Thursday, October 27, 2011
Understanding the Amazon Prime Customer - Become One!
Fulfillment by Amazon is the hot thing in ecommerce right now. Many people don't understand why sellers go to the extra "trouble" to pack up their items, ship them to Amazon, and pay Amazon to store and ship their items to the final customer. FBA is much more than just shipping and storage. In a conversation on my Facebook group yesterday, a member asked this very question, "I just don't understand FBA. Is it really an advantage to pack up your stuff & send it to them to sell? Not easier to list yourself? Seems like a lot of additional fees."
What most sellers not doing FBA don't understand is the Amazon Prime customer - these customers are the lucrative part of FBA and an FBA seller's best friend. A special group of Amazon customers, called Prime Customers, pay an $80 a year membership fee and anything they purchase with the “Prime” logo is shipped free, within 2 business days. The only way to sell to these customers, and to the ones who choose free super saver shipping with an order of $25 or more with the SSS logo, is to do FBA and have your items in an Amazon warehouse. In other words,
YOU CANNOT REACH THE CORE GROUP OF BUYERS ON AMAZON UNLESS YOUR ITEMS ARE IN AN AMAZON WAREHOUSE AND AMAZON TAKES RESPONSIBILITY FOR SHIPPING THESE ITEMS.
If you are only doing merchant filled, you can not reach these people and you are missing a huge % of the Amazon customer base. Also, Prime and SSS customers are not as price sensitive, they will pay more than for MF items, and buy more at a time. Point #2:
IF YOU SELL ON AMAZON, AND ARE NOT PARTICIPATING IN THE AMAZON FBA PROGRAM, YOU MISS OUT ON SELLING TO CUSTOMERS WHO ARE NOT PRICE SENSITIVE. YOU ARE LEAVING MONEY ON THE TABLE. LOTS OF MONEY.
When you switch to FBA, some magical things happen:
1) Your competitors drastically decrease. You are no longer competing against every other seller with the same product, only other FBA sellers and Amazon.
2) Your customer base increases because you now get to sell to Prime and SSS customers, whom you could not reach before.
3) Prime and SSS customers use a filter, "Show prime offers only." So many do not even see the MF offers. They don't care if they pay $5, $10 or even more for an item because they aren't looking at the MF items. This is a case of "what they don't know won't hurt them."
4) Your orders ship 24/7 (media goes intl), and you can spend your time sourcing and shipping box loads of items to FBA rather than shipping items. Once you get your inventory built up, you can spend your time at the gym, going on vacation, or goofing off, and you will still make money because Amazon is shipping your items for you!
5) AZ handles all post transactional activities like returns, customer inquiries, etc. Again, a time saver.
6) This is an economy of scale. Maybe now you are selling 100 items a month at an average of $8 profit per item. With FBA, you can sell 400 items a month at maybe $6 profit, with less effort and less time invested. Yes, there are fees, but the increase in sales offsets that. So you can go from making $800 a month to $2400 a month with very little extra effort.
So, yes, there are tremendous advantages to packing up your items and sending to FBA.
Thought for the day:
THE ONLY WAY TO FULLY UNDERSTAND YOUR CUSTOMERS IS TO BECOME ONE.
If you are new to FBA, or interested in seeing how it works from a customer's perspective, why not become an Amazon Prime customer? Amazon offers a 30-day free Prime trial. I highly recommend that you sign up for the free trial just to see what our customers experience. (Holiday time is a great time to try it out for your own benefit!) You start to think differently abut how you shop and how you can utilize your Prime membership - the other day I needed an item that Target carries. (For personal use, not to sell.) It was a rather large item. I was thinking that I may have to go to multiple Targets to find one in stock. Then I remembered my Amazon Prime account - found the item, it was offered on Prime, for only a few dollars more than the Target price. So I ordered it online, it was at my door in less than 48 hours, and I did not lose any time going on a wild goose chase trying to find it. I did not have to hassle with a large item, wheeling it out to the car, putting it in the car, unloading it from the car. I was able to use my time for other tasks while Amazon handled the problem for me - for only $4 more than I would have paid at the store (if it was even in stock).
The Prime trial requires a credit card, but it will not be billed until the free trial is over, so as long as you cancel by the 30th day, you are not charged anything. (I did the free trial last year, was not charged, and then converted to the paid Prime membership earlier this year.) This is not an affiliate program, I do not make any money or receive any perks if you sign up. This is an easy and free way to get inside your customers' heads and start to understand why Prime customers will pay more for items on Amazon. And once you understand this convenience and enjoy it yourself, you can better serve your customers as a seller and make more money in the future. Knowledge is power.
Click here to sign up for the Amazon Prime Free Trial.