of what Amazon is (after all, you’ve likely used it a thousand-plus times yourself), but while Amazon packages seem to be passing us at all times, very few people understand the nuances of how Amazon works, and of why it is so effective.
Most of us, I imagine, are old enough to remember the dot-com bubble. As you probably know, Amazon was very much a part of that, and actually started off as an online book store around 1995. A few years later, after acquiring some other businesses, Amazon expanded their product line and began selling more than just books. Fortunately, Amazon survived the dot-com bubble burst of the late 90s, because somewhere around 2000 is where “3rd party sellers” like you and I began to show up. In the first couple years, these independent 3rd party sellers accounted for about 3% of Amazon’s sales. Since then, it has continued trending up a few percentage points each year, and by 2015, 3rd party sellers had surpassed Amazon’s 1st party retail business itself in actual sales. As of 2018, 3rd party sellers had accrued 58% of all sales on Amazon, with the trend continuing towards 3PS. This is where you enter the game!
Whenever I get asked about my profession (as we all do) from time to time, I find that many people have no idea that Amazon even has 3PS’s. Furthermore, many people don’t know about Amazon’s fulfillment centers. This is what makes Amazon unique! 3rd party sellers isn’t a new concept and it certainly isn’t unique. Ebay and other 3rd party seller only platforms have been around for decades, but these companies do not own their own 3rd party logistics branch. Amazon as you may already know (or have just guessed) does have it’s own 3rd Party Logistics. It’s called “Amazon FBA,” or “Fulfilled by Amazon.” This is one of the main reasons why Amazon is building “distribution centers” all over the world. They are actually building one in my city as I write this. For me, this means that as an Amazon Prime customer, I should have access to same day or 1 day fulfillment on purchased products stocked at that warehouse. Furthermore, as an Amazon Prime member, the shipping fees from said fulfillment center (or any other fulfillment center) are included in my $10 a month membership fees.
As a 3PS on Amazon you have the option to either store your products in your garage, and ship directly to the customer (like you would on Ebay and the like), or you can pack up your inventory into one big box and ship it to an Amazon Fulfillment Center where they will handle the distribution and sales for you! This is the secret sauce! So in other words, if your products are located at these fulfillment centers, and a random customer purchases your product from Amazon.com, then an Amazon employee (or robot) pulls your product from a shelf, packs it up into a box, slaps a label on it, and ships it to the customer. Amazon FBA is what allows you to scale your business instead of staying up all night packaging and printing out address labels for all of your sold products, or the headache of hiring and managing someone else to do it for you. When you’re selling 100-200 units a day like I am, your options for distribution are to either work long monotonous hours, hire someone, or to use 3rd party logistics like Amazon FBA to do it for you. There really are no other options.
Another huge advantage to using Amazon FBA to fulfill your orders, is simply more customers will buy your products. The main reasons are, your product listing will automatically rank higher on the Amazon search engine, and perhaps more importantly, your products will qualify for free 2 day minimum shipping to all Amazon Prime members. Therefore, Prime members will obviously seek out Prime eligible products, which creates what Michael Scott refers to as a “win-win-win” for you, the customer, and Amazon.