Are you interested in starting an Amazon business? If you have done some research, you will certainly have come across the term FBA. People asking “what is amazon fba and how does it work?” this should be one of the biggest, most important things you have to learn. The term is one that a serious Amazon reseller should be familiar with because it can make or break your online business. Knowing what is FBA’s role in your income, revenues, and costs can be a game-changer. If you know how to utilize it and cut down its costs, you can boost your revenue and income in the long run.
So, are you ready to learn more about these services AMZ offers to its third-party sellers? Interested in learning how to start an Amazon store that makes money? Want to maximize your income by using the right FBA settings? Then let’s get started and jump right to it.
What is FBA?
Fulfillment by Amazon is a unique service that is offered by the website to its sellers. The simplest FBA meaning is this – you send your product to AMZ and let them handle your fulfillment. All you have to do is pay the FBA Amazon fees needed to maintain the service. With this offering, you can pretty much just sit and relax while focusing on making sales. Understanding FBA should be crucial to your life as an online seller because of the impact it has on your business.
Under FBA, AMZ handles the services like shipping and storage of the supplier’s products. The only thing that sellers have to do is ship their products to the fulfillment centers. In addition, post-sales services like returns, refunds, and other customer services are also handled by them. In this article, we are going to dig deep into what Fulfillment by Amazon entails.
What Tasks Should a Seller Specifically Handle under the Fulfillment by Amazon Business?
Most articles and online gurus only focus on what aspects of business a seller doesn’t handle under FBA. But there are certain responsibilities that a seller has to handle too. Understanding isn’t enough – you should also learn about your tasks as an online store vendor. Here are some of the services that a seller should take care of under Amazon FBA:
Select and source the products that you will be selling.
There is a vast range of products that are available on the AMZ website. So, it’s easy for any seller to choose any random product and sell it without actually researching it. But the problem with this kind of mentality? You’ll easily lose your money and capital on the wrong products! If you happen to choose a product that has no demand and doesn’t make sales, you will quickly drain your upfront capital. It’s not enough to understand what is FBA’s role in your business. You should always be one step ahead when it comes to product selection.
In order to make money, you should choose such products that possess high demand and have little competition. As a seller, only the best-selling products can take you to the top. Finding a winning product in AMZ is like unearthing a diamond in the rough. With enough work and dedication, you can quickly turn this rough diamond into riches.
Related: ZonBase is the most trusted and widely used seller software around the world for product research. It offers a database of highly converting products that can take quickly take you to the first page on the Amazon search page and help you sell more.
Keeping your products well-stocked
It is one of the common misconceptions that AMZ maintains your stock in their warehouses. But the reality is far from the truth. Once you ship your product to their warehouse, you have to keep an eye on the stocks coming in and out. You have to replenish the stock once it is out of stock at the fulfillment centers. Not doing so will give you a delay on your orders, which can mean bad customer reviews on delayed shipping.
Aside from that, it will also take quite some time for you to replenish your inventory. It takes quite a while to forward your stocks and have them ready over at the AMZ warehouse. This kind of delay is what makes sellers lose their sales over to the competition, which isn’t a good thing. As a responsible seller, make sure that you always keep your products well-stocked. If your inventory is starting to fall below 20%, start preparing the next batch of inventory to be delivered.
Marketing your products
Again, another misconception that newbie sellers have is this – they think AMZ automatically markets their products for them. If you don’t know how to sell on Amazon FBA yet, then you should remember this. AMZ does not advertise your products. Marketing your products is solely your responsibility and how you do it is all in your hands.
However, AMZ does offer advertising programs like Sponsored Ads to promote your product listings. Take note that they will charge for this service as well. So at the end of the day, it all boils down to this. You can either take care of your marketing yourself, either through SEO or your social media pages. Or use any paid advertising services such as AMZ’s PPC (pay per click) platform to promote your products.
Now you know what is fulfillment by amazon fba important role in making your store successful. But it doesn’t end there. Here are some more benefits of using this service.
Benefits of FBA
So now you know what is FBA? Great! But that’s not all of it. There are so many benefits that this fulfillment service can give to your business. If you utilize it properly and how to minimize your costs, you can make good money from using it. To help you decide if this service is the one that you need, you should weigh all the pros and cons beforehand. To give you a headstart, Amazon FBA takes care of the following services for your business:
The fulfillment process is taken care of
Fulfillment is a service that takes care of all the activities that are required to be done to complete your customers’ orders. The services include activities like:
- Picking your products and sorting the products in the warehouse.
- Packing the products.
- Shipping the products to the customer upon their order.
- After-sales customer support.
- Managing refunds and dealing with the return of the products.
If you as a seller indulge in all these processes by yourself it will require a lot of time and effort. In addition, you need to invest a huge amount of capital to complete all the services of storage, shipping, and customer support. Amazon FBA incurs fewer upfront costs to do business. It is especially important to small enterprises that have a low budget to start their business.
Managing your Customers’ Return
Handling product return is the most tedious task in the entire business. There are angry customers that you have to deal with. You have to check the valid reason and ensure that they don’t happen again. And what is FBA’s role in this? Simple. When you use it, you don’t have to worry about customer service ever again.
Also, you have to take care of product replacement and provide a refund without reduction. Also, if you have to take this job by yourself, you have to employ extra staffs that will cost you more. But with fulfillment by amazon fba, everything will be handled by their employees and you will be off the burden.
