The Definitive Guide to Selling on Amazon FBA in 2023

Last updated on March 15th, 2023

Written by Ken Zhou

The Fulfillment by Amazon (FBA) service launched in 2006 to streamline processes that would benefit both Amazon sellers and customers. Since then, it has burst into a wildly successful feature that helps alleviate fulfillment and customer service challenges while providing access to a comprehensive fulfillment network. 

The objective was to integrate Amazon's existing fulfillment model into third-party seller processes to benefit from this infrastructure and ultimately benefit Amazon customers. By introducing this service, not only would sellers have a lot to gain, but their customers would be receiving faster, more reliable shipping and service from this marketplace giant. 

This article will give you an in-depth explanation of Amazon FBA and how you can use it to improve operations that will help you increase sales and enhance brand awareness as you sell on Amazon. 

The Definitive Guide to Selling on Amazon FBA:

• The When and Why of Amazon FBA
• How Amazon FBA Works
• 6 Benefits of Amazon FBA Program
• Amazon FBA Fees Explained
• What is the FBA New Selection Program
• How to Become an Amazon FBA Seller
• 5 Amazon FBA Mistakes You Must Avoid
• Wrapping this up

The When and Why of Amazon FBA

Amazon FBA is your go-to solution when you don't have your own logistics team, a fleet of delivery trucks, and a warehouse where you can store your products. Selling and marketing is already a full-time job— what more if you also handle the order fulfillment side of the business? 

That's why Amazon FBA is heaven-sent for amateur and veteran sellers alike. But when did Amazon FBA start, and why?

In February 2005, Amazon launched an "all-you-can-eat express shipping" program, which is also known as Amazon Prime. The primary purpose of the said loyalty program is to attract more customers and drive more sales. 

Online shoppers took the bait because who wouldn't want to get their orders in less than two days? The standard shipping usually takes around 4-5 days. Moreover, you only have to pay a hefty one-time fee (initially, it was $79) for a year. This is more cost-effective than paying a small price ($9.48 at the time) for two-day delivery per order.

As more online shoppers join the Prime bandwagon, Amazon knows that it would hurt their bottom line if they continue to shoulder shipping and logistics costs. Hence, the birth of Amazon FBA in 2006. 

How Amazon FBA Works

This is how Amazon FBA works: you sell, then Amazon ships. The eCommerce shipping and logistics will take care of your deliveries, but it comes with a price. For a better understanding, here's the lifecycle of Amazon FBA from start to finish:

• Seller sends inventory to Amazon's fulfillment centers.
• Amazon receives, sorts, and stores the inventory once it arrives at the fulfillment center.
• The customer orders the seller's product from the marketplace.
• Amazon picks, packs, and ships the order to the customer.
• Amazon will handle customer service.
• If the customer wants to return the product, Amazon will also take care of it.

“But I can also avail myself of this service from courier companies or third-party logistics providers!” We wouldn't argue with you on that matter, except it doesn't have perks like customer service and item return features. But what else can you get from Amazon FBA? 

6 Benefits of Amazon FBA Program

More than half of third-party sellers utilize Amazon FBA based on a study. Simultaneously, two-thirds of the top 10,000 Amazon sellers entrust its order fulfillment operations to Amazon. It shows how valuable and useful this service is, and that's why many are using it. Below are the reasons why you should become an Amazon FBA seller:

Top-notch logistics and warehousing facilities

Once you join FBA, you will have access to Amazon's high-end fulfillment centers, truck trailers, air freight, bicycle couriers, merchant vessels, and air drones. 

Amazon owns one of the most advanced fulfillment networks in the world, which has tens of thousands of full-time associates that work alongside robots. 

It is not only the facilities and workforce you may take advantage of but also the years of experience and expertise Amazon possesses, which is known worldwide.

Fast and free shipping

Online shoppers LOVE free and quick shipping.

Amazon realized this. That's why when they launched Prime, express shipping is one of the features they included in the program. Fun fact: Amazon is the brain behind same-day delivery service. Besides same-day delivery, Prime subscribers can also enjoy Prime Now 2-Hour Delivery, One-Day Shipping, and Two-Day Shipping. The online retail giant made this possible by strategically putting up fulfillment centers worldwide and employing tens of thousands of FBA staff, especially during holidays and sales. 

