When it comes to eCommerce and online shopping, Amazon is undoubtedly a household name. Amazon has over 300 million users. And as of 2021, over 126 million customers are subscribed to Amazon Prime (Source: Statista).
You’ve certainly bought items from Amazon too. But did you know you can also sell on Amazon using FBA? Amazon partners with third-party sellers on its Marketplace, and it would interest you to know that more than half of the sold items on Amazon come from third-party sellers. Another interesting fact is that about two-thirds of the top U.S sellers on Amazon Marketplace use Amazon FBA (Source: Statista).
If you want to diversify your income stream, starting an Amazon business is one of the best options out there. In this post, we’ll explain the basics of Amazon FBA, its pros and cons, and the best Amazon seller software for building a successful Amazon business. Let’s get started.
What is Amazon FBA?
First, Amazon FBA stands for Fulfillment by Amazon. This is a service offered by Amazon to third-party sellers whereby Amazon handles inventory storage, order fulfillment, and customer service on their behalf.
This is in contrast to the Fulfillment-by-Merchant (FBM) model whereby sellers bear the responsibility of storing inventory, fulfilling customers’ orders, and managing customer service.
AMZ launched the program in 2006 to help third-party sellers scale their businesses by leveraging AMZ’s advanced logistics infrastructure and customer service network.
Starting an Amazon business is much easier when you use Amazon FBA since AMZ does much of the heavy lifting. You’ll no longer have to worry about warehousing your inventory and shipping logistics and can focus on other key aspects of your business.
How Does Amazon FBA Work in 2021?
Starting an Amazon business is not as difficult as it may seem. Although it involves some complex processes, you only need to understand the basics and you will definitely succeed. Let’s walk you through the steps involved in an FBA business:
Step 1: You first have to sign up for a seller account to become a Seller. Next, set up the account and provide all necessary details.
Step 2: Add your products to AMZ’s catalog by creating product listings. Specify Amazon FBA as your Fulfillment Channel.
Step 3: Prepare your products in line with AMZ’s requirements, create an FBA shipping plan, then send your inventory to an AMZ Fulfillment Center (warehouse) for storage.
Step 4: After AMZ receives your inventory, warehouse employees sort and store your products using a tracking code.
Step 5: When a customer orders your product, AMZ picks and packs the item, then ships it to the customer using their chosen shipping method.
Step 6: After the sale, AMZ provides customer support and handles returns, requests, and exchanges.
Step 7: AMZ deducts seller fees and remits your funds every two weeks.
Related Content: Amazon FBA for beginners: 7 steps to start selling like a Pro.
Amazon FBA Program Fees: How much does it cost?
AMZ is not a charity organization so, of course, its service comes at a cost. In exchange for handling storage, fulfillment, and customer service for you, AMZ charges fees related to this. You have to get familiar with Amazon fees so that you can factor them into your pricing.
Understanding the FBA fees will also guide you in stocking your inventory.
The major FBA fees that sellers have to pay are:
- Fulfillment fees: This covers the cost of picking, packing, and shipping your orders, customer service, and product returns. Fulfillment fees are charged per unit based on the weight and dimension of your item.
- Inventory storage fees: This covers the cost of storing your inventory in an Amazon fulfillment center. Inventory storage fees are charged monthly based on the volume of your inventory, which is determined by unit size. Inventory storage fees are also based on the calendar month.
As an Amazon FBA seller, you may also incur additional Amazon fees such as:
- Long-term storage fees: This is charged on items that have been stored in a fulfillment center for more than 365 days.
- Returns processing fees: This is charged on orders for which AMZ offers free return shipping.
- Removal order fees: This is charged when AMZ disposes of your inventory on your behalf.
- Unplanned services fees: This is charged if your FBA shipment to a fulfillment center without proper preparation and labeling and AMZ has to do it for you.
Also, ensure you factor in Amazon FBA shipping fees when choosing Amazon FBA products. Here are a few tips to consider when choosing Amazon FBA products.
How to choose the best Amazon FBA products for your store
- Use the AMZ Bestsellers rank to determine the bestselling products in your niche.
- Choose products that are between $10 – $100 in price and ensure your profit is about half the value of the product.
- Choose small and lightweight products, this will help you cut down on FBA shipping fees.
- Avoid selling in restricted product categories.
Now that you know how FBA Fees work and how to choose the best Amazon FBA products, let’s take a look at the pros and cons of using Amazon FBA.
Related Content: Amazon FBA Fee Calculator: All You Need to Know
Amazon FBA: Pros
Despite the costs involved, most sellers use Amazon because the program is unarguably beneficial. Here are some of the benefits that Amazon FBA sellers:
- Shipping made easier: Shipping logistics can be very stressful to handle. But it relieves you of that burden. AMZ handles packaging and shipping from start to finish. And AMZ’s fulfillment network is world-class so you have nothing to worry about. You only have to monitor your listings and restock your inventory.
