Running an online business is now easier than ever with Amazon FBA. Without spending huge upfront money on storage facilities and support staff, third-party sellers can now build their businesses. If you are wondering how Amazon FBA works , you’ve come to the right place. This article aims to get the concept of Amazon FBA explained in the simplest way possible. We will explain how this fulfillment method works and the benefits that sellers can enjoy from using this program.
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What is Amazon FBA?
FBA is an abbreviation for Fulfillment by Amazon (FBA). This is a paid fulfillment service offered by Amazon to third-party sellers. It is an alternative to the FBM model, which means sellers fulfilling their customers’ orders by themselves. Many sellers often wonder how does Amazon FBA work, since they are interested in adopting this model.
Fulfillment is one of the core aspects of an online business. It covers everything from warehousing, packaging, and shipping orders to customers, and processing returns, refunds, and exchanges. If your fulfillment process is not optimized, your customers will not have a satisfactory experience, and this can hurt your business.
However, not many sellers can afford sufficient capital to pay for fulfillment infrastructure. This is where this fulfillment method comes in.
What makes FBA a Good Alternative To Self-Fulfillment?
Most of the time, sellers fulfill their orders. This means that whenever an order comes in, sellers pack and ship the products through their means.
Through the Fulfillment by Amazon (FBA) program, third-party sellers can now outsource their fulfillment process. Since the platform boasts an advanced distribution network, delivery infrastructure, and customer service operation, fulfillment becomes faster. As a result, selling on Amazon is stress-free.
Under this fulfillment method, AMZ handles inventory storage, order fulfillment, and customer service on behalf of sellers. In addition to storing your inventory in Amazon warehouses (or Fulfillment Centers), they also pick, pack, and ship customers’ orders on your behalf. Furthermore, the service also provides customer support and handles seller returns and refunds. If you are still wondering how does Amazon FBA works, this is the simplest explanation for this Fulfillment by Amazon (FBA) model.
With Amazon packing and fulfilling orders on your behalf, you can easily grow your business. You can launch or sell your product and increase your inventory level, without having to worry about storage space and workforce.
How does Amazon FBA work?
This fulfillment method is quite simple. Here’s a step-by-step guide on how Amazon FBA works.
- Sign up for a Seller central account. Regardless of the model you choose, you will have to create a seller central account before selling on Amazon.
- Create a product listing to sell your products and indicate Fulfillment by Amazon (FBA) as your fulfillment channel.
- Send your inventory to Amazon warehouses. They will determine which warehouse you should send to.
- Workers will sort and store your inventory
- When a customer purchases your product, AMZ processes the payment and updates your inventory.
- AMZ then picks, packs, and ships the product to the customer.
- They will also manage the customer service operations after the transaction by processing returns or refunds.
- Finally, AMZ deposits available funds into your account every two weeks.
Essentially, AMZ automates fulfillment for you by having its employees perform tasks that you should ordinarily do. These services are done on your behalf for a fee. Most of the time, the fees are cheaper than the costs you will incur if you fulfill the orders by yourself. Now you won’t have to wonder how Amazon FBA works.
Source: Jungle Scout
What Are FBA Fees?
Using this fulfillment service to fulfill orders or sell your product on Amazon is not free. Sellers need to pay a certain amount of money for the services such as packing, delivery, and storage. Below are some of the fees that sellers need to address.
Storage Fees
So, you decided to use this fulfillment method? Cool! However, it would help if you had a warehouse to store all of your inventory. Amazon warehouses are all over the country to store FBA sellers’ products. However, storage fees to keep this inventory intact are required. Depending on the product you are selling on Amazon, its size, and category, storage fees might vary.
There are two types of storage fees: monthly and long-term. The monthly storage fee is a fixed amount you need to pay whenever you use Amazon warehouses to store your goods. However, if you do not sell your product within 365 days, you will also incur a long-term storage fee. This is the reason why you should store inventory that you sell well.
To have a better idea of how much you need to pay for storage, here is a list of AMZ’s storage fees.
Fulfillment Fees
By using this model, you let Amazon pick, pack, ship and deliver the products to your customers. But like everything else, this fulfillment service also comes at a price. Again, fulfillment fees might vary depending on your product’s size, weight, and category.
For example, heavier and bigger items will most likely be more expensive to fulfill. This is why it is always better to pick smaller, non-fragile items when looking for a product to sell. Also, certain items such as those with lithium batteries and television sets require an added handling fee. So if you are selling these items, you might think about using FBM instead.
You can check the fulfillment fees for different kinds of products here.
Referral Fees
Every time that you make a sale, you need to pay a certain referral fee to AMZ. This fee is separate from the Individual seller plan fee which amounts to $0.99 for every sale.
Referral fees also have different rates depending on the product category. Some products range from 6-8% of the product value. Some products, on the other hand, can reach up to 15%.
You can see the referral fees here.
Variable Closing Fees
There are certain categories in the New Media that require a variable closing fee. You need to pay a variable closing fee if you sell products in the Book, Music, Video Games, and Software category. Variable closing fees cost $1.80 per item.