Also, here's the inside scoop: Amazon is planning to transform department store spaces previously occupied by JCPenney and Sears into fulfillment centers, according to Business Insider. That's how aggressive Amazon is when it comes to fulfilling the demands of online shoppers. If you haven't heard the news, both stores filed for bankruptcy as it was hit by the COVID-19 pandemic last year.

Prime-eligibility guaranteed

Amazon Prime subscribers rely heavily on the fast, free delivery service offered in the marketplace. These peeps don't mind splurging a little to get premium shipping and other perks exclusive for Prime members only.

According to Statista, Prime subscribers spend an average of $1400 each year. This is a stark difference to non-Prime members who only shell out $600 yearly. Besides, 81% of Prime members are between the age bracket of 18 and 34, which has more buying power nowadays.

So, if you want to sell your products to this group of generous people, you better join Amazon FBA to get instant passes and become instantly qualified for Prime shipping. 

Have a chance to win the buy box 

Being an Amazon FBA seller just gets sweeter and sweeter because of this benefit. The Buy Box is the most coveted space on the product detail page. It is the section where customers can quickly add items to their shopping carts.  

Every seller wants the Buy Box as it converts into sales. You can win the Buy Box if you're Prime-eligible because Amazon gives priority to them. 

Get the best deals on shipping rates

Amazon made an agreement with major carriers such as UPS, USPS, FedEx, and DHL Express, and they are called Amazon partnered carriers. These shipping companies often grant Amazon deeply discounted shipping rates. 

If you're an FBA seller, you don't need to negotiate just to save on shipping fees because Amazon does it for you. Plus, your cargo is taken care of by reputable courier firms.

Effortless scalability

But wait, there's more! You don't have to formulate or think of a business plan to scale your business quickly. Amazon has several programs under FBA that you can "add-on" to your current business strategy, as follows:

• FBA Subscribe & Save = you can offer discounts on qualified FBA products to repeat customers.
• FBA Small & Light = small, lightweight, and cheap FBA inventory can get lower fulfillment fees.
• FBA Export = you can cross borders and sell your products to more than 100 countries at no additional cost.
• FBA Pan-EU = let Amazon distribute and sell your products across European marketplaces at no extra charge with faster shipping time.
• Multi-Channel Fulfillment = Amazon allows you to offer your products to third-party eCommerce sites or your site. Plus, they will pick, pack, and ship to your customers.

Amazon FBA Fees Explained

However, you need to pay the price to get the benefits mentioned above. While it is true that Amazon doesn't charge anything when they ship the order to customers, you must be aware of the following Amazon FBA fees so you can manage your expenditures wisely:

Seller account subscription fee 

There are two types of seller plans you can choose from: 

•  Individual plan - which costs CAD $1.49 per item with no monthly subscription fee. It is recommended for sellers who are only planning to sell fewer than 20 items per month.

• Professional plan - is CAD $29.99 a month and perfect for sellers who are planning to sell more than 20 items per month. It has other perks as well, such as creating bulk listings through APIs, selling in restricted categories, advanced reporting features, promoting your products via Amazon advertising tools, and more.

Both plans allow you to have access to Amazon FBA.

Referral fees

Amazon gets a commission for each item sold in their marketplace. It could be a flat fee, 15%, or less. Referral fees are paid after the sale is made. Here is the current referral fee table:

FBA fees

Amazon FBA fees consist of four different fees rolled into one, including the storage, packing, and handling of your inventory. The category, weight, and size of the item are also considered in the computation. 

Storage fees

You have to keep in mind that you have to deal with two types of storage fees:

Monthly storage fee

Amazon charges you for any space your inventory takes up in their fulfillment centers before the sale.

Long-term storage fee

If your inventory stays at fulfillment centers for more than 365 days, Amazon will charge you a fee of CAD $150 per cubic meter.

Removal order fees

Avoid long-term storage fee by requesting a removal order:

Returns processing fees

Amazon offers free returns for customers that the seller will shoulder. It is equivalent to the total fulfillment fee for a given product.

Additional FBA fees

You may incur these fees when your inventory has no proper labeling or preparation. Amazon charges you a per-item fee for FBA label service, FBA prep service, manual processing service, and FBA repackaging service.

What is the FBA New Selection Program?

Did you get overwhelmed with the fees you've got to deal with? But if you want to be an Amazon FBA seller, how about you try enrolling in the FBA New Selection program?

This program offers free monthly storage, free returns processing, and free removals on eligible new-to-FBA ASINs. Participants can get a $100 discount on Amazon-partnered carrier shipping as well. 