Reduce Shipping Cost
Shipping costs will take away a huge amount of your cost. Also, if you charge your customers it will increase the price and they will run away to your competitors. Amazon FBA will save you from all these costs and will let your shipment be handled by other major shipping companies that they have contacted directly.
No Need For A Warehouse of your own
Warehousing is the most important service of any manufacturing and trading company. If you choose to buy or rent any warehouse, it will take a major portion of your cost. If you want to start an online business with minimal capital and low upfront costs, using it is a beneficial option. After all, what is fulfillment by amazon fba’s cost compared to renting your own large space to store your goods? Most likely, renting a space can be more expensive in the long run.
Expanding your business worldwide requires immense financial investment. Yes, expanding your business is an excellent idea for growth. However, it cannot be done unless you have huge capital.
What is FBA’s role in all of this, you say? Simple. Using the service can make your dream come true. You can expand your business internationally with fewer financial costs by leveraging AMZ’s warehouse and fulfillment networks. Since AMZ has been working with couriers all around the world for so long, it’s a no-brainer that they can fulfill orders anywhere.
So, are you selling on other platforms too aside from AMZ? If you are, then one of the best things about FBA is that you can use it to fulfill orders from other stores too. If you have an Etsy, eBay, or Shopify store that needs assistance in fulfilling orders, you can use FBA. With this service, you can do multichannel selling while using only one warehouse and fulfillment method. This can be a great feature that you can use to your advantage.
Cons of FBA
Like all other services, this one also has its own sets of disadvantages. Now that you know what is FBA’s advantage, it is time to see its disadvantages as well. To help you decide if using it is the right decision for you, here are some of its cons:
Cost Isn’t Free
Always remember that AMZ isn’t doing this for free, so any dreams that you have of using this service without having to pay is over. For a seller who is just starting out, the initial inventory costs will already take much of your upfront capital. Add the FBA fees you are required to pay into the mix and you will have even bigger costs. Fortunately, you can use this FBA Amazon calculator to double-check your fulfillment fees before committing to the service.
Possibly More Returns
One of the biggest selling points of AMZ is its return policy, especially for customers who are Prime Members. With that being said, using the FBA service can be one reason why a seller gets an increase in returns. Since there is a no-questions-asked return policy in place, you are at a disadvantage as a seller. You can’t do anything when buyer’s remorse kicks in.
Tight Product Preparation Requirements
Before you even send your products to the AMZ warehouse, you are required to prepare them following strict requirements. These requirements are set by AMZ itself, so you don’t have a choice but to follow them carefully. If you don’t comply with these preparation requirements, there is a chance that your products will be returned. This means additional time and money wasted, which can really set your business back.
To know more about AMZ’s packaging and preparation requirements, you can click this link.
Sales Tax Confusion
As a new seller, having to think about how to sell your products is already challenging. Now, add the fact that you have to also manage your sales tax, and it can make your head spin. Since sales tax is managed at a state level, it can be confusing which one to apply to your business. Sometimes, you are selling in one state but your AMZ warehouse is in another. Times like these can be confusing when it comes to which sales tax to apply.
Is Amazon FBA right for my business?
Before diving into the FBA business meaning, you should examine the nature of your business to be sure it’s the right fit. Here are some factors you should consider:
- Level of sales order: If you have just started your business and your sales order is low, you can handle fulfillment by yourself. However, if you sell more than 40-50 units monthly, you should opt for FBA.
- The number of employees: If you deal in regular products and you have plenty of employees to handle our business, you can do it on your own. If you deal in seasonal products and you have unusually high demands, you should dive into FBA.
- Type of products you sell: Products that are small in size and less in weight are best if you opt for FBA. The fees are reasonable and your products will be shipped quickly to your customers. If you deal in products that are large and weigh more, Amazon FBA fees are skyrocketing and you might want to look into other options. It will also cost more to ship these types of products to the warehouse which might reduce your profit margin.
How does Fulfillment by Amazon business work?
Step 1: Set up your Amazon Seller Account and include fulfillment in your account.
Step 2: Add all of your products into Amazon’s catalog either individually or in a group.
Step 3: Now, pack your products to ship them to Amazon’s warehouse.
Step 4: You have done your job and now your products are ready to be sold. Amazon takes care of the remaining services after this step.
To wrap up, Amazon FBA is an all-inclusive program that can be used by almost all types of sellers to focus on their business growth and let Amazon handle all the fulfillment services. You should take note of the considerations discussed above to find out whether you can handle fulfillment on your own or you need assistance from Amazon with the Amazon FBA program.
Because of all the perks of using this service, many beginner sellers can really benefit from it. However, there are also costs involved in using this fulfillment method. If you aren’t really sure whether this fulfillment method is the best for you, use this calculator as a reference. Sometimes, FBM (fulfillment by merchant) can be a better choice if you are selling bulky fragile products such as television.
The Best Amazon FBA Tool
It’s not enough that you know the FBA’s meaning and how to use it in order to succeed. If you want to have a successful Amazon FBA business, you will need an Amazon seller tool to help you out. The best Amazon FBA tool for your business is ZonBase. Zonbase is an all-inclusive Amazon seller software comprising tools that assist with product research, keyword research, listing optimization, and more.
Now that you know what is FBA’s role in your online business, the next thing is to ensure your success. This can be achieved through data-driven decisions with the help of powerful seller software tools such as Zonbase. Voted as the number 1 most accurate, bang-for-the-buck software for AMZ sellers, Zonbase is a real game-changer.
Interested to give Zonbase a try? Sign up for a free trial.