Amazon FBA (Fulfillment by Amazon) is used by 66% of the top 10,000 sellers. If Amazon's high-earning sellers trust the world's most advanced fulfillment network, why shouldn't you? As an Amazon FBA seller, you can entirely focus on marketing your products. Simultaneously, Amazon will handle the other half of your business—the fulfillment of orders. However, one reason new sellers hesitate to join FBA is the slew of fees Amazon charges. This article will discuss how Amazon FBA works, the breakdown of associated fees, and tips on saving costs.
Amazon FBA's concept is simple. You sell products, and Amazon ships them. Besides order fulfillment, it is their responsibility to answer customer queries and manage returns. Here's how Amazon FBA works:
1. Your supplier ships the products to an Amazon Fulfillment Center.
2. Amazon will store your products.
3. The customer makes an order.
4. Amazon will pick, pack, and ship the order.
5. Amazon will handle any queries from the customer.
6. Amazon will manage returns assuming the customer isn't satisfied with the order.
In the first step, your supplier will ship the products to an Amazon Fulfillment Center via a freight forwarding firm or pallet shipping. Amazon will then store your products until it gets ordered.
Amazon FBA's Fulfillment Centers operate in a highly sophisticated environment. Every fulfillment process is handled there, from start to finish, making it more than just a storage facility. Other than the 250,000 associates working in Fulfillment Centers worldwide, more than 100,000 robotic drive units, palletizers, and robo-stows operate around the area. Humans and robots work hand in hand to make the complicated process of order fulfillment seamless.
Aside from the process mentioned above, Amazon FBA sellers can enjoy the following:
In case you're not aware, you need to undergo a rigorous process to be Prime-eligible, which includes joining a waiting list and completing a trial. Why is it a big deal to have the shiny blue badge? You can sell to ready-to-buy customers who love free two-day shipping. FBA products can qualify for Cyber Days and Prime Days as well.
As a Prime seller, you will surely appreciate Amazon's advanced Fulfillment Centers capable of managing a high volume of orders. Amazon is the pioneer of free same-day shipping.
Amazon's A10 algorithm prioritizes FBA product listings over non-FBA products. Apart from this, your product listings have a higher possibility of winning the Buy Box.
Amazon offers specialized services to help scale your business. There are different Amazon products you can join, like FBA Small and Light, FBA Subscribe & Save, and Multi-Channel Fulfillment.
Your enrollment in FBA will be all for naught if your product is not promising. How can you build a brand (or an empire!) with a product that no one wants? Whether you like it or not, conducting product research is a must. You should accomplish this before creating a professional Amazon seller account—even while you're just thinking of selling online.
One of the easiest ways to choose what to sell on Amazon FBA is through Amazon itself. Look for the best-selling products by going to the Amazon Top Seller section, near the bottom of the Homepage. Once you click the link, it will show a selection of viable product ideas.
Here are qualities of a feasible product idea that you may consider to create a shortlist of profitable products:
Besides the criteria above, always set the price range between $15–$50 while searching for the perfect product, as this is the “sweet” spot for many Amazon customers.
After you've figured out what to sell on Amazon FBA, your next task is educating yourself about its fees.
The Amazon FBA fees you will see on Amazon's website are enough for you to run for the hills and never take a look at FBA ever again. Don't be scared. It might be overwhelming at first as a new Amazon FBA seller, but you will soon grow accustomed to the fees as your business progresses.
Here's a summary of Amazon FBA fees you’ll eventually get acquainted with:
Amazon offers two types of plans, namely, Individual Seller and Professional Seller.
We suggest starting with an Individual Seller plan if you haven't chosen a feasible product idea yet. You can transition to a Professional Seller plan once everything has been laid out.
Your inventory storage fees depend on how long your items stay at the Fulfillment Center:
The FBA "perks" of picking, packing, and shipping an item comes with a price. It also includes customer service and returns. Fulfillment fees start from $2.41–$132.32 per unit.
One downside of being Prime-eligible is that the customer can return an order whenever they want without your consent. The return processing fee is equivalent to the fulfillment fee.
As an exchange for letting you use their online marketplace to sell your products, Amazon charges a referral fee or commission of 15% per item. It is also based on the product category.
If your supplier doesn’t label your items with a barcode, Amazon will do it for you at $0.20 per unit.
There you have it! It is quite a long list, but you must be fully aware of the different Amazon FBA fees.
It is a useful tool that gives you a projection of how much you can earn, depending on your chosen product idea. The FBA Revenue Calculator also shows the Amazon FBA fees you will be paying on a per-unit basis.
What are the types of Amazon FBA fees it covers? Let us break it down:
The FBA Revenue Calculator only calculates upfront costs. There are other fees that you should take note of, as mentioned above.
Don’t let these Amazon FBA fees bring you down. Here are ways to reduce your expenses:
The success of your Amazon FBA business doesn't only depend on how much money you invest in it. You must be extra cautious in searching for a viable product with high demand and low competition. Moreover, you must always think of ways to save yourself from drowning in Amazon FBA fees; try out the tips above to reduce your costs. It is integral for you to know how Amazon FBA works, so your budding business can easily adapt to the ever-changing environment of Amazon FBA.
Are you still scratching your head wondering “How does Amazon FBA work?”, then talk with Seller Interactive today! We have a team of expert Amazon consultants willing to help and guide you through the ins and outs of Amazon FBA. For inquiries, email [email protected]. We’d love to hear from you!
Are you curious about how to sell on Amazon? In this step-by-step guide, we'll show you everything you need to get started. We'll cover creating an account and listing, tips for increasing your sales and tracking your sales and profits alongside the benefits of selling on Amazon. Plus, we'll give you some tips on how […]
Introducing a new product to the market is always a nerve-wracking event for a business owner like you. You might be feeling excited because you can finally showcase what you have prepared in the past months. At the same time, you might be feeling anxious about whether the launching event will make the new product […]
If you're currently an Amazon seller, you should perhaps keep in mind that you ought to do everything possible to utilize your listings and for it to progress fully. Amazon SEO is one of the best ways to improve your visibility and rankings on the site and can help you reach more potential customers. In […]