As of now, there are more than 60,000 sellers enrolled. This year they've added new benefits like:

Oversize item eligibility

Starting April 1, 2021, Amazon offers free storage (up to 90 days) and free removals (up to 180 days) on eligible oversize items (up to 30 units per parent ASIN).

Sponsored advertising

Starting April 1, 2021, the online retail giant provides promotional credits for sponsored ads.

ASIN limit

Starting April 1, 2021, Amazon allows an unlimited amount of eligible, new-to-FBA parent ASINs. Thus, removing the 500-ASIN limit.

It seems this program is promising, but how do you enroll? 

First, you must assess yourself if you're eligible. Amazon only allows Professional sellers. You must also maintain an IPI score of 400 or higher. New Professional sellers or sellers yet to be assigned an IPI score can join, too. However, once you get an IPI score below 400, you will be automatically removed from the program.

Besides seller eligibility, ASINs are evaluated as well. You can enroll in small standard and large standard-size items. Plus, ensure that you haven't enlisted the parent ASINs within the past 180 days. Take note that used items and Media categories are not eligible. Lastly, only categories in Jewelry; Apparel; Luggage; Shoes, Handbags & Accessories; or Watches are qualified for free returns processing.

Take note that your enrollment is still subject to Amazon's approval. You can visit this link to learn more about the FBA New Selection program.

How to Become an Amazon FBA Seller 

Here's the part you've been waiting for. The step-by-step guide on how to become an Amazon FBA seller:

Step 1: Select a niche 

You have to be meticulous when choosing a niche because FBA has different requirements and restrictions than non-FBA products. If you fail to comply, it will result in any of the following:

• Return or disposal of your inventory upon its arrival at the fulfillment center.
• Amazon will block your future shipments.
• You will be charged for noncompliance or preparation.
• Possible deactivation of your selling account.

You can prevent this by avoiding the following niche or categories:

• Vehicle tires
• Alcoholic beverages (including non-alcoholic beer)
• Products with unauthorized marketing materials, such as pamphlets, price tags, or other non-Amazon stickers
• Gift cards, gift certificates, and other stored-value instruments
• Loose packaged batteries
• Meltable, heat-sensitive inventory (during warmer months).
• Products requiring AC, freezing, or refrigeration.
• Perishable or expired products.
• Items with price tags, marketing paraphernalia, or other non-Amazon stickers.
• Damaged or defective units
• Products with labels that were not correctly registered with Amazon before shipment or that do not match the registered product.
• Products that have been illegally replicated, reproduced, or manufactured.
• Products that do not comply with any agreement between Amazon and the seller.
• Products that Amazon otherwise determines are unsuitable.
• Products that require preparation but that have not been prepared according to FBA packaging and prep requirements.

That's quite a long list! However, it would be better to follow Amazon's rules to avoid unfortunate consequences.

Step 2: Find products to sell

Now that you know which niche you should avoid, next is searching for a product to sell within your chosen niche. Let us share with you some tips on how to find one:

• Choose small, lightweight products that only need minimum handling and shipping costs since Amazon includes the size and weight in the calculation.
• Source generic products so you can rebrand them easily.
• The product doesn't need Amazon's approval before selling it to save yourself from complicated paperwork and time-consuming process.
• You can sell the product all year-round, and it isn't just seasonal.
• The product must not have a trademark or patent yet, so you can own the rights to sell it exclusively under your brand.
• It has a high-demand, marketable, and low competition.

Product research is an arduous process, but it is worth it in the end because you can avoid any hassles in terms of packaging, and you will have confidence in the product you have chosen to sell.

Step 3: Look for a supplier or manufacturer

The supplier you will choose can make or break your Amazon FBA business. Keep in mind that this is where you will be getting the products that you will sell in the marketplace. How will you know that you've spotted the "right" supplier? The supplier must have the following characteristics:

• They can manufacture a product in a consistent manner.
• They welcome third-party inspection to ensure the quality of the product.
• They abide by the rules and regulations of Amazon and local authorities.
• They are willing to communicate with you when needed.
• The supplier is an ethical and socially-compliant company.