- Cost-effective: The shipping costs you’ll incur by fulfilling orders yourself is much higher than the costs included in your fulfillment fee. AMZ is a retail giant and can negotiate lower shipping costs better than you can. In addition, you don’t have to bear the upfront costs of renting a warehouse for storing your inventory.
- Access to more storage space: Amazon’s fulfillment center has a large capacity and can store more items than a regular warehouse. With FBA, you’re guaranteed near-unlimited storage for your inventory.
- Speedy delivery: It makes your products automatically eligible for Prime Free Two-Day Shipping and they also get the Prime badge. And you won’t have to pay extra fees for this.
- Customer Service and Return Management: Amazon’s trusted customer service team handles customer inquiries and support for you, which guarantees great customer satisfaction. In addition, Amazon handles returns and refunds for you.
- More time on your hands: With AMZ handling the heavy lifting tasks that ordinarily fall on you, you get more time to do the things you love. You also get to concentrate on scaling your business.
Amazon FBA: Cons
Although it is helpful, it is not without its drawbacks. They include:
- Costs: Minimizes your startup costs but fees still cost some money. And because the fees are deducted after a sale, your profit margin may be really low if your products are low-cost. In addition, Amazon usually increases the fees yearly.
- Risk of Long-term storage fees: If your products end up selling slowly and staying in the Amazon warehouse for a long time, you may incur hefty long-term storage fees, especially if they are large and heavy.
- Sales tax compliance issues: Amazon FBA sellers have to remit sales tax to the state where their inventory is warehoused. However, AMZ sometimes moves inventory to a warehouse located in another state without notifying the seller, and this may raise tax liability issues.
Amazon FBA Business Models
Aspiring entrepreneurs often get stuck wondering how to start an Amazon business because many assume it is difficult to start an AMZ business. On the contrary, there are several business models for new sellers to choose from, and many of them are flexible and easy to start. Below is a list of the business models that you can start with.
- Private Label:
This business model is ideal for sellers who want to build their brand on AMZ. In other words, you can get suppliers to manufacture products based on your product type. This way, the products carry your brand logo and packaging.
In this model, you buy products in bulk from suppliers and sell them at retail prices on AMZ. So, products do not carry your brand logo because the products are not made for your brand. If you don’t mind making huge capital investments, this business model is great for you.
Here, you buy items at discount rates from physical or online stores and resell them on Amazon. Retail arbitrage requires little capital investment. It is also a great way to start an Amazon FBA business.
Want to start an FBA business without the extra cost of shipping and storage? Dropshipping is best for you. All you have to do is buy customers’ orders on Amazon and ship them to the customers.
This way, you won’t have to worry about replenishing inventory and shipping to Amazon FBA.
AMZ does not restrict you to selling only factory-made items. You can also create unique hand-made designs and put them up for sale on Amazon.
Choose a business model that captures your interests and is within your budget. Also, regardless of the business model you opt for, you will still have to fulfill orders. And if you intend to sell through FBA, you must learn how to ship products to Amazon FBA warehouses. We’ll cover this in the next section.
How To Ship To Amazon FBA
To ship products to FBA fulfillment centers, you’ll have to secure the services of a reliable freight forwarding firm. But that’s not the first step. The shipping process to Amazon FBA fulfillment centers begins from your seller central dashboard. So, you must understand how the seller central dashboard works before learning how to ship to Amazon FBA.
Before now, shipping to Amazon FBA fulfillment centers was complicated, and new Amazon FBA sellers often struggled to learn how to ship products to Amazon FBA. Thankfully, AMZ recently introduced a “Send to Amazon” beta feature that allows sellers to ship to Amazon FBA warehouses in fewer steps. Here’s how to ship to Amazon FBA using the beta feature.
How To Ship Products to Amazon FBA Using the ‘Send to Amazon’ Beta Feature
Step 1: Navigate to the ‘Inventory’ tab in your Seller Central dashboard. Then, click on the ‘manage inventory’ option in the dropdown.
Step 2: Go to the ‘Edit’ dropdown menu on the right-hand side and click ‘Send/Replenish inventory.
Step 3: Enter the current location of your inventory and specify whether your products are individual products or case-packed products.
Select ‘individual products’ if your shipment includes various products with different SKUs and conditions. On the other hand, the ‘case packed’ option applies to products that share the same SKU. If your products are case-packed, you’ll have to specify the number of cases and unit per case for each SKU. Private label sellers often use this option when shipping multiple product units.
When you’re done, click ‘continue to shipping plan’.
Step 4: Specify the number of units in one case and how many cases you’re shipping. After filling the required fields, click ‘Continue’.
Step 5: Brief AMZ about the packaging procedures of your products. Also, state whether or not your products need to be prepped before shipping. Then, select the type of products you’re shipping from the list that follows.
