There is no denying the massive reach that Amazon has. The platform boasts over 310 million active users (Source: etailest). Apart from regular users, there are 200 million Prime Members worldwide (Source: Statista).
AMZ is easily one of the biggest online marketplaces in the whole world. Hence, building a profitable store on the platform is something that many third-party sellers aim for. What’s more amazing is that AMZ has made it easier for businesses and individuals to sell products. Sellers can now access its enormous customer base through the FBA program. As an Amazon FBA seller, you get to leverage AMZ’s world-class infrastructure. and services for your business’s success.
Have you always dreamt of being your own boss by starting and running an online business? Then becoming an FBA seller is one way to make this dream a reality. Let’s help you get started in the right direction. We’ll show you how to become a seller (and a profitable one at that) with this mini-course.
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Who/What is an FBA Seller?
An FBA seller is a third-party seller on the Amazon marketplace. These sellers rely on the FBA service for fulfilling customers’ orders.
So, the next question is, “what is Amazon FBA?”
Amazon FBA refers to Fulfillment by Amazon. With this service, sellers can outsource storage and order fulfillment. AMZ will also provide customer service on behalf of sellers. In other words, AMZ helps sellers to store their inventory. They’ll also pack and ship orders to customers. All these services are available for a fee.
This model is the opposite of the FBM (Fulfillment by Merchant) model. Under FBM, sellers inventory, fulfill customers’ orders and provide customer service by themselves.
By becoming an FBA seller, it means that you don’t have to worry about storage space for your inventory. Order fulfillment, customer service, and return management will be nothing to worry about. AMZ handles all this for you so that you can focus on the other more important aspects of your business.
How To Create a Seller Account
If you want to know how to create an account, here’s how to go about it. Sign up here.
Some of the requirements needed to create a seller account are:
- Government-issued identification card
- Tax information
- Credit-card (this will be used to charge you)
- Active bank account and bank routing number (this is where Amazon will send your money)
- Phone number
You have two options to choose from when creating a Seller account: Individual and Professional Plan.
Individual Plan – this one is free to create, but AMZ will charge you a commission of $0.99 per unit that is sold. This is a good starting plan if you are still unsure about what to sell and still testing the waters.
Professional Plan – with this plan, you have to pay a monthly fee of $39.99. But it also opens up more opportunities and marketing tools for you. These include access to restricted categories and AMZ’s PPC (pay-per-click) advertisement.
How does FBA Work?
The process of selling on AMZ through FBA is quite straightforward. Here’s how it works:
- Prepare and package your products in line with AMZ’s requirements. Then send your inventory to a designated fulfillment center.
- AMZ receives your inventory in their fulfillment centers. Next, they’ll store your inventory with a tracking code.
- When an order is placed, AMZ processes the order and updates your inventory.
- Next, they will pick up, packs, and deliver your product to the customer.
- After the transaction, AMZ also handles customer support queries, returns, refunds, and exchanges.
- They deduct selling fees bi-weekly. After which they’ll send the remaining funds to your bank account.
Related: How much does FBA cost?
What Amazon FBA Sellers Have to Do
You may be wondering what’s left for you to do since AMZ takes care of all your business processes. There are a couple of things you’ll still have to do if you want your business to run well. Let’s take a look at those tasks
Some of the responsibilities that you have to handle include:
- Picking a product: Carry out product research and decide what products you want to sell on AMZ. They’re also responsible for sourcing their products from reliable suppliers.
- Preparing products: You’ll have to package and prepare products in line with AMZ’s strict requirements. Ensure you do this before shipping your inventory to a fulfillment center. If you fail to do this, AMZ will handle it for you but you will incur an unplanned services fee.
- Ensuring inventory is sufficient: You are responsible for topping up their inventory when stocks are low. You can check your Seller Central dashboard to view your inventory levels.
- Create and promote your product listings: You have to add their products on AMZ by creating a fully optimized product listing. But that’s not all, you have to make your product listings visible to a large audience. You can do this through marketing efforts like Amazon PPC ads, social media posts, and so on.
Benefits of Becoming an Amazon FBA Seller
So, is FBA worth it? here are some of the advantages you can enjoy:
- Reduced workload: Fulfillment is the most taxing aspect of being an AMZ seller. FBA takes that huge burden off you. AMZ does all the heavy lifting by picking, packing, and shipping orders. This will allow you to focus on other key aspects of your business.
- Minimized costs: With FBA, you do not need to spend upfront costs on renting a warehouse for storing your inventory. The business model uses a pay-as-you-go approach which means fees are taken out after orders have been fulfilled. You incur fewer shipping costs. This is because you incur more costs when you handle fulfillment yourself.
- Free shipping: Using Amazon FBA makes your products eligible to carry the Prime badge. This means you’ll have to offer Free One- or Two-Day Free shipping. Especially on eligible orders for Prime customers. Prime subscribers are AMZ’s largest and most loyal customers. You also get to offer free shipping to other AMZ customers on eligible orders. Customers love free shipping so this gives you an advantage over FBM sellers.
- Leveraging Amazon’s brand credibility: Using FBA means that your products are eligible to be fulfilled by AMZ. Everyone knows that AMZ is one of the most reputable and trusted brands in the world. Customers trust they will receive their orders on time. Also, returns can be processed on time if there are any issues. As a result, customers are more likely to buy your item than an item fulfilled under FBM.