Things You Need To Do As A Seller
With FBA doing much of the heavy-lifting, you can sell your product seamlessly while saving time and money. However, some tasks will remain your responsibility if you decide to start selling on Amazon.
Finding winning products to sell:
AMZ isn’t going to tell you what to sell. You will have to do your research and find profitable products to sell on the marketplace. You will also have to source your products from a trustworthy supplier.
Prepare your products
Before sending your inventory to the warehouse, you have to prepare and package your products the way you want customers to receive them. AMZ has laid down requirements that you must adhere to, and these standard requirements are a must-follow for every FBA seller. If you don’t follow them, your products will not be accepted, and they will be returned to you.
Inventory management
Inventory management is your responsibility, not AMZ’s. AMZ stores your inventory and notifies you when your stock is low. So, you have to replenish your inventory regularly, so you don’t run out of stock. However, you must also make sure not to overstock your items. Items stored in fulfillment centers that don’t get sold within 365 days incur additional penalty fees. You need to make sure you can sell your products quickly.
Create your product listing and market your product on Amazon effectively
FBA gives you access to a wide customer base. However, you still need to boost your visibility and improve your rankings. The best way to do this is by creating optimized product listings and campaigns. Then, promote your product on Amazon with various advertising methods.
Using FBA software to support you in carrying out these processes is your best bet for success. But you don’t want to spend money on several software tools for each of these processes. With an all-in-one FBA seller software like Zonbase, you can find all the tools you need for your business in one place.
With Zonbase, you can do product research, find relevant keywords for your AMZ listings and PPC ad campaigns. You can also optimize your product listing, and improve your overall sales ranking.
Benefits of Amazon FBA
Below are some advantages of using this fulfillment service:
- With FBA, selling on Amazon is much easier, and your business can thrive on AMZ’s trusted reputation. The platform already enjoys so much customer loyalty because of its top-notch services. By having them handle fulfillment for you, people are more likely to buy your products.
- AMZ is an eCommerce behemoth with more money, resources, and employees than you. They can handle payment processing and fulfillment logistics more efficiently than you can. With FBA, your customers are guaranteed fast and efficient shipping and customer service.
- Using FBA makes your products eligible for Prime Free Shipping. Customers are more likely to buy your products because everybody loves fast and free shipping. This gives you an edge over sellers who do not use FBA.
- Using FBA is cost-effective. You incur fewer costs as you don’t have to worry about renting or buying a warehouse, employing staff, or handling shipping logistics.
- You have an increased chance of winning the Buy Box if you’re an FBA seller.
- With Amazon packing and shipping orders on your behalf, you’ll have more time on your hands. You can focus on scaling your online business.
- You can also use Fulfillment by Amazon (FBA) for multi-channel fulfillment. So even if you run an online business on other marketplaces, Amazon can still fulfill orders for you.
Disadvantages Of Amazon FBA
It’s always great to have a helping hand. However, there are a few drawbacks of this fulfillment service that you should be aware of, such as:
- As an FBA seller, you will have to pay fees to AMZ for its services. These fees include fulfillment fees and storage fees. Yes, they may not be as costly as costs you’ll incur on your own. But in some instances, using FBA can cost you more. For instance, your fees may be higher if you sell a heavy product on Amazon. Also, if your goods don’t sell quickly and stay in the Amazon warehouse for more than 365 days, you’ll incur long-term storage fees.
- Preparing and packaging your products in line with the requirements can be quite taxing. And if you don’t do it properly, AMZ will take care of it for you, but you will be charged a fee.
- Products fulfilled with this model are branded with Amazon’s logo. This makes it difficult for brand owners to build their brand awareness and boost their reputation.
Conclusion
We hope you’ve gained more clarity about how the AMZ fulfillment service works, at this point. The benefits far outweigh the downsides, and many sellers have used this service to build successful businesses. Ultimately, you have to determine if this model suits your business needs.
Whether you plan to become an FBA seller or use the FBM model, one thing remains the same. You still need products to sell. Before you even start thinking about what fulfillment service to use, what you should think about is finding the right product.
Zonbase: An Amazon Seller’s Best Friend
As a third-party seller, finding the most suitable and profitable products to sell is crucial. When it comes to your survival as a seller, choosing the right products can be the difference between making money and going bankrupt. Choosing the wrong products to sell can be the reason for your store’s downfall. That is why using a software product to help you find the best products to sell is important.
With over 13+ tools and services to help sellers succeed, Zonbase is a software that we recommend. It is great for product research, keyword research, and listing optimization. Considered as one of the best-value and accurate software suites today, Zonbase can help you get your competitive edge.
One of Zonbase’s tools is Zonresearch. You can use this tool to choose a product on Amazon and find the best products to sell fast. Another popular Zonbase tool is the Zonbase Chrome Extension tool which allows you to search Amazon’s database. Through this browser extension, you can discover the sales data and revenue for each product sold on the website.
As an FBA seller, having access to a powerful tool such as Zonbase is significant. With Zonbase, you can build a competitive advantage over other sellers in your niche. For a successful online business, Zonbase is the best FBA seller software that you need. Now you don’t have to wonder how Amazon FBA works and how you can find the best products to sell.
Sign up for a free trial here.