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A guide to starting a drop shipping business

Want to start selling online but don’t really have the capital? Or maybe you’re not sure whether it’s for you and you want to test the water first? If you answered yes to either of these, then a dropshipping business may be the answer. It’s an excellent gateway to online retail that requires less financial…

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Win at Drop Shipping

https://vimeo.com/675913568…

Access All Areas at TEC

The Ecommerce Club is designed to mentor members and enable collaboration between all parties. Not just help on your ecommerce journey but help on your business journey.

March 2022 FBA fee changes for Amazon 

Amazon has announced 2022 FBA fee Changes which will come into effect on the 31st of March. You will definitely want to make a note of these changes as they are not only an increase in prices for many but there are also some changes to some size and weight tiers that could have an additional impact on your costs.

Amazon describes the prices changes as ‘moderate’, pointing out that their cost has increased over the past two years. 

“Throughout the pandemic, we have worked to support you – postponing and keeping fee changes low, reducing or eliminating select fees like those for customer returns, and absorbing billions of dollars in increased costs on your behalf – all while making significant and necessary investments in people, technology, transportation, and infrastructure. As you’ve seen widely reported in the press and have likely experienced yourselves, costs are rising and we now need to make adjustments to this year’s fee structure in response. We will adjust our fees to partially offset the higher permanent operating costs we face going forward.

Starting March 31, 2022, certain selling fees will be adjusted in our Amazon Europe stores. Most referral fees will not change, and we are making only moderate increases to fulfillment fees. Review the detailed fee change pages below for more information.”

– Amazon

2022 FBA fee changes include new bands

As an example, currently, the service for a Large Envelope 960g is defined as ≤ 33 cm x 23 cm x 5 cm. From the 31st of March, this will become two bands – one for a Large Envelope ≤ 33 x 23 x 4 cm and a new Extra Large Envelope ≤ 33 x 23 x 6 cm. You’ll find similar bands added for parcels with additional weight tiers introduced.

Dimensional weight introduced

Amazon will also start to use the greater unit or dimensional weight to determine the weight tier of the product. This will impact you if you have very lightweight but large items. The dimensional weight in kilograms is calculated as (length x width x height cm3) divided by 5000. This change in itself could have a greater impact on your fees than the price rises or new bands, so take the time over the next two months to assess how the changes will impact you and which of your product set will be most impacted by dimensional weight measurement.

Small and Light

Amazon will also introduce three new size and weight tiers for Small and Light. These include extra-large envelope 225g, small parcel 150g and small parcel 400g. All other Small and Light size and weight tiers will remain the same.

Amazon IPI threshold reduced to 400

Great news for many sellers – as of the 1st of January we’ve seen the Amazon IPI threshold reduced to 400.

Seeing the Amazon IPI threshold reduced (Inventory Performance Index threshold) means that you should be able to store more product in Amazon FBA warehouses and your storage volume limits should be under less pressure. IPI, is a metric to gauge your inventory performance over time and your IPI score measures how efficient and productive you are in managing your FBA inventory. Multiple factors could influence your IPI score, however, the most important ones are to:

  • Maintain a balanced inventory level between sold and on-hand inventory and avoid excess and aged inventory.
  • Avoid long-term storage fees.
  • Fix listing problems.
  • Keep your most popular products in stock at the right levels, when possible, to meet customer demand and maximize customer satisfaction.

With Amazon IPI threshold reduced, Amazon estimates that less than 10% of sellers will have storage volume limits as we enter 2022. However, be aware that throughout the pandemic we’ve seen IPI thresholds change rapidly with little warning so this shouldn’t be an excuse to simply stuff FBA with inventory. A good guideline is to maintain enough inventory to cover 30 to 60 days of your expected sales. Amazon considers an item to be excess if it has over 90 days of supply based on the forecasted demand and with Christmas over if you have stock which is likely to hang around it’s worth considering how to deal with it.

Reducing prices, removing, disposal are all options and the reason this is critical is if IPI thresholds change again then stock which has sat in an Amazon warehouse for over three months could easily put you over the limit and impact restocking just at the wrong time of year.

What is Amazon FBA? Starter video

https://vimeo.com/536370853…

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The Ecommerce Club is designed to mentor members and enable collaboration between all parties. Not just help on your ecommerce journey but help on your business journey.

Feed Visor

An Amazon FBA calculator which can compare Amazon FBA to FBM or simply calculate fees involved with selling through FBA.

Access All Areas at TEC

The Ecommerce Club is designed to mentor members and enable collaboration between all parties. Not just help on your ecommerce journey but help on your business journey.

Amazon Brand Registry

When creating your own e-commerce business, you put blood, sweat and tears into perfecting your brand to rake in the sales. Amazon is set up with protections to prevent brand impersonators because it’s not uncommon for people to try to mimic your hard work. However, we all know that these things aren’t that simple, so…

Access All Areas at TEC

The Ecommerce Club is designed to mentor members and enable collaboration between all parties. Not just help on your ecommerce journey but help on your business journey.

