Originally published on May 31, 2021 by Logiwa Marketing, Updated on March 3, 2023
Amazon FBA: What is Amazon FBA, How Does It Work, Is It Worth It?
If you are starting a new business and want to make a considerable amount of money over the internet, selling your products online is one of the best ways to reach your goal. As the leading ecommerce platform in the world, Amazon is one of the best platforms to reach your customer base and sell your inventory. In fact, it is a massive market all on its own and growing more than ever, to ensure it meets every kind of demand for its online customers. Becoming a seller via the Amazon FBA program can give you a similar advantage.
With the ecommerce platform guiding you throughout the entire process and welcoming you into the vast world of online shopping and delivery, FBA from Amazon is one of the most convenient and affordable ways to start selling your products online. They offer a way to sell your products without having to rent a warehouse, manage complicated fulfillment operations, or endure the hassle of customer support!
And the good news? Becoming a seller on Amazon FBA can be accomplished in just a few steps. Once you send your products directly to Amazon’s warehouses, the company takes care of the rest. That said, your Amazon FBA membership has elements that you, as a seller, need to be aware of it. Here is everything you need to know about the Amazon FBA: what the program entails, how it works, and the benefits it may provide for your company.
In our Amazon FBA guide, we’ll help you understand:
- What is Amazon FBA?
- What are the Various Amazon FBA Business Models?
- How Does Amazon FBA Work?
- What are the Benefits of Amazon FBA?
- What is the Average FBA Cost & How to Calculate It?
- How to Start Amazon FBA?
What is Amazon FBA?
What is FBA on Amazon? What does it mean? Amazon (Fulfillment By Amazon) FBA is a fulfillment process where Amazon and its warehouses handle almost the entire operation on your behalf. A company expects to fulfill functions from A to Z in a traditional fulfillment strategy, starting with storing, packing, and shipping orders and handling exchanges and returns when necessary. The Amazon FBA program provides all of those operations for your company once you send your inventory to its warehouses. Amazon picks, packs, ships products, and provides customer service for all your orders. When done effectively, the reliable fulfillment process Amazon provides ultimately delights customers and brings the company more and more revenue over time.
It is one of the most advanced fulfillment networks around the globe because Amazon sells and ships products without forcing companies into the complex world of warehouse management.
Ultimately Amazon FBA helps companies scale their businesses and reach more customers.
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What are the Various Amazon FBA Business Models?
There are several Amazon FBA business models and programs to choose from, depending on your brand’s size, sector, and spectrum.
- Private Label Model: You can create your product and label using specific Amazon FBA services entitled for this purpose.
- Wholesale Model: You can buy products in bulk from a particular brand or various distributors, gather an extra stock of the items, and sell them on Amazon.
- Reselling Model: The reselling or arbitrage model includes buying discounted products via retailers to resell on Amazon.
- Dropshipping Model: Amazon FBA dropshipping is a model in which the company buys products directly from a manufacturer. The manufacturer fulfills the order, ultimately shipping it to the customer now.
- Handmade Model: You can also create and craft your products and sell your handmade inventory on Amazon.
How Does Amazon FBA Work?
Amazon FBA shipping has an easily understandable and manageable system, with a process to match. All you need to do is ship your product base to Amazon and let them handle the rest. Following Amazon’s FBA guidelines, the shipment you provide needs to operate according to a certain standard. You will be asked to label and pack your inventory, as well as set up a shipping plan in the Amazon Seller Central dashboard provided by Amazon’s back-office system. Once your products safely arrive at the warehouse, Amazon will be in charge of storing and tracking the products and sending specific orders out to various distribution centers depending on the geographical demands.
The next part of the process entails adding your listing to Amazon’s database. Once your products have safely reached the Amazon warehouse and enter into Amazon’s seller database, your listing will be activated, which means you will then be able to start advertising through whichever channel you like. You can use Facebook ads, common SEO tactics, or PPC options, depending on your budget and branding goals.
Once an order is place through Amazon, your product will be processed and prepared to ship immediately. The orders will have to be manually or automatically routed through multi-channel fulfillment.
If you are selling on another third-party platform. During the shipping and tracking process, Amazon ships out the item once it’s chosen from the closest warehouse and packed. Afterward, both your customer and company can follow the product’s shipment status using the tracking number and information provided by Amazon FBA. Using an Amazon FBA calculator, you can estimate the approximate cost and fees you will likely come across during the first few months of your integration.
What are the Benefits of Amazon FBA?
