Amazon FBA Challenges: Episode 6 of the Hustle Lab
You know how Amazon FBA is supposed to be the ultimate solution to all your sales and fulfilment worries?
Yeah. They lost about three quarters of my stock.
Don’t get me wrong, they reimbursed me the cost of the stock, but a large portion of the profit I was supposed to make on this little side hustle just got flushed down the toilet thanks to their misplacing 42 pairs of headphones and a drone.
I packaged everything up exactly as they asked. I put custom Amazon barcodes on most of the stock, but since the headphones were all brand new and sealed, I decided not to bother with those and used the original manufacturer barcode instead.
That’s a legitimate option that Amazon offer you. It is called stickerless, comingled inventory. That means that if other sellers are selling exactly the same thing, your stock will be stored alongside theirs, and when someone orders something, they could be sent either your goods or the other seller’s goods because they’re all supposed to be identical.
I sent my package to Amazon, and had a little hiccup I documented in an earlier article. After my package finally arrived, I waited and waited and waited until finally the system acknowledged my goods, and I had 3 out of 65 items I had shipped available for sale.
Where were the other 62? Good question.
Eight were being held pending a safety check because they contained batteries. I had already filed all the paperwork, but Amazon wanted me to file it all again, in a different way, by uploading a document.
Two drones were labelled as “unfufillable, inactive”, and there was a suggestion I might want them shipped back to me.
48 pairs of headphones and three more drones had simply gone missing. Never received.
Raising Issues, Getting Things Fixed
In fairness to Amazon, despite messing up spectacularly with my inventory, they were fairly efficient at resolving issues once they were raised or dealt with.
I printed off the dangerous goods declaration forms, completed them and sent them in. 48 hours later my keyboards were available for sale.
I raised an issue with my drones being sequestered and the next day those two drones were once again available for sale.
I raised yet another issue for all my missing stock, and after 3 days of investigation, I received an email confirming they’d found 9 headphones but the rest were missing, along with a drone, and they’d be crediting me the cost of the items to my next statement.
So what was the real cost?
I missed out on most of December, which is obviously a good month to be selling things. I will go into January with a few items in stock that I’d hoped to sell beforehand, and those items will likely most much slower in the new year than they would have just before Christmas.
I missed out on the profit margin for all those headphones. The 9 that I did actually get to sell shifted really fast, so there’s a certain amount of demand for that on Amazon UK, but I ran out of stock just as quickly. I’m a bit miffed at Amazon for losing me all that margin.
I’m going to have to discount the drones quite hard if I want them to sell.
Why Did This Happen?
It’s Christmas and I can imagine things at the Amazon FBA warehouse are fairly hectic at this time of year.
That said, Amazon also sell headphones and drones on their own platform and it’s hard to ignore the cynical little voice in my head that points out how convenient this all is for them. I don’t have too much trouble imagining Amazon doing this to a large number of small suppliers during this period. While our stock sits in limbo theirs flies out the door after being sold.
The same applies to the headphones. They didn’t disappear. They’re in the Amazon warehouse somewhere and I can see a whole bunch of them on sale from other suppliers at higher prices than I was quoting. Now that I’m out of stock, those will sell, with higher fees for Amazon. Sellers other than me will earn margins on stock they sell, despite the fact that I went to the trouble of purchasing and shipping those items.
That leaves a slightly sour taste in my mouth.
As a first experience of FBA, I can’t really grade this higher than must do better, and I can’t shake the feeling that I’ve been messed around.
So what’s the take-away from all this experience?
- Selling stuff that has someone else’s brand on it dramatically reduces your options. If these items had been branded with my name on them, they could never have been comingled, and I would likely still have the items to sell
- FBA is decent, but you need to be prepared to lose some stock with them from time to time. Amazon is not the hyper-efficient detail-oriented organization that it’s external-facing systems imply
- There’s a cost to doing business. If your margins are 50%, then assume somewhere between 10% and 20% is going to disappear in “random acts of business vandalism”