- Customer Service and Returns: With FBA, you don’t have to worry about managing customer service and returns. AMZ’s experienced customer service team handles refunds and exchanges on your behalf. So you can be sure your customers will get excellent service. You won’t have to worry about return policies anymore. AMZ’s customer service team will handle it for you.
You might ask yourself, how much do FBA sellers make? A Junglescout survey shows that about 44% of FBA Sellers make around $1000-25,000/month. The top-sellers (6%) make around $250,000 upwards each month, which gives them around $3m in annual sales.
There are different fees that you need to take into consideration. To make sure that you are making money on your sales, you need to carefully track all these fees. Listed below are some of them:
Inventory Storage Fees
Sellers send their inventory to AMZ’s fulfillment centers for storage. Since you are using up space in their warehouse, they will charge you a monthly storage fee to store your items.
The amount that you have to pay will vary depending on the size and category of the item that you are selling. During peak periods such as Black Friday, Christmas, and Cyber Monday, storage fees may go up. This AMZ storage fee chart can help you estimate how much your monthly storage fee might be.
FBA also covers the shipping, delivery, and tracking of all your sales. Since AMZ takes care of shipping and delivering your items to your customers, you also need to pay them a fee.
Like FBA storage and referral fees, the shipping fees also depend on your item’s category, size, and weight. Items that are heavy and fragile might incur extra fees. Items that require special care such as lithium batteries or large television screens, may also incur extra costs.
Here is an Amazon FBA shipping fee chart that can help you estimate how much you are going to pay to ship your items.
Other Selling Fees
You’ll have to pay to use AMZ’s fulfillment centers. This is apart from the monthly storage fees. You also have to pay a certain amount to AMZ every time you make a sale. In other words, for every product sold on their website, Amazon takes a small percentage cut.
This fee is also known as the Amazon referral fee. It is different from the selling plan fees that you must also pay upon creating your Amazon account.
Just like Amazon FBA storage fees, the referral fees also vary depending on the category of your item. Amazon Devices and Accessories such as the Amazon Echo have quite a big referral fee. Usually, it’s about 45% for this category while items such as appliances can be around 6-8%.
Here is an Amazon Referral Fee chart that you can use to see under what category your product is in.
Variable Closing Fees
Books, DVDs, Music, Computers, Accessories, and the likes incur a variable closing fee. This amount is equal to $1.80 per unit sold in these categories.
How does Amazon pay FBA Sellers?
When you first open an account, AMZ asks you for your bank information. The reason for this is so that they can transfer the money from the sales you made to your account.
So how does AMZ pay FBA Sellers? It’s simple. After settling your FBA fees, you may still have a net positive balance on your account. If you do, AMZ will send your money through an electronic funds transfer. Sometimes, ACH (Automated Clearing House) is also used.
The payment schedule is available on your Seller Central account. You can find it under Statement View > Payment Reports.
Once AMZ sends you the payment, it might take anywhere from 3 to 5 banking days to process the transaction. Once the processing is completed, you’ll see the money in your bank account. Take note that AMZ doesn’t send payments to credit cards or online wallets such as Paypal.
Tips to remember as an FBA Seller
Streamlining your business is essential. This will help you keep your store flowing smoothly. Below is a guide and checklist that you need to remember:
- Make sure you always have products in stock: One of the biggest mistakes that beginners make is not stocking enough products. in their inventory. If you use FBA, remember that it might take a few days before your item arrives at the fulfillment center. You can lose out on sales, especially during peak season, if you don’t have enough stocks in your inventory. Your competitors are also getting your customers and raking in sales while you wait. Don’t make this novice mistake and always ensure that you have enough stocks.
- Always allot extra money to purchase your inventory: Remember that the amount of time for the money to be deposited in your bank account might take 3-5 banking days. This means that you need to always have extra money outside your balance to buy the next batch of inventory. Relying only on your AMZ payments for your business costs is a huge mistake. One that many beginners often make. So, you should avoid doing that.
- Pay Attention To Customer Reviews and Questions: Positive customer ratings can push your product on top of AMZ’s recommendations. Also, replying to customer questions on your listings can also improve conversions. Make sure to pay attention to reviews and questions. These two things will help you streamline and improve your products even more.
- Consider getting a Virtual Assistant: Don’t have the tech-savvy or expertise to deal with product and inventory management? Consider getting a Virtual Assistant to help you out. This will allow you to focus on the other important parts of your business like marketing and supply.
Becoming a third-party seller is not easy. But with the help of this guide, hopefully, we have simplified the process.
So is FBA worth it? In our opinion, yes it is worth it. As a beginner, you might not have enough experience. Shipping, tracking, and inventory management are quite complex to manage. You also may not have enough resources to hire your customer service team. There might be a lot of new, uncharted territory that you have to cross. This can be quite intimidating to do everything on your own.
As an FBA seller, you can take advantage of AMZ’s expertise. Are you a beginner who wants to have a smooth-sailing experience? Use ZonBase. ZB can help you build a thriving store. ZB can also help you make data-driven decisions that will give your AMZ business an edge. With the ZB suite, you can handle complex tasks seamlessly. The tools are designed for product research, keyword research, and listing optimization.