It’s safe to say that the process and operational strategy of Amazon FBA is easy to follow since most of the labor is conducted on Amazon’s side. The Amazon FBA program offers many additional benefits for your business, including a customizable program that fits your business demands and multiple channels of support. They are committed to helping you tackle the complex elements of your operations that you might not be able to overcome on your own. So… is Amazon FBA worth it? It’s time to find out.
Here are some of the significant benefits that Amazon FBA has to offer:
Amazon FBA offers scalability & significant logistics support.
One of the best things that Amazon FBA has to offer is the fact that the platform takes care of logistics operations to help you save a money on storage, warehouse management, and other delivery costs. All you need to do is hand over your personalized Amazon FBA program needs to Amazon and let the program scale your business. Amazon FBA will even take care of the extra shipping duties that may occur if your business is selling more than expected.
Amazon Prime is one of the fastest free shipping options out there.
Amazon has a significant impact on the way customers choose to shop. Amazon Prime, the platform’s ultra-fast delivery innovation, offers customers delivery at the speed of light with options such as same-day delivery and delivery within the next 24 hours. As an Amazon FBA seller, you can opt for this package and have your products delivered in just a few days – or in some cases, hours. Amazon has thousands of fulfillment centers worldwide, making same-day delivery and fast shipping a piece of cake.
You can take advantage of specific discounts on shipping rates.
Being the true king of ecommerce, Amazon has various contracts with major shipping companies, which translates to sellers taking advantage of reduced shipping costs. Sellers on Amazon FBA can spend much less with the platform’s vast logistics network that offers the best deals and excellent shipping rates. At times, you can even receive free shipment options with Amazon Prime.
You may also like: Amazon buy shipping guide with all the details of advantages and disadvantages.
Customer service is also just as important as logistics and shipping.
Amazon knows how vital customer support is and how much of an impact quality customer service can have on sales and revenue numbers. That is why all Amazon FBA sellers equip to take advantage of the platform’s 24/7 customer support operations, where professionals handle all kinds of customer inquiries, exchange and return operations. Keep in mind that using an Amazon FBA revenue calculator, you can find out the processing fees regarding the returns.
What is the Average FBA Cost & How to Calculate It?
Amazon FBA breaks down its fees according to various types of logistic plans and company demands. Professional Seller Central Account, Shipment from Warehouse to Amazon Fulfillment Centers, Stickering & Labelling are the three multiple packages you can choose. While the Professional Seller Central Account has standard Amazon FBA fees of $39.99 a month, the other FBA fees vary depending on the weights and dimensions of the orders. You may be granted access to Amazon partner carrier rates with the Shipment from Warehouse to Amazon Fulfillment Centers program, which will be a much more cost-efficient option than the latter. Stickering & Labelling will cost you $0.30 per product if you choose to have the platform label your products for you.
How to Start Amazon FBA?
Although not a perfect fit for every business model on the planet, it is safe to say that Amazon FBA is one of the most popular warehouse management options chosen by ecommerce entrepreneurs due to its utilizing and profitable dimensions. If you are already an Amazon seller, being a part of the Amazon FBA program is a fantastic solution to expanding your brand and boosting your sales. Amazon FBA can help you reach the next level in the online business world and focus on sourcing new products instead of wasting time on laborious logistics tasks.
Taking advantage of the Amazon FBA program can be worth your time and money, especially when you start to reap the fruits of this lucrative venture. Once you master the rules, regulations, and customs of Amazon FBA, you can once and for all decide if the Amazon FBA services are right for you. If you are looking for more information on how to start Amazon FBA, visit the platform’s official source on the program.
In conclusion, the benefits of Amazon FBA for your brand will depend on the business objectives you set for your company and the span of your products. Amazon FBA is the simplest and easiest way for most Amazon sellers that helps outsource multiple tasks directly linked to running an ecommerce platform. Once you make sure that the benefits justify the extra cost you put into Amazon FBA, there is no reason not to try it out and see if it’s a good fit for your operation.
What is FBA?
FBA stands for Fulfillment by Amazon, and is a service that allows you to store products in Amazon Fulfillment Centers until they are picked, packed and shipped out as orders.
Does it cost money to use Amazon FBA?
With FBA, you only pay for the services you use. According to their site, there are no subscription fees, contracts or minimum inventory requirements, making it an affordable options for smaller operations.
What’s the difference between dropshipping and FBA?
The difference has to do with posession of inventory. When you dropship, you don’t take on ownership of any merchandise because you are the direct contact between suppliers and customers. When you use Amazon’s FBA, however, you have to invest in merchandise and store it in Amazon’s warehouse.
What’s the difference between 3PL and FBA?
Both 3PL and FBA hold your inventory and fulfill your orders. 3PLs provide more flexibility and control to product owners, while FBA provides access to Prime users with an established, tranparent fee structure.