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The advantages of using pre-FBA logistics when going global

The moment our FBA volumes in Europe became substantial, we started pondering global expansion. And obviously the United States of America were the first country on the radar. We were pretty excited because everyone said that Amazon US is 10 times bigger than Amazon Europe. There was a big market to tackle.

Catalog transformation didn't take long as language is the same in UK and US. However, what we did and what I would recommend to everyone is to do some optimization for local language terms and phrases that differ across US and UK. We sent our first FBA shipment and saw sales grow pretty quickly. However, since lead time from Europe to US is long, we were not able to replenish FBA stock just-in-time. Seeing that to be an issue, we stocked up at FBA US a lot to be safe and prevent out-of-stocks. Unfortunately, what happened is that the stock-out period between initial sell-out and replenishment caused rankings to drop significantly and we ended up with a bulk of goods at FBA in US and a very slow sales record. The long-term storage fee (LTSF) clock started ticking and sales did not recover. After a couple of months it was time to organize a massive stock removal (take it out of Amazon FBA).

Avoid removals at all cost

How to organize a removal if we don't have any warehouse presence in US. Family and friends? Yeah, maybe for a dozen of units but not for 10 pallets of goods. We quickly found an independent warehousing service for Amazon sellers and requested Amazon to return our goods to the new address. The plan was to store it there and send back to Amazon just in time. Sounds good in theory but in practice it turned out to be a big mess. First of all, Amazon returned the stock in a very poor condition - the packaging was dirty and dented. Majority of the products were unsellable. Moreover, the quantities did not match what we requested. We were also sent by mistake goods that belonged to some other sellers, not us. Then came the nightmare of sorting the goods through and inbounding them in the new warehouse. The provider we chose did not math up to the expectations. The didn't have any warehouse management system (WMS), it was hard to get stock count from them and they were extremely slow when doing replenishment shipments. We decided to do another removal and try a different warehousing provider - and the same thing happened. Third attempt was another failure. Then I came across a fellow seller who recommended a state-of-art warehouse in US with the right systems in place and, what is crucial, experience doing FBA. They told us that doing removal orders form Amazon doesn't really make sense as the stock always comes back messed up. They recommended a totally different strategy.

Have a stock buffer - send in bulk to an intermediary warehouse and then replen to FBA

The idea was to send stock in bulk to their warehouse in US and replenish from there to FBA, which would also open an opportunity to sell on other than Amazon channels as well as B2B. First big shipment went through and I was astonished how smooth the process was. The warehouse operated in a swift and professional manner with full transparency and reporting. The spend on 3PL warehousing generated big savings at the end of the day. First of all, ordering in bulk and shipping to US had brought the overseas shipping logistic cost per unit way down. This doesn't mean that we overstocked and weren't lean. We could still keep the order quantity under tight control not to overstock. It was a matter of sending 1 container per month rather than 4 pallets every week. At the 3PL we decided to keep around 6 months of coverage and this buffer prevented us from going out of stock - which is very costly. Keeping stock outside of Amazon also reduced FBA storage fees. Not to mention all prep and labelling that was done at a much lower rate outside of Amazon.

The bigger the lead-time (manufacturing and delivery), the bigger stock buffer you need. And keeping buffer at Amazon is not good for the following reasons:

  1. Standard FBA storage is expensive

  2. FBA long-term storage fees are extremely high and likely to accrue for slow moving SKUs that are stored in the warehouse for longer than 6 months (Small and Light FBA) or 12 months (standard FBA)

  3. Amazon standard storage and long-term storage fee structure changes often, which might require you at some point to remove excess stock - we had to face that ourselves. And stock removal should be avoided it will be returned very messed up

  4. If you keep some stock buffer outside of Amazon, you can can prevent out of stocks and fulfill other than Amazon orders, for example bulk B2B orders (using FBA multichannel would be extremely expensive for this purpose)

So better keep your stock in an intermediary warehouse, prep there, and replenish to Amazon just in time. Obviously if you have your own warehouse in Europe, this is not an issue. But very often US, Australian, and Asian sellers do not have physical presence in Europe.

We followed the same approach when entering Amazon Australia and Amazon Japan. Finding the right warehousing provider is a challenge. If you want to enter Amazon Europe, or if you are already selling here and want to streamline your operations, be sure that we can handle this for you.

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