Fulfillment by Amazon (FBA): What You Need to Know

Fulfillment by Amazon (FBA) is a very popular service offered by Amazon that helps millions of online sellers be successful on Amazon Marketplace. Amazon FBA takes a ton of work out of the seller's hands, as this fulfillment program takes care of things like storing, packing, and shipping products to customers.

Amazon FBA is a game-changer for many online sellers since it lets you take advantage of Amazon’s top-notch customer service and fulfillment centers. FBA can be a great option for ecommerce sellers looking to expand to Amazon Marketplace or grow their existing Amazon Marketplace offerings.

In this article, we’ll go over everything you need to know about Amazon FBA, including how it works, the benefits and disadvantages, and how you can get started.

What is Amazon FBA?
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Amazon FBA is a service provided by Amazon that allows sellers to store their products in Amazon’s fulfillment centers, streamlining much of the work that an ecommerce business is typically responsible for. Sellers who are enrolled in Amazon FBA get the advantage of letting Amazon take care of the packaging, shipping, and customer service when a customer places an order for one of their products.

Many sellers who want more time to focus on things like sourcing products, marketing their products, expanding to other marketplaces, etc., find using Amazon FBA very convenient as it saves countless hours of time. By enrolling in Amazon FBA, you also get the advantage of offering free, two-day shipping through Amazon’s Prime service.

How does Amazon FBA work?

Once a seller enrolls in Amazon FBA, they can then send their products to Amazon’s fulfillment centers. Amazon will store your products there until a customer places an order. Once an order is placed, sellers can sit back while Amazon picks, packs, and ships the product to the customer.

Essentially, Amazon’s FBA program takes care of everything once an order is placed. In addition to shipping the product from their warehouses to the customer, Amazon will also handle any customer inquiries, returns, and refunds involved in an order. This is a benefit for both sellers and customers alike - sellers save themselves a ton of time by not having to worry about these things themselves, and customers get the benefits of Amazon’s highly-revered customer service team.

Of course, the conveniences of Amazon FBA come at a cost. We’ll break down all the costs for you below so you know exactly what to expect.

Amazon FBA fees

There are several different storage and fulfillment fees that sellers enrolled in Amazon FBA have to pay. These fees are essentially the “cost” that a seller pays in exchange for the benefits of the Amazon FBA service.

Here’s a breakdown of all the fees that sellers enrolled in Amazon’s FBA service are responsible for:

Inventory storage fees

Charged for all items stored in an Amazon fulfillment center, and based on your daily average volume of inventory measured in cubic feet. To see how to determine the product size tier for your items, click here.

Fulfillment service fees

Charged per unit for picking and packing your orders, shipping and handling, customer service, and product returns. To estimate what your fulfillment service fees would be, you can use the FBA Revenue Calculator.

Removal Order Fees

You can have Amazon return or dispose of your inventory in a fulfillment center for a per-item fee.

Aged inventory surcharge (formerly known as “long-term storage fee”)

Assessed monthly for all items stored in a fulfillment center for more than 181 days. Maintaining sound inventory health can help you avoid this fee.

Unplanned service fees

Charged when inventory arrives at a fulfillment center without proper preparation or labeling, making unplanned services required. You can avoid this charge by following Amazon’s guidelines for shipping your products to their warehouses.

Returns processing fees

Charged on orders when Amazon provides a customer with free return shipping.

To learn more about the cost of FBA, you can use the Fulfillment by Amazon Revenue Calculator.

Benefits of using Amazon FBA

There are several benefits of using Amazon’s FBA service that make it a popular fulfillment option for millions of sellers.

• Prime eligibility: Your products are eligible for Amazon Prime FREE two-day shipping, which is very enticing to customers that are enrolled in Amazon Prime.
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• Customer Trust: Amazon has built a reputation for exceptional customer service. When customers see that your products are fulfilled by Amazon, they are more likely to trust the quality of your products and feel confident in their purchase.
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• Efficient Fulfillment: With Amazon FBA, you can leverage Amazon's extensive logistics network. They handle all aspects of order fulfillment, including storage, picking, packing, and shipping. This saves you time and resources, allowing you to focus on growing your business.
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• Global Reach: Amazon FBA enables you to sell your products to customers around the world. With Amazon's international marketplaces, you can expand your customer base and increase your sales potential.
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• Inventory Management: Amazon FBA provides sellers with robust inventory management tools. You can easily track your inventory levels, receive alerts for restocking, and ensure that your products are always available for purchase.

Disadvantages of using FBA

While there are tons of benefits to using Amazon’s FBA service, there are also several cons to keep in mind when considering if the program is right for you and your business.

• Fees and Expenses: There are several different Amazon FBA storage and fulfillment fees that can eat into your profit margins. Proper financial planning and optimizing your operations are essential to mitigate these costs.
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• Inventory Prep: Amazon has very strict guidelines on how your inventory must be prepared and shipped to their warehouses. If you make a mistake, your inventory will be rejected by the warehouse, which can result in your inventory being sent back to you and/or extra fees from Amazon which can be costly.
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• Non-Customizable Packaging: Any orders shipped from Amazon’s warehouses will use Amazon’s standard packaging that is branded with their own logo. If brand identity is something that is important to your business, you lose out on the opportunity to offer unique, branded packaging that can help you stand out to consumers.
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• Potential for Increased Returns: Amazon is known for its easy and forgiving return process, which sometimes means that customers are more likely to return items than they normally would be, leading to an increase in returns processing fees.
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Getting started with FBA

If Amazon’s FBA service sounds like it might be right for your business, there’s a few simple steps to enroll in the program and successfully manage your FBA operations.

1. Create an Amazon seller account if you haven’t already. Click here to sign up for one.
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2. Enroll in Amazon FBA. After logging into your Seller Central Account, click here to enroll in FBA.
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3. Prepare your products for transfer to Amazon’s fulfillment center. Make sure you adhere to Amazon’s packing guidelines and shipping and routing requirements.
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4. Ship your products to Amazon. Create a shipping plan, print Amazon shipment ID labels, and send shipments to Amazon fulfillment centers. Learn more about sending inventory to Amazon.
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5. Monitor and optimize. Once your FBA products are live on Amazon, continuously monitor their performance and optimize things like your inventory levels and the prices you list your products for. If you want to streamline price optimization, consider using an automated repricer such as Informed Repricer.