With more than 2.7 million sellers on Amazon in the US alone and sales reaching $200 billion in 2019, it’s no secret that the online marketplace offers eCommerce businesses tremendous potential to grow.
Fulfillment by Amazon (FBA) is just one piece of the online marketplace puzzle enabling merchants the world over to sell globally and offer the same fast, cheap or free shipping, and great customer service that are synonymous with the Amazon experience.
So, what exactly is FBA? It’s a fulfillment service provided by Amazon that gives merchants the flexibility to store their products in Amazon’s fulfillment centers and have Amazon handle picking, packing, and shipping, as well as customer service and returns.
In this guide, we’ll take you through the essentials of Amazon FBA:
Let’s get to it!
When selling on Amazon, there are a few fulfillment options available to you – but which one is right for your business? We’ve created this comparison guide to help you decide.
Amazon FBA handles all things picking, packing, and shipping for you – as well as customer service, order updates, and returns. If you don’t have the resources to handle increased customer demand or simply don’t want the added responsibility, the FBA fulfillment option is probably the right choice for you. Likewise, if you’re running a small business and don’t have the warehouse space to hold stock, FBA could be a beneficial fulfillment option.
However, unless you’re selling products with a high-profit margin (which can be tricky to do given Amazon’s fiercely competitive marketplace) or in large volumes, FBA can be pricey as you end up paying for order handling, picking and packing, weight handling, and inventory management.
With Amazon SFP, you can avoid the costs of paying Amazon to handle your order fulfillment by managing fulfillment from your own warehousing facilities while still displaying the Prime badge (and reaping its benefits) on your own listings.
So, what’s the catch? To be eligible for Amazon Seller Fulfilled Prime, you have to meet a strict set of requirements. This includes going through a 30-day trial period where you sell a minimum of 300 orders and:
With FBM, you are responsible for managing shipping, handling, and customer service but don’t have access to Prime benefits as you do with SFP. While this does equal added responsibility, FBM is a good choice for merchants who simply can’t justify the cost of paying for FBA or aren’t able to meet the eligibility criteria for SFP.
Handling fulfillment yourself may be a wise option if you want full control over nurturing and growing your customer base personally, because customer service is owned by you. However, remember that FBA can be used across multiple channels (including your eCommerce store), which is also beneficial for streamlining order fulfillment as you scale up.
FBA is an effective fulfillment option for many businesses, but not all, so here are some key factors to consider.
Once you hit around 40 orders a month, you’ll probably find that it’s more cost-effective to outsource your fulfillment to Amazon. This FBA calculator will tell you how much you could save by switching to Amazon FBA.
Amazon FBA could offer you the adaptability needed to meet fluctuating customer demand and deal with peak sales periods, with fulfillment fees charged per product and per cubic foot, which means you can scale up or down as needed.
The best products to sell on Amazon FBA are small, light, and relatively expensive to minimize the risk of losing profits due to excessive weight handling costs. Compare what profit margins would look like on different products before committing to product selection.
There’s no one-size-fits-all solution when comparing fulfillment options on Amazon; it all comes down to knowing what’s right for your business and using demand forecasts to understand which option is going to meet your customers’ needs and create the highest profits.
Decided to start selling on Amazon with FBA?
Here’s what you need to know about choosing the right products, determining profitability, and finding a reliable supplier.
Investing time on product selection at the outset will help ensure you’re in a good position to achieve revenue targets. Research existing products from other Amazon Sellers to make sure that:
You might want to know how to sell products on Amazon, but what you really need to know is how to sell on Amazon and make a profit. The percentage of revenue that goes to Amazon depends on a number of factors, but thankfully their profitability calculator easily works this out for you. Enter your product name, UPC, EAN, ISBN, or ASIN to select a comparable product and input variables including item price and fulfillment fees. Amazon will then calculate your potential net profitability using your own fulfillment method and using Amazon FBA.
Unless you manufacture products yourself, you’ll need to find a business to make or supply your products. Alibaba is the largest network and search engine for factories and suppliers in the world, but many of the suppliers are based in China, and not all of them are legitimate. There are a number of supplier directories you can look for, but be sure to research any you find on an aggregator site thoroughly to verify suppliers you can trust.
Although selling on Amazon can lead to increased sales volumes, it can also increase returns.
Rest assured that even the most seasoned Amazon sellers get returns now and then – and a lot of the time, it’s simply due to a change of mind.
The Fulfilled by Amazon return policy works differently to the Amazon Seller-Fulfilled policy as Amazon handles the returns for you. Most of the time, Amazon will accept the return no questions asked – unless the item is damaged, in which case they might ask the customer for photos.
The most important point to remember is that buyers have up to 45 days to return items, even after they’ve received a refund. That means the onus is on the buyer to send back the item and you can expect it to be back in stock within 45 days (unless it’s not resellable).
Here’s how to protect your reputation as an Amazon Seller and keep your inventory levels as accurate as possible.
It’s good practice to keep the email you receive when a customer returns an item so that you have a record of when the return was first initiated. If you can’t find the email, you can also login to your Seller Central account and go to Reports at the top. Under that tab, select Fulfillment, and then Returns.
There will be times that customers don’t send back their items on time or Amazon deems an item not fit for resale. When that happens, you can claim reimbursement for the item via your Seller Central account.
It’s a good idea to contact a customer who has returned an item, especially if it’s because they were unhappy with the product. Getting in touch with them directly, apologizing for their negative experience (if need be), and offering a way to fix the problem helps reduce the chances of them leaving you a negative review.
Amazon warehouse workers are there to do their job quickly, and that could mean your item goes back on the shelves without proper inspection. Have Amazon FBA return inventory back to you so you can inspect returned items thoroughly before reselling – and don’t forget that you can use TradeGecko to easily keep track of stock in different locations.
Amazon makes it easy to see the reasons for returned items in your Seller Central account. With this information, you can look for commonalities in returned items and optimize your product range accordingly.
Effective inventory management is crucial to effective fulfillment, so it makes sense to manage them both from a centralized system.
You can fulfill sales orders from any sales channel using Amazon FBA. Any orders from Amazon Seller Central are also fulfilled by FBA automatically, with details appearing in the sales order.
Likewise, any time you create a purchase order in TradeGecko, you can easily choose your FBA warehouse as your “Ship to” address.
Using TradeGecko’s stock control functionality, you can transfer your stock to any FBA fulfillment center, and add the cost of shipping.
Any stock transfers you make through TradeGecko are also automatically synced with your FBA account.
You can use TradeGecko’s pack size variant feature to automatically tell Amazon to expect a case-packed shipment and not to split it between multiple warehouses (or to split it evenly in line with your pack size).
All your products, customers, orders and transactions synced and secure in the cloud.