Amazon FBA means Fulfillment By Amazon (FBA). It's a fulfillment method where an amazon seller sends the inventory to amazon fulfillment centers and from there amazon sends the products to its buyer. This whole system of storing the goods with amazon till the buyer buys, after which amazon packs and ships the product from its warehouse to the doorstep of the buyer is called Fulfillment By Amazon or Amazon FBA simply.
I have been personally selling as an amazon fba seller for a very long time. And being an FBA seller has helped me to grow my eCommerce business by leaps and bounds to 6 figures. Especially due to Amazon's fastest delivery times when using fba.
How Does Amazon FBA work?
On Amazon, there are two types of sellers, Amazon and non-Amazon seller. An Amazon seller is where amazon themselves is selling on amazon. And non-amazon sellers are those third-party merchants who are selling on amazon marketplace.
When products are sold by Amazon, they store their products in their own fulfillment centers or warehouse and ship them directly to the customer from the nearest warehouse. This helps them to deliver goods within 2 days or even some products on the same day.
So when any third-party merchant wants to use this service and make their products prime eligible, ie quick shipping then it's called Amazon FBA. For which the seller has to pay some fees for storing, packing, and shipping by amazon.
Types of Fulfillment Methods with Amazon
There are two types of fulfillment methods for amazon sellers
1. FBM Method or Fulfilled By Merchant: In this, the products are stored by sellers in their own warehouse and when they get the order they dispatch it to the buyer from amazon. So storing, packing and shipping are all taken care of by the merchant once the order is placed on the amazon portal.
2. Amazon FBA: This method as described above is the one in which storing, shipping, and packing to customers is taken care of by amazon. It also makes product listings eligible for amazon prime shipping. ie. Fastest shipping like same-day delivery or 2-day shipping.
Advantages of using FBA for Amazon sellers:
After personally coaching many friends and family on selling on amazon fba I can surely say that the benefits of selling via FBA outweigh selling by any other means.
As an amazon fba seller, you have multiple advantages of using the amazon fulfillment center. As not only it reduces your headache of inventory management but also many more as listed below:
Storage Fees: Amazon provides you with storage for your products at a very discounted rate for 6 months which is any day cheaper than having your own warehouse.
Location Advantage: Amazon FBA helps take your product closest to your customer's location. For eg you are based in new york and your customer is in Seattle, then amazon stores the goods in the nearest fulfillment centers so that it can deliver those goods at the fastest possible time. If the seller decides to fulfill self, it would be difficult since it can be expensive to have multiple storage facilities across the country.
Inventory Management: It also divides your inventory as demand, thereby sending your inventory to multiple warehouses across the world or country where it forecasts demand for your products.
Packing and shipping: Amazon takes care of all the shipping costs and packing and you don't have to worry about anything once your product reaches their warehouse.
Subsidized Fulfillment Fees: Though amazon charges storage fees, as well as its packing and shipping costs but they, are all subsidies as compared to doing it directly.
Standard Costs: Its costs are standard across the country based on the dimensions of the products, so you don't have to worry about the distance between you and the customer.
Customer Support: Since the whole fulfillment is by amazon, they are responsible if your package is lost or it isn't delivered in time.
Customer Returns and Refunds: If the customer wants to return the product, then the returns processing is also done by amazon itself.
Prime customers also love amazon fba sellers since they are assured of quick delivery times hence amazon gives preference to FBA sellers by giving buy box to those sellers who sell via amazon fba.
Disadvantages of Using Amazon FBA:
But there are a few disadvantages of selling via Amazon FBA:
- Peak Season Fees: Amazon fba fees go higher during peak festival season.
- Inventory Limits: Amazon places a limit on the amount of inventory you can send to amazon fba. It also depends on how fast moving your inventory is, if the inventory is too slow then you will have higher limits on sending the inventory to Amazon.
- Long-Term Storage Fees: You start incurring heavy inventory storage fees if your inventory stays unsold for more than 6 months.