Moreover, the supplier or manufacturer doesn't mind providing sample products for every reproduction to check it for quality assurance. After you tick all the boxes, here are different ways to find a supplier:

• Subscribing and reading industry trade publications.
• Visiting trade shows.
• Mingling with business owners in an industry association.
• Registering in online wholesale directories like Worldwide Brands, SaleHoo, The Wholesaler, Price Master, Liquidation, Big Lots, The Wholesale Forums, and Tuesday Morning.
• Joining Facebook groups targeting suppliers of your chosen niche.
• Visiting online B2B wholesale websites such as DHgate, Amazon Business, Alibaba, Global Sources, and eWorldTrade.

Step 4: Establish your brand

You have to give a face or identity to your product. Otherwise, it won't stand out in the overpopulated Amazon marketplace. A well-researched and developed brand is a valuable marketing weapon you could have to build your brand.

Brand names

You must think of two brand names. Why do you need two? One is for your seller name, and another is for your product brand name. 

If your goal is to expand into other niches, think of a unique and memorable company name, which will be your seller name. On the other hand, you must assign a product brand name for each item you're offering. 

Brand design

Next is creating a brand logo and design for your company and products. If you're not artistic or have zero knowledge about graphics design, better outsource this task because you need a professional-looking design and logo. 

It isn't advisable to use graphics or pictures from stock photo websites because there is a high chance you might encounter a seller that has the same design as yours.

Step 5: Sign up for an FBA seller account

Before you hit the "Start Selling" button on Amazon Canada's page, you must have the following first:

• Tax information
• Government ID
• Active credit card
• Business email address
• Business phone number
• Bank account number

Then choose the right Amazon seller plan that fits your business strategies and objectives. It is either the Individual plan or the Professional plan. 

Step 6: Create product listings

Product listings or product detail pages are the "showroom" where you display your products in the marketplace. On this page, try to describe your product as if a customer is personally looking at it. 

Ensure that the product title is descriptive enough for online shoppers to understand. Upload high-resolution product images shot in different angles so the customers will have visual clarity on how your product looks. 

State the benefits of your product in bullets and expound it further in the description section. While doing this, keep in mind that you must pass the standards of your prospect buyers and Amazon's algorithm, the A10. Be thorough in performing Amazon SEO (search engine optimization) to target the right keywords or search phrases. 

Step 7: Prepare your products for packaging

Are you still with us? Great! We're on the third to the last step of this guide. This one needs additional staffing because you will be packing many items for shipping.

Amazon is very meticulous when it comes to inventory preparation and packaging. They've laid out rules on their website on how you must prep up your products to ship them to Amazon's warehouses.

One of the rules is that case-packed products must not exceed 50 lbs or exceed 25 inches in length on any side. For more information, you must visit Amazon Seller Central and read thoroughly the instructions regarding Amazon FBA packaging and prep requirements.

Step 8: Ship your inventory

Time to create your first shipment! Follow the steps below:

Part 1: Select products to ship

1. Register your seller account for FBA. 
2. On your Seller Central account, go to Inventory > Manage Inventory.
3. Select the products you would like to ship.
4. In the Actions drop-down menu, choose to Send/Replenish Inventory.
5. Set your Ship From Address, the location where the inventory will come from. 
6. Decide what will be the Packing Type of your inventory, either individual products or case-packed products.
7. Hit Continue to create a shipping plan.

Part 2: Shipment creation workflow

1. On the Set Quantity page, fill in the Unit per Case and Number of Cases fields per product. Then click Continue.
2. The next page is Prepare Products, where you choose who will prepare the inventory by selecting in the Who preps pull-down list.
3. On the Label Products page, set the number of labels you need in the # of labels to print columns. Then hit the Print labels for this page to start printing.
4. You will be directed to the Review Shipments page to check the details of your shipment plan.
5. If everything is correct and complete, you may now Approve the shipment plan. The page will change to View Shipments after you approve it.
6. Moving on to the next page, the Prepare Shipment, you may now choose your final delivery method.
7. Choose your preferred Shipping method and Shipping carrier under the Shipping service section of the Prepare Shipment page.
8. Double-check the contact information before proceeding.
9. Click Calculate to know how much you will be paying, and you may approve it by selecting the I agree to the terms and conditions.
10. Click the Accept charges button to proceed to the last step.
11. Select the Print box labels. This action will print the FBA shipping labels that you will put on top of each box and pallet that you ship.

The product listings are now ready, and your inventory is on its way to Amazon's fulfillment centers. What's next? Introducing your new product to the Amazon marketplace and its customers.