After selecting a product category, you will be notified about the prepping requirements. If you cannot prep your products, AMZ can do that for you. AMZ charges a fee for packing and prepping, typically from $1.00 to $2.30 per unit. The cost varies based on the type of product and the packing material used.
Step 6: Select how your products will be labeled. You can add FNSKU codes yourself or have AMZ do it for you if your products require them. Also, while labeling your products with FNSKU numbers, make sure you follow the proper procedures.
Step 7: This is where you’ll be assigned a fulfillment center. Also, sometimes, AMZ may ask you to split your inventory and send it to different places. But, this only happens if you retain ‘Distributed inventory placement’ as your default setting. If you don’t wish to separate your inventory, adjust this parameter to ‘inventory placement services.’
However, choosing the latter option puts you at risk of incurring an additional per-unit fee. The fee is usually between $0.30 and $0.40 depending on the weight of your products.
You can make changes to your settings by navigating to the settings tab and clicking on inbound settings.
Next, click “Approve and Continue”. Then, “Work on shipment”.
Step 8:You’ll select your shipping provider and how your things should be packaged in this section. After that, you’ll supply the dimensions and weight of your package so that AMZ can calculate pricing. Once you’ve completed this, your inventory is ready to ship!
Complete all required fields, choose a shipping date and print your labels. Then click ‘Complete shipping’ once you’re done.
Step 9: Create a new packing template. These templates will assist you in storing information about your SKUs so that you can reuse them if necessary.
Step 10: Confirm your FBA shipping fees and details.
Step 11: Finally, you can print your labels and ship your products to Amazon FBA. Ensure that the barcodes on both sides of the package are visible. After that, either drop off your packages at UPS or arrange for a pickup.
Now that you have learned how to ship products to Amazon FBA from your seller central dashboard, you can send in your first FBA shipment and start counting to your first order!
How To Maximize Your FBA Sales: 5 Helpful Tips
1. Use Amazon seller tools.
Find out which product categories are the most profitable on Amazon. You should use Amazon software for product research.
The first step to making sales is to find the right products. Without effective product research, it would be almost impossible to scale your business.
2. Select the right product.
Sales rank is important, but so is your profit margin. Competitive products sell fast, and they keep inventory moving. Take this into consideration when making product choices.
Low-ranking products have less competition. But, there’s also the risk of incurring extra storage fees, which can be bad for your business. So, consider all options before making a decision.
3. Create product bundles
Amazon is notorious for its dozen similar listings that are only different in a few ways or by a few dollars. Craft a unique selling point for your brand. One way to do this is to put similar items together in a package or listing. You can attract more customers by offering product bundles that offer more value. If you decide to create product bundles, there’s an increased chance of your inventory getting exhausted quickly. In this case, you will have to create a strategy for replenishing inventory quickly to avoid running out of stock.
4. Create a brand for yourself.
Don’t select products and leave the rest to chance. It is important to put your brand in a position with the potential for success. Also, think of better ways to reach your target audience, you can do this through social media ads.
Ensure you focus on selling high-quality products. So, source products from authentic suppliers. Also, good reviews are important if you want to win the buy box and maximize your sales prospects.
5. Create and optimize your listings for conversions
Product listings are a crucial part of every Amazon business. So, if you would like to scale your business, optimizing your listings is very essential.
Here are a few tips to help you optimize your listings for conversions:
- Use high-quality product images
- Include product titles and use short descriptions
- Add product features in your listings – they help to convince your buyers.
- Use bullet points
The Best Amazon Software for Building a Successful Amazon Business
Starting an Amazon business is one of the best things you can do for your financial health. Selling on AMZ is easier with this and the benefits far outweigh the costs.
Although AMZ handles the more tedious tasks, you will have to execute some other tasks. These tasks include product research, keyword research, and listing optimization. And you need to use AMZ seller software to manage these processes efficiently.
ZonBase provides a set of seller tools for Amazon FBA sellers. It also comes with a sales estimator and photo enhancer tool that you will find very useful.
Use ZonResearch, Hot Products, Product Validator, and Zon Chrome Extension for product research. All these tools work together to bring you the best product options. Also, the Hot Products tool provides a list of authentic suppliers for any product you decide to sell.
ZonBase also offers keyword research tools. For instance, ZonTracker allows you to choose keywords and get detailed information. ZonBase’s reverse ASIN tool helps you spy on your competitors’ keywords to outrank them. You can also use the keywords tool to confirm your keyword choices.
With the sales estimator tool, you can access sales trends for various products. Then, select those that have a track record of sales. Also, the software comes with a photo enhancer tool.
With this tool, you can enhance your image quality. As a result, you can optimize your listings for conversions using high-quality images.
Want to build a successful AMZ business? You should use Zonbase, an all-in-one software with the best seller tools.