Beginners Guide to Amazon FBA
Those that are part of the world of eCommerce know that it is a fast-paced and highly competitive endeavor. You no doubt have heard of Amazon FBA and perhaps even considered expanding your reach into the realm of Amazon selling.
Amazon’s main goal is to provide a wide variety of products for customers and provide them with the very best eCommerce experience. That is the sole reason FBA was created. This storage and fulfillment option enables sellers to offer 2-day shipping and Prime, allowing their customers to receive goods quickly.
This guide will give you an excellent background on what the Amazon FBA program is, and how it can help eCommerce sellers better manage their business.
What Exactly is FBA?
Fulfillment by Amazon, or FBA, is a service that is offered to third-party sellers in an effort to automate their fulfilling and shipping processes. Essentially, the seller will send their inventory to Amazon to store in one of their fulfillment centers. Once a customer places an order, Amazon takes the reigns and handles the picking, packaging, and shipping of that order. Amazon also handles any returns, refunds, and general customer service of that order. This makes it very attractive for sellers.
How Does it All Work?
After setting up a shipping plan in the Seller Central dashboard, FBA guidelines stipulate sellers ship their products to one or more Amazon fulfillment centers. When the inventory reaches Amazon, it is sorted and may be sent to other Amazon warehouses, depending on demand.
Once the inventory is entered into the Amazon database, the product listing becomes active online, and the seller can then start to advertise that product. Many sellers choose Pay Per Click (PPC), or opt for external ads based on the items they’re selling.
Starting FBA Costs
When a seller registers for FBA, they have two choices: the individual or professional plan. Which one you choose will depend on the amount of inventory you anticipate having. For those that typically sell less than 40 units per month, the individual plan works best. Under this plan, Amazon charges you $0.99 per sale. This is a good plan for sellers who are just starting out in the eCommerce business, or who don’t yet know what their established product line will be.
The professional plan is $39 per month, with no limit to the number of items sold. Professional Amazon sellers have access to APIs and selling reports on their Seller Central dashboard. Additionally, this plan is a good option if you want to utilize programs such as Launchpad or Handmade.
In addition to plan fees, Amazon also charges fees for inventory storage based on weight and size. These fees are updated annually and can be found here.
Getting Started – What You Need
When you register to be an Amazon FBA seller, you’ll need the following at hand:
Bank account and routing numbers
Government issued ID
The Pros and Cons of Amazon FBA
As with anything, there are upsides and downsides to using FBA for your eCommerce business.
Here are the Pros:
The convenience of time-saving. FBA can save sellers time (and money) in the long run, because Amazon takes care of the logistics after the sale is made, and also handles returns, refunds, and customer service. This frees up precious time for the seller to focus on other aspects of the business.
Fast Delivery. All FBA products are eligible for Prime and 2-day delivery, as well as free shipping on eligible orders made from Amazon customers.
Confidence and trust. Amazon customers know that they’ll receive their orders in a timely manner.
Excellent customer support. When you are an FBA seller, customer service is handled by Amazon round the clock.
Returns and refunds. FBA sellers have the distinct advantage of Amazon handling any returns and refunds for the customer; it is considered part of the fulfillment process.
The Amazon algorithm. Amazon favors FBA sellers, which means you have a better chance of ranking higher in search results. This leads to greater visibility on Amazon, and that naturally leads to a greater sales volume.
Here are the Cons:
Fees. To use Amazon FBA, there is a monthly fee, depending on which plan you choose, as well as storage fees.
Inventory issues and potential delays. During peak shopping times, such as holidays, there may be shipping delays due to high demand. This can also mean running out of inventory on your best-selling items, so it’s important to always keep on top of inventory levels.
Product preparation. Amazon has strict requirements for products coming into their warehouse. FBA sellers need to follow these requirements to a tee regarding how items are packaged, proper labeling, and more.
Less branding. Your branded products will get less exposure, so you may lose out on potentially valuable branding opportunities with FBA. This is because all boxes shipped out will have Amazon’s branding.
Payments less fees. Before making payments to you, Amazon will deduct all fees owed upfront. If you don’t have enough sales to cover these fees, Amazon will charge the credit card you have on file with them to pay off the balance.
Despite these cons, most FBA sellers would agree that the pros far outweigh them; it is just the cost of doing business in the lucrative world of eCommerce selling. The bottom line is if you want to save some serious time and money, the FBA program takes some of the logistics off your plate so you can focus on growing your eCommerce business.