Step 9: Launch your product

Product launches are exciting yet nerve-wracking, especially if you're about to introduce an unknown product to the public. Don't worry; we've got you! We've come up with an easy-to-follow five-step guide to launch your product with a bang.

1. Optimize product detail page

Before you hit the "launch" button, optimize your product listings to ensure that you include every essential detail that the consumers need to know. Take high-quality photos of your product and make sure it stands out of the background. Apply the "show don't tell" writing style when revising the bullet points and description.

2. Create a buzz

Utilize the power of off-Amazon advertising. Create informative blog posts that discuss how your product can help others. Set up accounts on different social media platforms and make some noise there by using catchy hashtags and intriguing posts about your product.

3. Set up PPC campaigns

Don't take for granted the importance of the Amazon PPC campaign. Remember that you need to rank first your newly-minted product as per Amazon A10's standards. However, PPC campaigns aren't free, so you have to allocate a specific budget for it. You may start at Sponsored Brands, Stores, Posts, and Amazon Live to start building your brand and connecting with online shoppers and can increase live online shopping of your products.

4. Gather organic reviews

Amazon will take down your seller account if you use "black hat" tactics such as incentivized reviews. To get organic reviews, you may try using the Amazon Early Reviewer Program for a fee of $60. There is also a "Request a Review" button where you can politely ask a customer to leave a review.

5. Launch your product!

Self-explanatory, right?

5 Amazon FBA Mistakes You Must Avoid

It is understandable to make mistakes since you're an Amazon FBA newbie. But it is better to be proactive because some errors could result in seller account suspension. Here are the mistakes that you should avoid as an Amazon FBA seller:

Dependent on FBA alone

The coronavirus pandemic froze the global supply chain last year, and Amazon has been affected as well. When COVID-19 hit the world, Amazon enforced several restrictions, such as prioritizing essential items only. This action got third-party sellers scrambling to get their shipments reached the fulfillment centers.

Tip: Always have a plan B. Plan B would be switching to Fulfillment by Merchant (FBM) set up whenever the need arises. FBM is when you handle the order fulfillment operations by yourself.

Not protecting your brand

Amazon is one of the most competitive marketplaces on Earth. Sellers are willing to fight tooth and nail just to get most of the sales. This gave birth to shady characters like hijackers and counterfeiters. They are eager to take down their fellow sellers to stay ahead of the game.

Tip: Do everything to protect your brand and reputation. Enroll in Amazon Brand Registry and have your products trademarked. 

Running out of stock

You won't be penalized if you run out of stock. But your seller performance metrics and ranking will be affected. Amazon also automatically removes a listing that has zero inventory. And, of course, you will lose out on potential sales.

Tip: Regularly check your stock levels on a weekly or bi-weekly basis. Replenish right away to keep selling and earning.

Not understanding Amazon's policies

We won't sugarcoat this one: Amazon rules and regulations are mind-boggling and overwhelming to read. No wonder sellers skip this part. It consists of hundreds of web pages that will make you scream, "Information overload!" But failing to do so would put your selling privileges at risk.

Tip: Sorry, buddy, but there are no shortcuts for this one. You have no choice but to read it from front to back. And do whatever it takes to stick to the rules to avoid getting banned from the largest online marketplace on Earth.

Selling on FBA gets you rich quick

Nope. Yes, you can earn money as an FBA seller, but it will not be an overnight success. Many new and inexperienced sellers have this delusion that Amazon FBA is an easy way to get rich quickly. However, this is not the case, and it takes blood, sweat, and tears to earn your first hundred or thousand dollars on the platform.

Tip: Hard work and dedication are the keys to be a successful Amazon seller. There is no such thing as magic bullets and quick hacks. You need to roll up your sleeves and get to work. There is no other way.

Wrapping this up

All it takes is four words to give you an edge to sell in Amazon's vast online marketplace. You need to have these on your product listings:

"Fulfilled by Amazon" and "Prime"

The first phrase assures customers that they are guaranteed free and quick shipping. At the same time, the latter allows you to offer your products to read-to-buy customers. If you want to hit two birds with one stone, enroll in Amazon FBA to start selling and growing your online shopping business in no time. Just follow the steps on this guide and take heed of the mistakes above to stay in the good graces of Amazon. 

If you want some help to jumpstart your Amazon FBA business, our experienced consultants in Seller Interactive are willing to help you. Please email us at [email protected] or [email protected], or call 1-800-820-3746 today.