What is Amazon FBA? How does it work?
FBA
FBA stands for Fulfillment By Amazon is an Amazon service for sellers that provides Storage, Packaging and Shipping assistance. This takes the burden off of sellers and allows them to more flexible with their selling strategies. The program allows sellers to ship their goods to an Amazon Fulfillment Center, where items are stored in warehouses until they are sold.
So when an order is placed, Amazon employees pack and ship the items by themselves. This will help Sellers to grow their business and avoid investing thousands of dollars for storage facilities and staff.
How Amazon FBA Works?
Amazon FBA does not require any separate account. You can use your Amazon selling account to use this service with few steps to access it. It only requires a few clicks to expand your business with help of Amazon.
How Amazon FBA operates is pretty straightforward.
1. You send your products to Amazon
2. Amazon will safely store them in their warehouses
3. When customer orders one of your products that you sent to Amazon, Amazon itself picks the ordered item and does the packaging, Shipping, and handling customer support for you.
4. Amazon also handles your Returns and Refunds.
5. Every 2 weeks Amazon will settle your account and deposit the profits directly into your bank account.
All you have to do is just provide them with the stocks and you will earn the cash.
Amazon will charge a fee for the FBA services. But when we compare the profit, the FBA costs are less.
How to get started with FBA?
It will take few steps to start with FBA.
1. Create an Amazon Seller account
2. Setup FBA
3. Read the instructions and accept the instructions.
4. Pack the items that will be sent to the fulfillment center.
5. Make sure to follow the Packaging Guideline as well as shipping and routing requirements.
FBA Fees
- Standard Seller Fees — Amazon will charge 15% — 18% of the product price as a seller’s fee when customers order the product.
- Fulfillment Fees — These fees are per unit. It will vary based on the product size and include picking and packing, shipping and handling, customer support, and product returns.
- Inventory Storage Fees — Amazon will charge per cubic foot of inventory based on the calendar month and daily volume of the products.
You can check the list of FBA fee and use the fee calculator here
Advantages of using Amazon FBA
1) You will get Amazon’s reputation to benefit your business
People from all over the world will know about Amazon and they trust Amazon. They know that if they order a product in Amazon it will be delivered within a time and they can return the product if any issues. This reputation will help your business to grow.
2) Superfast service
Amazon fulfillment runs with a separate team. So the ordered product will ship to your customer quicker than you may able to.
3) Higher ranking on Amazon and Better visibility
When you use Amazon’s FBA program, your product will appear top in the search results. This will make your product one of the first items in the search results.
4) Amazon’s Customer Service
Amazon is providing 24/7 customer support management. They will handle inquiries, returns, and refunds on behalf of seller.
5) Your customers will get free delivery
When you are using Amazon FBA, your customer can get free amazon delivery using Amazon Prime membership. This is certainly advantageous to you who are not using the Amazon FBA.
6) Your running expenses have been greatly reduced
As Amazon FBA will take care of storage, employees, and Administration you don’t need to spend much money on these.
7) Increased Productivity
As Amazon will handle all your customer inquiries, Storage, Shipping, Returns, and Refunds you can save your time and utilise that time to focus on your business.
Disadvantages of using Amazon FBA
1) Amazon FBA costs Money
As like you, Amazon is also running a business to make a profit. So they do charge for the Storage and fulfillment facilities.
2) Preparing your Product for Amazon FBA is a tricky process
When you register for Amazon FBA you need to follow the guideline set by Amazon to preparing and shipping your products to their warehouses. These guidelines are very strict and they will not compromise for any mistakes.
3) Product packaging is not rendered with your logo
When your products are delivered to the customer, the package will have an Amazon logo. So it is difficult for you to build brand awareness as your brand logo is not visible in the package.
4) Product handling issues by Amazon
Sometimes inventory may get lost or damaged in the fulfillment process. Often time, the error is on Amazon’s side. In these cases, Amazon will reimburse sellers proactively. However, some cases might go unnoticed and the seller’s money will be lost.
Summary
FBA (Fulfillment By Amazon) is a better feature for Amazon sellers. It will definitely decrease your investment in Storage, Employee, and Administration facilities and increase your overall profit. All you need to do is follow Amazon’s packaging guidelines and sent it to Amazon fulfillment. The rest will be taken care of by FBA.
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Happy Selling! 😄