How Amazon FBA Works? A Complete Guide on Fulfillment By Amazon
You’ve probably heard of FBA, or Fulfillment by Amazon, if you’ve ever sold something on Amazon. With the introduction of FBA, online sellers were able to sit back and relax while Amazon took care of the heavy labour. Amazon’s vast warehouses across the world are now open to sellers.
All orders for your products would be packed and sent out by Amazon’s hardworking workforce. Even customer service is handled by Amazon workers when it comes to FBA.
What is Amazon FBA?
One of two main fulfilment alternatives available to Amazon sellers is Fulfillment by Amazon (FBA). The other is Fulfillment by Merchant (FBM), which is a system in which the seller packs and ships orders to customers directly. FBM vendors mostly use Amazon to reach out to customers and develop demand.
How does Amazon FBA work?
One of two main fulfilment alternatives available to Amazon sellers is Fulfillment by Amazon (FBA). The other is Fulfillment by Merchant (FBM), which is a system in which the seller packs and ships orders to customers directly. FBM vendors mostly use Amazon to reach out to customers and develop demand.
When making a product listing or posting a product for sale on Amazon, sellers must decide on their fulfilment plan. Sellers have the option to switch between fulfilment options at any time.
Below are the simple steps that shows how Amazon FBA Works:
- The products are procured by sellers and shipped to an Amazon warehouse. Amazon will provide you with all of the relevant contact information and address.
- The items are then kept in Amazon’s fulfilment facility until a client places an order. There is a storage cost, which is based on the product’s size and volume.
- When you place an order, Amazon handles the transaction and updates your inventory.
- Amazon is in charge of packing and shipping the order.
- Customer service and order tracking are handled by the online retail behemoth. Amazon also handles returns and refunds.
- Amazon provides you the revenue from your sales every two weeks.
Amazon handles critical logistical services, this is an excellent option for many sellers to build and scale their online businesses. All you have to do now is restock your goods and count your cash.
How Much Does Amazon Fulfillment Cost?
There are various sorts of fees to consider when evaluating the costs of using Amazon FBA. Let’s take a look at each category one by one.
FBA members are charged a variety of fees by Amazon.
Standard Seller Fees: When an item is sold, Amazon charges a seller’s fee of about 15-18% of the product price. The amount varies based on the product. Although Amazon claims to charge 15%, there are certain hidden fees, such as refunds that are not fully charged back, which raises the overall charge to the seller.
Fulfillment Fees: Picking and packaging, shipping and handling, customer support, and product returns are all included in these expenses, which vary depending on whether the product is standard or excessive.
Inventory Storage Fees: Sellers are charged a monthly storage fee per cubic foot of merchandise based on the calendar month and daily average volume. These fees differ depending on the product size tier. Long-term storage fees apply to items kept at an Amazon fulfilment centre for more than 365 days and are in addition to any monthly inventory storage fees.
International Shipping: Amazon now has a feature called Global Export, which allows sellers to ship their inventory anywhere in the world.
For more Amazon FBA Fees and Pricing Visit here:
Benefits of Using FBA Services
When sellers join up for Fulfillment By Amazon, they will have access to all of Amazon’s services and benefits.
1. Amazon’s customer care team is available 24 hours a day, 7 days a week to help FBA sellers with questions, returns, and refunds. Except for the Returns Processing Fee, which is applied to certain product categories, the service is free.
2. Having Amazon’s name attached to a product is a quality assurance that most purchasers will value, making them more likely to favour a seller as a result. Consumers expect outstanding customer care and fast delivery from FBA, so having the Amazon name attached with their products will help sellers earn consumer trust.
3. Amazon has a partnership with delivery providers, sellers who use this service will be able to save money on shipping compared to if the items were shipped from an individual’s account. Additionally, because products sold through FBA are qualified for Amazon Prime and FREE Super Saver Shipping, sellers can provide free shipping on orders over a certain amount.
4. Amazon’s fulfilment centres are available for FBA merchants to store their merchandise. Amazon is able to send things swiftly while also managing inventories across numerous channels, not only Amazon’s marketplace.
5. Amazon can distribute and manage merchandise that is sold through a variety of channels, not simply the Amazon marketplace.
6. All FBA orders are handled in the same way that Amazon handles its own inventory. This means that when a customer buys something, Amazon selects it from their inventory, packs it, and ships it to the customer. A merchant can put an item on his own website and have Amazon do all of the heavy work with the Fulfillment By Amazon service.
7. Prime-eligible FBA listings have the Prime logo displayed on them. This allows the seller to reach out to new and existing customers looking for free one- or two-day shipping, filter for Prime-eligible products, and convert only if the Prime logo is visible.
Advantages of Amazon FBA
1. Logistics support and scalability
This is the most advantageous aspect of Amazon FBA. You may save a lot of money on storage and simply scale your business because Amazon handles the shipment and storage of the product. To hire storage space, you don’t have to spend a lot of money up front.
If your firm is just getting started and you’re selling more than ever, Amazon will cover the additional shipping costs. All you have to do now is make sure your stock is replaced.
You don’t have to do anything because Amazon does it all for you. All you have to do is maintain track of your listings, make sure they’re stocked with stuff, and leave the fulfilment to us. For a modest cost, you can remove a significant burden from your shoulders.
