It seems like you can buy and sell just about anything online. In fact, many are even choosing to sell groceries on Amazon FBA. With so many markets to choose from, how do you know if it’s the right choice for you? In this article, we’ll walk you through the pros and cons of selling groceries on Amazon FBA.
As with any other good, selling groceries on Amazon FBA increases your product consumption. Fulfillment by Amazon (FBA) is an upgrade of the regular Amazon which allows you to use an Amazon fulfillment center as a storage facility and transaction center. All you have to do is ship the items there with a unique barcode and let Amazon fulfill the transactions and shelf your products.
Pros of selling groceries on Amazon FBA
Access to prime customers
According to statistics, Amazon prime customers spend more and buy more than non-prime customers. To be more specific, they spend around $1,340 on Amazon annually, whereas non-Prime customers clock in at $529. When you sell your products with Amazon FBA, your items automatically qualify for Amazon Prime shipping, so all Prime members can get free two-day shipping for your products which encourages customers to buy more. Therefore, selling groceries with FBA gives you access to a much broader customer base that is willing to buy more and even spend more on a purchase. Moreover, you will be charged the same shipping fee regardless of whether or not your customer ordered via Prime or regular shipping.
FBA takes a load off of selling groceries; Amazon workers take care of packing and shipping the products to the customers when you make a sale. When selling groceries on FBA, you will have less work of packing and shipping the groceries to the customers which will give you more time to focus on stocking up your inventory. What’s more, Amazon workers will take care of any returns by the customers which will save you time and money. This is because there will be no need to employ additional customer service reps. Grocery selling requires considerable storage space because of the continually increasing inventory. However because you store your items in Amazon’s fulfillment centers, you won’t have to worry about needing all of that space for your ever-expanding catalog.
Cheap shipping and packing
Perhaps the most significant thing about FBA is the reasonable shipping and packing. If your product sells through Amazon itself, then you will pay $1.04 per unit in packing costs, and between $0.50 to $0.60 per pound of weight in handling charges. In these cases, the shipping is free. Therefore, if you sell items that weigh 3 pounds on average, you’d pay about $2.50 per order for shipping. This is not bad considering you’re selling groceries which are bulky and would otherwise be too expensive to ship.
When you use FBA, you are not limited to just selling through Amazon’s marketplace. With FBA, you can sell your products through any channel you wish to sell on and fulfill your multi-channel orders. This will increase the number of customers you will reach on this online platform. This will, in turn, make your profits bigger and help to clear your inventory. When selling groceries on Amazon FBA, this is beneficial to you because you’ll be able to sell your goods before they expire. This reduces the amount of food that goes to waste and the financial losses you suffer.
Cons of Selling Groceries on Amazon FBA
Inventory tracking/stale inventory
When you do not have direct access to your inventory, it is easy to lose track of what you have, what you have left over, and what you should have more of to meet customer demand. This will force you to hire an inventory manager which is an added cost to your usual budget.
Moreover, after some time, you end up with quite a bit of stale inventory that you are paying rent for but not selling. This is especially bad in grocery selling because groceries are easily perishable and cannot sit on the shelf for long. Even if they have not gone bad, customers will keep away from them because groceries are best when they are fresh. This is a crippling disadvantage that can also cause you to suffer financial losses rather than profit.
FBA services are not free. You will pay according to the amount of inventory you ship and store in the warehouses. The pricing system also relies on how long you intend to store the merchandise in the warehouse. Additionally, FBA is a fee-based service which means that you’re paying to be a part of it as well.
Because you pay so much money to use FBA, you need to know exactly how much product you will ship to the warehouses to get the most out of your money. Unfortunately, this is a close to impossible task because you can neither predict customer wants nor alter buying preferences.
It is already tedious to ship products to customers when they order them, and it is even more tedious to send your products to Amazon with the uncertainty of whether they will sell or not. This is a gambling situation when selling groceries because they are easily perishable and can go bad within the first few hours. However, the case is different if you handle shipping yourself because you can just do the prep on an as-needed basis, so it that doesn’t require as much dedicated time all at once.
Will you start selling groceries on Amazon FBA?
With these pros and cons in mind, we hope you can decide if this is a market you’d like to enter. Selling groceries on FBA has its benefits, especially as it becomes a more popular product. However, you must also consider two unique downfalls – its short shelf-life and difficulty in predicting demand.