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For many consumers around the world, Amazon is the go-to option when it comes to shopping online. The sheer size of Amazon's customers and its quality of service have compelled brands to sell their merchandise through them, in addition to their website.
Amazons humongous scale of operations truly makes them the goliath of ecommerce and at times it feels like every retailer has to play by their rules — or at least follow their footsteps. For instance, Amazon has successfully made 2-day shipping a rudimentary customer expectation.
This is one of the major reasons why brands opt for Fulfiled by Amazon (FBA) to fulfil their orders. In the FBA scheme, the seller sends inventory to Amazon fulfilment centres and Amazon fulfils orders on behalf of the seller — ensuring shipments meet Prime shipping standards. Overall FBA allows brands to simplify ecommerce fulfilment, but it comes with its own challenges. Some of these include complex fulfilment fees and minimal scope for branding and personalisation.
As mentioned earlier, FBA offers various benefits to a seller like access to Amazon's network of fulfilment centres, the Amazon Prime badge on listed products, and returns management.
However, FBA isn't the most suitable choice for a lot of ecommerce businesses because of some of its drawbacks like lack of inventory control along with expensive storage and fulfilment fees.
If you have chosen FBA, Amazon will fulfil your orders in boxes with Amazon's branding all around the package. This limits you from creating a branded unboxing experience. It also restricts your ability to build a brand image and attract customers to your website for future purchases.
Amazon has a complex fee structure - some fees are fixed, some are variable, and some are situational. Apart from a seller fee, Amazon charges brands with two broad fees for FBA:
Amazon fees can vary depending on several factors such as seasonality and product category. For instance, Amazon's storage becomes more expensive during holiday seasons and they charge an extra fee for the apparels segment. In addition to this, Amazon has various penalties pertaining to its stringent packaging and labelling guidelines.
The sheer quantity of sellers and their products in Amazon's warehouses makes it challenging for every merchant to get a bin location for every product. Often your inventory will be pooled with similar products from other sellers. This increases the chances of your customers receiving items sold by the other seller — which results in a compromise in the quality of your merchandise and in some cases it could even be a counterfeit.
It's difficult to send and remove inventory from Amazon warehouses that are not intended to be long-term storage facilities. Amazon charges a penalty for inventory which is in storage past a defined time period, especially during holiday seasons and sales. This makes it difficult to adapt to your customer demands and be in complete control of your inventory levels. Since you need to commit to all your inventory at once, you can't acquire inventory based on the market scenario — replenishing inventory when it is required.
It is really difficult to send your inventory to Amazon's warehouses due to their extensive guidelines — FBA prep. This involves specific and stringent instructions pertaining to packaging, labelling and safety.
For instance, Amazon has a very strict Amazon Standard Identification Number (ASIN) system where sellers are required to label each product individually and pack them into multiple shipments before dispatching them to different Amazon warehouses. This means one shipment to Amazon will effectively be two or three shipments — increasing your bottom line costs.
In addition to this, Amazon has various penalties pertaining to its stringent packaging and labelling guidelines.
SFP is when the seller ships their merchandise directly to the customers while complying to Amazons strict shipping standards, allowing them to display the Prime badge on their product listings. Order fulfilment can be implemented from the seller's own facility or from a third-party logistics (3PL) provider's fulfilment centre. SFP can be an expensive choice — mostly because sellers have to pay for the 2-day shipping (frequently by air) to meet Prime shipping standards.
FBM is when the seller ships their merchandise directly to the consumer after receiving the order information from Amazon. While FBM doesn't enable your product listings with the Prime badge, it gives brands complete control over the post-order customer experience.
Note: With the onset of the Covid-19 pandemic, numerous Prime orders have seen delays. This has made FBM a much more lucrative business model.
Working with a tech-enabled 3PL like Eshopbox to fulfil Amazon orders can have a range of benefits for brands, such as:
Eshopbox allows brands to centralise their inventory, this means brands can sell on Amazon as well as other marketplaces and shopping carts (including their website) from one point-of-control, while also maintaining the Prime badge. This allows businesses to accelerate their sales velocity and meet projected revenues.
As mentioned earlier, Amazon has made 2-day delivery a fundamental requirement of the modern-day customer. However, offering 2-day delivery through SFP can take a sizeable toll on your margins. Eshopbox meets Amazon's stringent requirements so that your product listings are Prime enabled and you can offer affordable 2-day delivery to your customers.
Eshopbox has a powerful network of fulfilment centres spread across India which allows you to split your inventory and store it closer to your customers. This enables you to offer 2-day shipping by ground rather than expedited shipping by air to meet Prime requirements.
Inventory management involves way more than just storing your merchandise, you need to have complete visibility of your inventory at any point in time — so that you can analyse sales and actively replenish inventory to avoid stockouts.
Eshopbox offers you more control over your inventory along with deep insights across all it's fulfilment centres. Additionally, brands can expect timely notifications to plan re-stocking of inventory.
As mentioned previously, FBA limits your ability to create a branded experience by using Amazon's branding. Eshopbox offers you the ability to completely customise your post-order experience by incorporating powerful workflows. Brands can choose to use branded boxes and marketing inserts such as coupons, free samples, and more to curate highly personalised unboxing experiences for their customers.
Eshopbox offers you with a simple pricing proposal composed of three primary components:
Now that you're aware of FBA and how it works, you can decide whether its the most suitable choice for your business.
If you feel like FBA isn't the right option for you, you can opt for one of the alternatives which would help you scale while also maintaining the primary benefits of FBA such as Prime enabled listings, 2-day delivery, and returns management.