Fulfillment by Amazon, commonly known as FBA, is a service offered by Amazon to third-party sellers. This service includes the storage, packaging, and shipping of products. In simple terms, FBA is a process where AMZ helps sellers fulfill their customers’ orders. For a certain fee, you won’t have to deal with the logistics of delivering products to your customers.
Fulfillment by Amazon is helpful to both new and experienced sellers. If you are looking to free up more time so you can focus on other aspects of your business, a helping hand is always welcome. AMZ is willing to provide this helping hand for a certain fee.
For new sellers, it is difficult to handle all the fulfillment services by themselves. Because they are often inexperienced, they can’t handle all the burden of selling by themselves. For experienced sellers, having more time to handle other aspects of your business is better. Whether you are a new seller or an experienced one, you can find value in using the FBA service.
Under this service, all you need to do is ship your products to a Fulfillment Center for storage. Once the order is received for your products, they will do the rest. Its employees will handle all the work, which includes picking, packaging, and delivering the product to your customers. You will have to pay a nominal FBA fee. But compared to the costs of doing it all on your own, paying the FBA fees might be cheaper in the long run.
Advantages of Using FBA
Third-party sellers have the option to either let Amazon fulfill their orders or fulfill the orders on their own. If you happen to choose FBA, here are several advantages that you can enjoy:
Using Amazon’s brand name for your products
Customers that are buying goods on AMZ don’t look for seller names. They are mostly attracted by their brand loyalty to Amazon. If your orders are fulfilled with FBA, customers are guaranteed that the product will reach them on time and without defects. You can gain the trust of the customers, and gain repeat customers in the process.
Fulfillment centers do not just store goods that are sold on the Amazon marketplace. It is a multi-channel storage facility. Once you store your products in their fulfillment centers, they can also fulfill the order from multiple channels. This means you can sell on other platforms such as Shopify or Etsy, and still use fulfillment by Amazon.
Sponsored and reduced shipping fees
With its huge network, Amazon is more likely to have strong partnerships with multiple shipping companies. And if the shipping orders are huge, then obviously that the shipping costs per unit are reduced. Since they are shipping hundreds of thousands of products in a day, they pay much cheaper fees on average. On the contrary, if you go and ship your product by yourself, the shipping cost is much higher.
Because of this, Amazon usually charges sellers lower shipping fees if they use FBA. Aside from this, using FBA also makes your products eligible for the free 2-day shipping option available only to Prime subscribers. Sellers who don’t use FBA have to offer free shipping to compete with FBA sellers, leading to higher shipping costs.
AMZ is already a trustworthy brand with a standardized shipping network in place. Because of this, it is easier for them to fulfill your orders in a timely and efficient manner. By using the FBA shipping and delivery network, you are also increasing your customer’s trust. You can build a good relationship with your customers if you assure them that their products will be shipped safely and quickly.
Target Valuable Prime Audience
If a seller opts for fulfillment by Amazon and his products are Prime eligible, the product is displayed with the Prime logo. That means the products can be ordered by Prime customers. Prime features which include free delivery within one or two shipping days can be a good way to convert your customers. Targeting a prime audience has the advantage of selling your products fast.
In addition to picking, packaging, and shipping the products to the customers, they also handle other after-sales services. It includes the most cumbersome task of handling inquiries, returns, and refunds on behalf of FBA sellers. The return service is free except for some product categories.
Disadvantages of Using FBA
Issues Regarding Product Handling
Sometimes, various issues can occur in the fulfillment process. The goods could be lost or damaged, and there is just nothing you can do about it. When this happens, Amazon often reimburses the fees. But oftentimes, in cases where these are not brought up and noticed, your seller’s fees will not be returned. These errors are often on their end. In such cases, the suppliers should be extra careful.
Strict product guidelines
There are a lot of preparation and packaging requirements that you need to know if you use Fulfillment by Amazon. Also for specific products that need special packagingsa such as poly bagging and bubble wrapping, they need to be in optimal condition. If your product doesn’t follow these strict guidelines, it might be returned to you. This will mean additional costs.
More Returns and Refunds
Since returns are free of cost and the refund amount is 100%, customers can abuse this rule. Some customers might return as many goods as they want and still get back all of their money. It may lead to higher return rates and create operational inefficiency in their employees.
