Amazon FBA: Is it Right for You?

how does Amazon FBA work

So you have been selling on Amazon for the past few months and sales are pretty good. You found a few places to source items from regularly and you are looking to step up your sales game. One thing that is holding you back is that you don’t know if you are going to have the time and will to package and ship many more packages than you are currently shipping.

If this is the case then Amazon FBA might be a good fit for you

What is Amazon FBA?

Amazon FBA (Fulfilled By Amazon) is a program that Amazon offers to sellers that allow them to send their products to Amazon and then have Amazon handle the shipping and Customer service. Amazon has one of the largest distribution systems in the United States and they use their vast amount of warehouses to store and ship your products all over the country.

Amazon FBA

What Do I Need to Start Amazon FBA?

The first thing that you are going to need to do is sign up for an Amazon Pro Seller account. The cost of the Amazon Pro Seller account is $39.99 per month. Although you have to pay the $39.99 every month, you save .99 cents on each transaction so if you sell 40 items a month through Amazon FBA you will recoup the fees. On top of that, Amazon will let you test out the first month for free.

Amazon FBA Pro Seller Account

How Does Amazon FBA Work?

So now you have started an Amazon Pro Seller account and you are ready to start using Amazon FBA but how exactly does it work?

Once you have your products ready you have to set up a shipment to send to Amazon. First you are going to enter how many products you are shipping in a box and the total weight of the box. The measurements of the box cannot exceed 25” on any side.

Next Amazon will generate barcodes for your items. You will need to tape a barcode onto each item and one on the box itself. Now you are ready to ship! One of the biggest benefits of Amazon FBA is that when you ship items to Amazon you get the same highly discounted shipping rate that Amazon gets through UPS. This can equate to about a 70% discount on normal UPS advertised rates.

After you ship the products to Amazon it will take them a few days to receive and process your items to be available in your inventory. Now you can sit back and relax because Amazon will handle the shipping and customer service for your products!

Amazon FBA Benefits

Amazon FBA Benefits

There are a few major benefits that you get on top of the highly discounted UPS shipping rates.

Prime Shipping Eligibility – One of the benefits is that your FBA listings qualify to ship for free for customers that have Amazon Prime. It is no secret that people love Fast and Free shipping and only Amazon and FBA listings qualify for it. This benefit will have a great effect on your number of sales and you can dropship with Amazon prime too.

Price Elasticity – Another benefit is that you can charge a premium price for your products. If you have a product where you are the only or are one of the few FBA listings you can charge more than the Merchant Fulfilled listings because of your Free Amazon Prime Shipping. This is great because it can increase your profit margin to cover the FBA fees.

Customer Service – Customer service handles inquiries, returns, and refunds for my FBA orders and this is high level customer service which is good for your Amazon Business. This way I am able to build trust with customers and maintain a positive reputation on my platform. The customer service also helps me resolve issues quickly and efficiently, leading to higher customer satisfaction rates.

Multi-Channel Fulfillment – Amazon fulfills orders on Amazon Marketplace, Amazon FBA also offers me multi-channel fulfillment services. This means I can use Amazon’s infrastructure to fulfill orders from my own website or other online sales channels. With multi-channel fulfillment, I can centralize my inventory management and streamline my order fulfillment process across multiple platforms, all through Amazon Seller Central.

Does Amazon FBA Cost Extra?

Amazon does charge a fee on each item to store and ship it out for you. This fee normally averages between $2-$5 but can vary depending on the size and weight of the product. This fee is added on top of Amazon’s normal selling fees. This is something that you have to keep in mind when sourcing for Amazon FBA to make sure that you are still within your desired profit margin. You can find out more about these fees when you click here.

What are the Factors to be Considered Before Choosing Amazon FBA?

Business Size and Scalability – Assessing the scalability of your business is crucial before opting for Amazon FBA. Consider your current business size and potential growth trajectory. FBA benefits larger businesses with higher order volumes due to its streamlined fulfillment process, but smaller businesses may find the fees prohibitive.

Product Type and Category – Evaluate whether your product type and category align with the requirements and restrictions of Amazon FBA. Certain categories, such as hazardous materials or oversized items, may be subject to additional fees or restrictions. Ensure your products are suitable for FBA and comply with Amazon’s guidelines.

Profit Margins and Pricing Strategy – Analyze your profit margins and pricing strategy to determine if FBA is financially viable for your business. While FBA offers benefits like Prime shipping and increased visibility, it also entails fulfillment and storage fees that can impact your margins. Calculate the costs associated with FBA against your pricing strategy to ensure profitability.

Final Thoughts

Amazon FBA is a great way to sell in volume more efficiently without having to hire employees and maintain your own warehouse. You will have to make sure you are sending in items with a healthy margin, as you will be charged the FBA fees on top of the normal Amazon selling fees. Overall the benefits of Amazon FBA normally outweigh the associated fees so try it out today!

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