What is Fulfillment by Amazon (FBA)?

Your items are qualified for Amazon Prime FREE Two-Day Shipping, FREE Shipping, and then some.

Prime individuals love FREE Two-Day Shipping, and all Amazon.com clients can get free delivery on qualified requests. At the point when you list items for FBA, they are qualified with the expectation of complimentary transportation, as well. Qualified FBA postings are shown with the Prime logo, so clients realize that Amazon handles pressing, conveyance, client support, and returns.

Amazon has created one of the most advanced fulfillment networks in the world, and your business can benefit from our expertise. With Fulfillment by Amazon (FBA) you store your products in Amazon’s fulfillment centers, and we pick, pack, ship, and provide customer service for these products. Best of all, FBA can help you scale your business and reach more customers—in a 2013 survey, 73% of FBA respondents reported that their Unit sales increased on Amazon.com by more than 20%, since joining FBA.

Fulfillment by Amazon is a service provided by Amazon through which the company stores inventory for online retailers (sellers), then packs and ships products when retail customers place orders for those products.

How Does Fulfillment by Amazon (FBA) Work?

FBA works in a relatively straightforward way. To use the service, you must first ship products to an Amazon fulfillment center. When a customer places an order, Amazon picks items from its inventory, packages the order, and ships it to the customer’s address.

While FBA manages the logistics of handling and shipping orders, responsibility for other key aspects of the sales process remains with the seller. Sellers decide which products to sell and how to market them. They must also ensure items are prepared and packed correctly before sending to the fulfillment center. Sellers must also keep track of inventory to ensure stock is refilled prior to running out.

How Does FBA Issue Payments to Sellers?

When setting up an FBA account, a seller provides a credit card number and a bank account. Amazon charges the credit card to cover any fees, and proceeds from any sales are deposited into the designated bank account. Amazon seller payments are automatically tracked and paid out every 14 days.

Benefits of Using FBA

FBA offers several benefits for online sellers, including expedited shipping, adequate storage space, return processing, customer service management, and Amazon Prime branding. For many sellers, these advantages are time- and money-savers that allow them to spend more time on their core business and less time on fulfillment.

• Logistics and shipping
  First and foremost, FBA simplifies logistics and shipping for sellers. The service eliminates the need for sellers to maintain a physical warehouse for inventory storage or staff to pick, pack, and ship orders.
• Unlimited storage space
  Because sellers who use FBA store their inventories in Amazon fulfillment centers, the space available to sellers is virtually unlimited. This means your ability to offer a large selection of products is not contingent on the size of your own storage space.
• Shipping speed and cost advantages
  Orders that are fulfilled through FBA are typically shipped faster and at a lower cost than most sellers could achieve on their own. Amazon’s economies of scale allow the company to offer lower shipping prices. And its efficient operations make it possible to pick and ship orders faster than you are likely to be able to do yourself unless you maintain a sophisticated fulfillment operation of your own.
• Returns management
  In addition to shipping new orders, FBA handles product returns. If a return is needed, a customer will ship the item directly back to Amazon, avoiding the need for you to manage the physical aspects of the return yourself.
• Customer service management
  Unlike most other third-party fulfillment services, FBA offers customer service management, too. This means customers who experience a problem with their order will contact Amazon directly.
• Amazon Prime branding
  Most FBA products are eligible for Prime-related services – such as free two-day shipping to Prime customers – which makes it possible for third-party Amazon sellers to get exposure to 112 million Amazon Prime subscribers. Qualified FBA listings are displayed with the Prime logo, which indicates Amazon handles packing, delivery, customer service, and returns.

Challenges of Using FBA

While it does offer several business advantages, FBA does have some drawbacks that could make it less-than-ideal for some sellers.

Fees and costs

Amazon charges fees to sellers who use FBA, which may vary significantly depending on factors such as item type, weight, and dimensions. For example, when you ship through FBA, you may incur fees for inventory storage, returns processing, recalled item fees, and fees for items that you ship to Amazon without proper labeling.

Beyond direct costs associated with these fees, sellers may experience varied costs involved in FBA pricing, making the prediction of your exact FBA costs difficult. For this reason, FBA may not be a great choice for sellers whose order types are inconsistent, or who cannot accommodate fluctuations in their fulfillment costs.

How much does it cost to sell products on Amazon?

Typical expenses include the selling plan, referral fees, fulfillment fees, and other costs/fees as applicable. See expenses and examples below:

• Selling plan
  Individual plan: $0.99 per unit sold
  Professional plan: $39.99/month/unlimited units sold
• Referral fees
  Paid for each item sold, and can range from 8 – 15 percent
  — Consumer electronics: 8 percent
  — Home/garden: 15 percent
  — Personal computers: 6 percent
• FBA Fulfillment fees
  Fee per unit for picking/packing orders, customer service, product returns.
  Ranges from $1.97 per unit to $137.32 per unit
• Other fees
  May include inventory fees, long-term storage fees, or payment for optional programs, such as advertising or premium account services

Product returns

FBA simplifies the product return logistics process, meaning you may experience more returns than usual. However, Amazon imposes a few restrictions. Most items are subject to a 30-day return window, after which FBA will not accept returns. Some items are not eligible for returns at all.

The difficulty of preparing products

Amazon imposes a relatively complex set of rules regarding how sellers must prepare their items before shipping them to an FBA fulfillment center. As noted above, if you don’t prepare your items properly Amazon will charge additional fees in order to accept them.

Inventory tracking

Amazon provides tools to track and monitor shipments as well as remove inventory from Amazon fulfillment centers. However, sellers are responsible for keeping track of what is in their FBA inventory and ensuring it is replenished as needed. If you don’t do this properly, you risk accepting orders that can’t be fulfilled because the items are not actually in stock. Alternately, you could end up with excess inventory and pay to store items for a long period of time at an Amazon fulfillment center.

Sales tax issues

Calculating sales tax is complicated enough when items are sold and shipped directly. When you use a third-party fulfillment service like FBA, sales tax becomes even more complex. The seller could be located in one state, the FBA fulfillment center is in another, and the customer is in yet another, with each state having a different sales tax rate.

The U.S. states that host an Amazon fulfillment center require Amazon to collect sales tax on the seller’s behalf. However, in states without this requirement, it is up to sellers to register with each state in which they will collect sales tax. They must provide this information to Amazon in order to set up sales tax collection on Amazon FBA.

 

How to Sell on Amazon FBA for Beginners! EASY Step-by-Step Tutorial

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