- Slowing Moving Products: If you have products that are slow-moving or heavy and bulky then they are not something that you can ship to FBA and then expect amazon to ship again from their warehouse to the customers doorstep because of the simple reasons it can get expensive.
- Customer Details: Customer details are hidden by amazon, so you never know who your ultimate buyer of the product was.
I always recommend selling light and small products which increases fba selling profitability
Amazon Prime customers love amazon fba sellers since they are assured of quick delivery times hence amazon gives preference to FBA sellers by giving buy box to those sellers who sell via amazon fba.
What are FBA sellers?
FBA sellers are third party sellers on amazon who uses fulfillment by amazon (FBA). They don't ship products directly to customers but use Amazon's fulfillment center to service the customer.
What are FBA Fees in Amazon?
FBA fees are those fees that amazon charges to the seller for providing the fulfillment service. Where in they take care of complete inventory management. To understand how much amazon charges as fba fees you can look at the chart below.
Or you can visit amazon here to get fba fees.
Can anyone join FBA Program?
Yes, anyone who wishes to sell on amazon can join Amazon's FBA program, and there is a minimum inventory needed to join the FBA program. You can start as low as one item or one product.
What is the difference between amazon seller and Amazon fba?
If on any listing it says "Sold By Amazon" then it means the product is directly sold by amazon without any third-party seller being involved.
Whereas if the listing is sold by a third party but uses Amazon fulfillment centers then that is called an Amazon FBA seller.
What is FBA and FBM in Amazon?
FBA is Fulfillment By Amazon, as the name suggests the fulfillment of products is taken care of by Amazon.
FBM is fulfilled by Merchant, as the name suggests the fulfillment is taken care of by the merchant himself and amazon only provides orders.
Should your business use Amazon FBA?
There are many difficult questions that need answers. Sellers may use FBA in general if it is possible to sell low-volume products. The storage fee limit guarantees a safe and secure storage system. It must be remembered that fulfillment techniques vary by product. A seller may use FBA to create a small child's playroom or choose FBM as a table. This is why sellers have incorporated both fba and fulfillment methods into their products to get more profit from Amazon marketplaces. Can an FBA Firm Earn More Than $100 to Start? The second aspect is the mixing.
How Does FBA benefit amazon?
Well as you must be aware that more than 2/3rd of the product listings on amazon belong to third-party sellers who is of different sizes from the small sellers to multi-million monthly sellers. Now not all sellers can deliver products in the shortest time, so by taking over the fulfillment it also sees that the product of even the smallest seller is delivered on time.
Thus improving customer experience.
At the same time when products are fulfillment by amazon then amazon doesn't have to disclose customer details to the sellers.
How do you become an Amazon FBA seller?
In order to become an amazon seller, you have to register to sell as a seller on amazon. This will give you access to amazon seller central, and you can start listing your products.
Should You Sell on Amazon FBA? Is It Profitable?
Yes, if you are looking to start selling your products and don't have ready-made customer base then amazon fba is the best place to start. It's not only profitable but will also provide you with a readymade customer who is already searching for your products on amazon since Amazon is already the biggest search engine for products online.
If you are someone who is low on investment, then you can start by selling without inventory by using just the FBM method.
Should your business use Amazon FBA?
Yes, if your business has high volume selling products that can be sold in 6 months then you should surely use amazon fba for your business.
Amazon FBA inventory fees explained
One big benefit of the FBA is inventory management and storage. Amazon sellers can use this platform without wasting much money in order to acquire storage space. As I said before, the costs are very minimal. Amazon charges for the total number of orders in its fulfillment centers. It reflects volumes and is contingent largely on the number of goods purchased or stored and the period in which the items have been stored. Storage costs are increased throughout the holidays between November and December. Amazon charges monthly storage fees for up to 15 days of the month following the day the fee is applied.
More to Read: Common Mistakes New Amazon Sellers Make.
Amazon FBA course
If you are looking to sell on amazon fba you can check our free course on it .
Samrudha Salvi ‧ Author
With more than 5 years on selling on amazon, and helping 100s to get started on Amazon.