New product launches being slashed by FBA storage limits

FBA – Fulfilment by Amazon, FBM – Fulfilment by merchant, SFP – Seller fulfilled prime

FBA has always been considered the ultimate easy access fulfilment solution as it’s pay-as-you-go, massively scalable and is available to absolutely anyone. Sending inventory off to FBA was nearly as simple as delivering an email. Sign off a few things online, print a label and ship it to the Amazon warehouse. Not a care in the world as everything that happened next was Amazon’s problem (assuming you get sales of course!).

Houston, we have a problem. Apparently, warehouse space isn’t infinite and it’s been bad for business to allow it to be treated that way. To be fair, they didn’t see the massive rise in demand due to the pandemic, but this has caused a rethink. Following these discoveries, in the second half of 2020, we’ve seen Amazon has introduced a few things…

  • IPI-driven storage limits (The Inventory Performance Index, or IPI, is a metric to gauge your inventory performance over time. IPI score measures how efficient and productive you are in managing your FBA inventory)
  • Long-term storage fees
  • Amazon standard identification number (ASIN) level limits
  • Peak-season storage fees
  • Processing delays which run into 2-3 weeks or longer at peak times
  • A pandemic-related block on non-essential products which is now lifted to a large extent.

The emergence of COVID-19 has thrusted the demand for online shopping light years ahead. With that said, sellers are being struck with the harshest limit of all; a maximum 200 unit restriction on FBA storage for new products pushing many into a hybrid of FBA, FBM or even SFP. Combine this with processing delays and a natural uptake in online sales with the third lockdown, and it becomes next to impossible to make sure popular items are in stock.

Alternatives?

I’m sure you’re more than aware that FBA is not the only selling method on Amazon. However, if you wanted a short term passive income, FBA might have been the way forward for you. This option removes the labour-intensive side of order fulfilment in your own business, and it features a seamless integration with Amazon. If that’s not enough, you also receive the Prime badge which supports your listing at winning the Buy Box and increases the listing position in search ranking.

SFP (seller fulfilled prime) is an option but you have to use dedicated couriers and adhere to some pretty strict regulations to avoid being kicked off the privilege.

Amazon’s business model has been number one for the last 10 years as it attracts a bounty of entrepreneurs and side hustlers. FBA is deep-rooted in this model to the point most sellers tend to say “I’m doing FBA” instead of exclaiming how they’re selling on Amazon.

However, say you want to sell on Amazon, but not under FBA, what are your options? FBM – Fulfilment by merchant is what you are looking for! To simplify it, you either pay an external company to handle your own order fulfilment (3PL), or you do it yourself simply posting orders as you get them. If this is the case for you, there are fortunately a bevvy of third-part logistics companies who are more than capable of doing this.

There is a slight complication with FBM: obtaining a Prime badge. Running the program Seller Fulfilled Prime is your golden ticket to retrieving one of these badges. This will enable yourself or a third-party logistics company to prove that you are able to deliver orders as efficiently and accurately as Amazon. If so, you will be rewarded with the all important Prime badge.

Have you been affected by these changes?

The ASIN quantity limits are nothing new, but they have been massively scaled up since the latter half of 2020. Many sellers witnessed the impact these restrictions would have on new product launches since their announcement in July 2020.

Fortunately for us, as 2021 progresses and as we hopefully get back to some sense of normality with vast vaccination across the country, limits are expected to ease off. So just sit tight a little longer and hopefully the current climate will improve.

In the mean-time you might be asking the following questions:

  • How are sellers meant to successfully launch a product? Additionally, how are they going to formulate a sales history in the first half of the year to cope with this peak season?
  • How far ahead do sellers have to plan with these changes?
  • So, the limits are going to be eased off, but will they return?

Amazon extends returns window

It’s to no surprise that during the pandemic, the entire consumer population has been going crazy purchasing from their neverending list of things that they just don’t need. Amazon has of course been the pinnacle of selling points with its prime benefits and widespread range of items. Even Tik-Tokkers have been creating videos such as ‘things from Amazon you didn’t know you needed’ which is a top viral trend. Some might say the multinational company dominates the world. 

At last, Amazon has reacted to current issues surrounding Covid-19 and extended customer return windows. This applies to all orders purchased on the Amazon UK website that were shipped between

October 2020 and January 31st 2021, which people now have until February 28th to return. 

The company has grown on the back of laser focused customer service as they’ll accept a return for practically any excuse for a refund. This isn’t exactly good news for FBA sellers for the same reason that it’s a major cost factor in selling on the platform. But it is their sandpit and they make the rules so what can you do?

To be honest, Christmas returns would have been requested by now so it’s not the biggest issue, but say worst case scenario you will get a few people asking to return something which you normally wouldn’t be needing to refund. Technically, it’s still your decision with the duration of the returns window, but to keep yourself looked upon favourably, we suggest you go along with it.

Your start to selling on Amazon

Amazon is one of the world’s largest online marketplaces and is key to starting a successful e-commerce business. You may have heard people talk about things such as Amazon FBA and tell stories about all their profits that they’ve made as a seller, but it’s a rare occasion that anyone actually explains how you can…

Access All Areas at TEC

The Ecommerce Club is designed to mentor members and enable collaboration between all parties. Not just help on your ecommerce journey but help on your business journey.