Sellers need to give special attention to the nature of their goods. FBA fees can be considerably lower if you have small, fast-selling goods. However, if you have slow-moving and heavy products, the cost can quickly pile up. If your products don’t sell fast, the long-term storage fees charged to you can be quite big. Also, if your goods are defective and damaged, they are going to be removed from the fulfillment centers. A removal fee is charged for these instances.
Amazon fulfillment centers focus on keeping separate inventory based on the nature of the products. There may be chances that some other sellers have procured the same goods of less quality from the same manufacturer. When your products get mixed with these, it has serious repercussions. It might even lead to fraud and account suspensions.
Fulfillment by Amazon Fees
Let’s now talk about the real deal. There are several fees that a seller using Fulfillment by Amazon has to pay. Some of them are as follows:
Fulfillment fees are fees charged per unit. This fee depends on the category and size of the product that you are selling. Fulfillment fees include fees for the picking, packing, shipping, handling, and delivery of the products. It also includes product returns and other post-purchase customer services.
Whenever you sell an item from your store, there is a certain referral fee charged per item. This fee is different from the $0.99/unit sold fee that you have to pay if you sign up for an individual seller account. Depending on the category of your item and its size, there are different referral fees charged.
Inventory Storage Fees
Storage fees are charged based on per cubic foot of inventory. It is also dependent on the product’s size and category. Selling seasons also affect the price of inventory storage fees. During peak seasons such as Black Friday or Prime Day, inventory storage fees can also increase.
Under the inventory fees, there is another fee called long-term storage fees. This fee occurs when your inventory stays at the fulfillment center for a period of more than 365 days. This charge is different from the monthly storage fees. Because of this, you need to make sure that your inventory sells out fast. You must not stock inventory that is more than what you can sell.
Variable Closing Fees
Are you selling products in the New Media category? If yes, then you also need to pay a variable fee. The New Media category includes products such as books, software, music, digital purchases, video games, and so on. The variable closing fees are roughly around $1-2/item depending on what you are selling.
In addition to shipping within the local area, AMZ also offers Global export. It provides an opportunity to sellers to ship their goods anywhere in the world. If you want to sell to customers that are outside your country, you need to pay international shipping fees too.
Related Content: The Beginners’ Guide To Amazon FBA In 2021
Getting Started with FBA
So you are interested to start using FBA? Don’t worry, it is not that difficult to set it up. Just make sure to follow the steps listed below:
- Create a professional Amazon seller account.
- Set up your FBA by choosing it as the fulfillment option when you add your inventory.
- Source the packaged product, choose a shipping plan, and print the shipping label.
- Transport it to the Amazon fulfillment center.
- Abide by all the shipping, packaging, and routing requirements to ensure acceptance in the fulfillment centers.
Should You Go With FBA?
Now, this is a question that can only be answered by your own needs. Are you a seller who has a lot of time in your hands to pack, ship, and deliver your items to customers? Can you establish a lower shipping fee agreement with shipping companies? Do you have lots of time in your hands to handle customer service? If the answer is yes, then going for FBM (fulfillment by Merchant) isn’t such a bad idea.
However, if you want to scale your business up and sell thousands of items in one day, FBA might be the better choice. With FBA, you can focus on the other aspects of your business such as streamlining your manufacturing and production. You can also rest assured that you will be able to handle large orders from customers during peak season. Some sellers get really swamped up during Black Friday and Prime Day because of the huge amount of orders. By leveraging FBA’s delivery and logistic networks, you will be able to handle this huge influx of orders without problems.
Remember that you have to pay certain FBA fees though. And if these fees end up eating your profits, there is no sense in using the service at all. So make sure that your FBA costs do not end up taking away your profits.
Zonbase: The Best Software Tool For Amazon Sellers
Whether you are thinking of using FBA or FBM, you still need to find the best products to sell. And as a third-party seller, finding the best products to sell is such an important task. As a matter of fact, finding the right product means your store’s survival in the long run. Choosing the right product is like finding a gold mine that you can earn from. However, choosing the wrong product can also mean your downfall. Because of this, you need a software solution that can help you discover the perfect products to sell on Amazon.
Zonbase, with its 13+ tools to help Amazon sellers, is your homerun product finder. It can help you accomplish tasks such as product research, sales optimization, and listing optimization. Voted as one of the best software suites for sellers, Zonbase can help you find your winning product with just a click of a button.
As a third-party seller, having access to a powerful software tool is crucial. Zonbase gives you the competitive edge that you need to go over your competitors. And this will also help you as you start using fulfillment by Amazon to scale up your operations. Interested to know more about Zonbase? Sign up for a free trial.