What is Fulfillment By Amazon (FBA)?

Fulfillment by Amazon (or FBA) is a service offered by Amazon. It takes care of all aspects of Amazon sellers’ inventory storage, order fulfillment and returns. FBA allows sellers the freedom to concentrate on other areas of their business while Amazon handles picking, packing and shipping orders. FBA is a preferred business model. 91% of third party sellers use it.

What are the pros and cons of using Amazon FBA?

Amazon’s FBA program has enabled thousands of entrepreneurs to scale and grow their businesses by leveraging its logistics and consumer trust.

It is amazing how one person, with very little ecommerce experience, can sell their products on the largest marketplace in the world and have their products delivered to their customers within two days.

FBA has its many advantages, but there are also some drawbacks. Let’s look at the pros and cons to FBA.

Benefits of using Fulfillment by Amazon

• Prime shipping If your Amazon account is active, you may be familiar with Amazon Prime. Prime badges signify that you can get free shipping within one to two days of purchasing a product. You can also return the product easily with this badge. FBA sellers will get the Prime badge and access Amazon’s almost 200 million Prime members when they list their listings.
• Ship your inventory to Amazon’s fulfillment centers: To sell products via FBA, you only need to create a shipping plan within Seller Center and then ship your products directly to Amazon’s fulfillment center. Amazon will store and receive your inventory until customers make a payment.
• Customers trust Amazon: Once customers see the Prime logo they understand that they have access to Amazon’s customer support and fast shipping . Amazon-branded packages will often arrive with your products at your customer’s home, increasing their perceived value.
• Amazon ships all orders. Manually packing and shipping orders every day can be tedious and time-consuming. FBA allows you to have your own warehouse workers who do everything for you.
• Amazon provides customer service. Amazon can handle any customer service issues that may arise from orders shipped via FBA. FBM orders (fulfilled by Merchant), on the other hand, must be handled by the seller.

Downsides of using Fulfillment by Amazon:

• FBA fees: A disadvantage to utilizing FBA is that the FBA fees can be really costly. Contingent upon the size and weight of your product, the fees to satisfy your request are approximately 30–40% of your product price. You need to compute the fees prior to selling a product to decide the profitability.
• FBA storage fees: On top of FBA fees, Amazon likewise charges you to keep your things stored in their fulfillment centers. There are two sorts of storage fees: Monthly and long haul. Appropriately managing your inventory will assist you with keeping away from long haul storage fees, as they can turn out to be over the top expensive.
• Restock and inventory limits: Amazon has implemented restock cutoff points to keep sellers from overstocking their inventory, however it has shown to be to a greater extent a cerebral pain for some sellers who can’t send in sufficient product. Remember that you might not have sufficient permitted storage space to house the entirety of your inventory.
• Amazon makes it easy for customers to return items: While this is exceptionally advantageous for customers, the simplicity of returning things on Amazon might make you experience better yield rates contrasted with different marketplaces.

How much does it cost to use Amazon FBA?

As an Amazon seller, you will be paying an assortment of fees, particularly in case you’re fulfilling orders utilizing FBA.

Regardless in the event that you use FBA or FBM, you will pay a referral expense. It relies upon the category your products are in and typically, this expense is 15%.

In case you are utilizing FBA, you will pay based on the size and weight of your item. It will be viewed as standard-size or oversize.

To compute the fees for your products, utilize Amazon’s free FBA Calculator to get a breakdown of your expenses for both FBM and FBA.

Check out this video to know New FBA Fees Explained: How Much Does It Cost To Sell On Amazon in 2021? | Amazon Fees Breakdown

Is FBA right for your business?

Now that you know the pros and cons of using FBA, is it right for you?

You may want to use FBA if you:

• Sell little and lightweight products, making your FBA and storage fees lower
• Force your business to leave your home where you don’t have any storage space for inventory
• Try not to have the opportunity or ability to package and ship orders
• Need your products to be Prime shipping eligible
• Need Amazon to deal with client support and returns
• Can’t bear the cost of your own stockroom space or representatives to package and ship your orders

You may not want to use FBA if you:

• Sell exceptionally large or potentially heavy products
• Need authority over how your products are shipped to your customers
• Have your own stockroom space with storage and fulfillment capabilities
• Need to process brings yourself back
• Utilize a third-party fulfillment administration
• Handle your own fulfillment yet are enrolled in Amazon Seller-Fulfilled Prime.

It comes down to what works best for you and your business. Make sure to account for all of Amazon’s fees and variable costs before deciding to use FBA. Also, keep in mind that you can sell some products using FBA and others using FBM. It’s doesn’t have to be one or the other — in fact, 34% of third-party sellers use both!