2. Fast and free shipping from Amazon Prime
Amazon has permanently altered the way we shop for goods. Customers have come to expect lightning-fast delivery since the launch of Amazon Prime. Amazon FBA merchants are eligible for Prime immediately. Your purchases can be delivered in a few days thanks to Amazon’s thousands of fulfilment centres across the world.
3. Discounted Shipping Rates
You’ll save money on shipping through the FBA platform as you’re working with Amazon, a global fulfilment giant. As a result, even though you’re paying fees, they may be smaller than you anticipate when you consider the transportation savings, and they’re still less expensive than doing your own shipping and fulfilment in-house.
4. Customer Service Management
FBA vendors get access to Amazon’s own customer care. You may also use their FBA platform to handle your own customer support needs, with all of your service being routed through one platform for ease management.
5. Easy to grow your Business
Using Amazon FBM means you’ll be in charge of all inventory, labelling, packing, shipping, tracking, and customer care. You probably don’t have place for all that noise if you run your ecommerce business out of your living room or a small office.
Disadvantages of Amazon FBA
1. Cost
FBA isn’t cheap, but that’s not surprising. The problem comes as a result of Amazon’s storage prices. Because it adds up month after month, if you have a poor turnover, you risk losing a lot of money. This is exacerbated if your products are also charged for long-term storage. Inventory can be removed from Amazon warehouses, although this isn’t always free.
Amazon FBA is not free. In fact, when all fees are taken into account, the expenditures might be quite substantial.
2. Limited branding
You’re missing out on a branding opportunity since Amazon packs and sends your product from its fulfilment facilities. While you have control over your product packaging, Amazon’s logo and brand name will always appear on the shipping boxes. Your options with FBA are restricted if you want to build a brand and customise the customer experience.
3. Sales Tax
The state is in charge of sales tax. If your company is based in one state but has inventory stored in another, you may be unsure which tax rate to use. Fortunately, there are tools to assist you with automating various tax scenarios and guidelines, as well as determining what to charge, and Amazon can handle the majority of this for you.
Tips for Maximizing FBA Sales
This isn’t a brand-new platform. For you, this means there’s a wealth of information available to help you maximise your FBA sales right away. It’s not necessary to be a household name or have a brand-new product. Here are a few suggestions and methods to keep in mind if you’re employing this service to boost your revenues and expedite your expansion.
- Make use of online analysis tools – Use web analytics tools to conduct product research on the most profitable and popular items accessible on Amazon, as well as to decide which product categories are the best to sell in. Take note that the bestsellers are at the top for a reason.
- Consider your product choices – Consider not only your sales rank, but also what you earn in return. Although high-ranking products are competitive, they sell rapidly and keep inventory moving. Low-ranking products may result in inventory stagnation and long-term fees. However, because there is less competition, they may provide you the opportunity to become a top seller.
- One of the most difficult aspects of Amazon is competing against dozens of near-identical items that differ only by a few reviews or a few dollars in price, but are otherwise indistinguishable. Create bundled listings to catch people’s attention and provide them more for their money.
- You can’t just throw a bunch of stuff on the market and hope for the best. You must devote time and effort to developing a brand and positioning it in such a way that it achieves success and reaches your target audience. It’s not enough to be in the buy box. It’s all about ensuring that you’re selling high-quality products that have come from a respected manufacturer or distributor.
- When it comes to picking an Amazon seller, one of the most important elements to consider is how well they interact and engage when provoked. If a user has a query, respond quickly and courteously to let them know you’re available when they need you.
How to Get Started with Amazon Fulfillment?
To begin selling using Fulfillment by Amazon, you’ll need to link your Selling on Amazon account to your FBA account. Then you’ll send your products to Amazon so they can fulfil orders and respond to customer inquiries.
- Set up your FBA account – It’s simple to set up FBA if you already have a Selling on Amazon account. Otherwise, you’ll need to complete a few more steps to create a Selling on Amazon account.
- Make a product listing – There are a variety of ways to establish product listings, including utilising a third-party application or your Amazon seller account. Set them up all at once, in batches, or with third-party software.
- Prepare products – FBA sellers must guarantee that their products adhere to Amazon’s selling guidelines. Sellers can stay compliant by using a service like ShipBob.
- Send products to Amazon – Sellers must either ship their products to an Amazon warehouse or use a third-party logistics company such as ShipBob to do so on their own. Amazon and ShipBob have secured significant savings with several delivery companies.
- Monitor target levels – If your inventory levels match those on Amazon’s Restock Report, you’ll have a better chance of being able to offer free one-day shipping to your consumers.
Final Thoughts
Third-party sellers may now start and develop their online businesses with ease thanks to Amazon FBA. It enables new vendors to join smoothly into Amazon’s vast ecosystem.
Most successful sellers, on the other hand, don’t keep to a single fulfilment approach. The size, demand, and profitability of the product, among other considerations, should influence your fulfilment method selection.
Finally, the Fulfillment by Amazon programme provides sellers with the best of everything in a great little bundle that is reasonably priced. However, due to the cost structure and the way fulfilment is handled, it may not be suitable for all brands or products.
Hey Priyanshu , All the information about Amazon FBA is very well displayed. However , there are multiple tools for product sourcing , price analysis etc, so if you make any blog or video for that information that would be greatly appreciated.
Thanks for this blog.
Although , am following you on social media platforms , I would like to connect with you in a session or something like that for Amazon FBA.
I would like to start the FBM workshop . Can you please share me the link please?
Thanks