ow does Amazon FBA Works

Do you know how does Amazon FBA Works?

Amazon is now the biggest E-commerce market in the world doing Billions of Dollars in profit each year.

Would you like to know how you can be a seller on Amazon?

If yes, then keep reading because, in this blog, we will discuss Amazon FBA, its salient features, pros and cons, and that how Amazon FBA works.

Amazon FBA helps you in getting more sales out of your online business. You can earn a lot of profit if you use it correctly.

With the information presented here, we will try to increase your understanding of Amazon FBA and help you grow your business with high profit. We aim to keep you updated about the new features, important tricks, and cost-efficient ways of working on Amazon.

Table of Content

Chapter 1: Understanding ‘Amazon FBA’

Chapter 2: What are the benefits of using Amazon FBA?

Chapter 3: How does Amazon FBA work – Step by Step Process?

Chapter 4: Packaging requirements of Amazon FBA?

Chapter 5: Essentials to know about Amazon FBA

Chapter 6: Amazon FBA Freight Forwarding

Chapter 7: Frequently Asked Questions about Amazon FBA

Chapter 1: Understanding ‘Amazon FBA’

Understanding Amazon FBA

Amazon is the largest online marketplace that provides numerous opportunities to sellers and buyers. It has millions of active sellers who are making their mark in the world.

Signing up on Amazon means getting access to millions of buyers from across the globe. Hence, it is recommended to take some time and understand the complications of Amazon FBA before you decide to start your journey.

1. What is meant by Amazon FBA?

FBA stands for fulfillment by Amazon. The products you sell on Amazon are stored in the fulfillment center of Amazon. You can use the warehouses of Amazon to store, pack, and then ship your products when ordered by clients from around the world.

Amazon FBA also helps you in providing customer services, handling returns and exchanges through it.

What is meant by Amazon FBA

Amazon FBA is a very effective and reliable way of online trading for both clients and sellers. Once you have sent the products to be stored in Amazon’s huge warehouses, you can rest assured about the packing and shipping of these products.

2. What is Amazon Seller Central?

Amazon Seller Central is a platform that enables everyone to become a seller on Amazon.

By using an Amazon Seller Central account, you can become a retailer on Amazon without worrying about payment handlings, maintenance, designing, having and maintaining a personal website, and processing the returns.

It is open to everyone where you can sell directly on Amazon.

The Amazon FBA model has made the process of becoming a seller on Amazon very easy.

If you choose the FBA (fulfillment by Amazon) program, Amazon will take care of your inventory, and all the processes of packing and delivering once you send products to the warehouse.

What is Amazon Seller Central

Otherwise, you can choose 3PL (3rd Party Logistics Provider) to manage everything yourself.

3. Evolution of Amazon FBA – How it started?

The FBA program of Amazon was started in 2006. It aimed to help small businesses and earn a little profit from that. Amazon provided the fulfillment service so that the sellers can get relief from many side hustles and charge money in return.

Since its introduction, the Amazon FBA program is evolving itself for the better. Amazon still aims to change the FBA structure as required to meet the consumer requirements.

4. Newly introduced features of Amazon FBA

As discussed above, Amazon FBA is changing with time and adapting to the requirements of sellers and customers.

Keeping yourself up to date with the latest amendments and newly introduced features can save you from trouble.

This way you can deal with the changes that are not suitable for you and make a better plan for your business. Following are the two new features added in 2020.

Newly introduced features of Amazon FBA

  • Amazon FBA has added commingling (sticker less inventory) inventory. It stores all units of a single product together, and when someone orders them, Amazon sends any one of them.
  • In August 2020, Amazon introduced the inventory performance index. It helps to measure different elements to determine how the inventory of a seller is performing so that the seller can improve and increase sell-through rates. It gives you scores based on your in-stock inventory, standard inventory, sell-through inventory, and excess inventory. The seller has to score above 500 for better selling.

Amazon has a very communicative system, so it notifies the seller about any new change being introduced. This duty is on the seller’s part to keep him up-to-date about any new feature and adjust accordingly.

5. How can one get started on Amazon FBA?

If you wish to get started on Amazon FBA, then you should head on to the official Amazon FBA website. Sign up and start selling. Take advantage of Amazon FBA resources and tools for a better experience.

Apply the knowledge you gain about Amazon FBA to understand the process. Here we have discussed the important tips and tricks to assist you with your journey.

6. Cost of Amazon FBA

The total cost of Amazon FBA depends upon the fulfillment charges and the storage charges.

The storage charges are for the services of storing your products in warehouses and fulfillment centers. Amazon charges an inventory storage fee which is determined by the space covered by your goods.

Fulfillment charges are mainly related to picking and shipping products when ordered. It also includes packing and shipping of goods along with the return costs if applicable. It starts from $2.41 per unit. It may also go up to $137.32 for special products.

Cost of Amazon FBA

Standard inventory fee – the item not listed for sales also adds cost to the total bill. Low selling products that stay in warehouses for a long time also cause extra fees.

Other charges are briefly discussed below:

  • Cost of professional seller account: $39.99/month
  • Storage fee: $2.40/cubic foot (365 days)
  • Storage for long-term: after 365 days $6.90/cubic foot is charged.
  • Labeling fee: 20 cents/unit
  • Stock removal fee: 60 cents/ unit
  • Product preparation fee: $1-$2/unit

You can also check and see the whole pricing of Amazon.

7. Using Amazon FBA without selling goods

Amazon FBA service is not merely for the orders placed on Amazon. One can use the Amazon FBA service to process the orders placed on his/her e-commerce website.

In such cases, Amazon stores provide warehouses to store the single composite inventory and then fulfill the orders once they are placed on the seller’s website.

Chapter 2: What are the benefits of using Amazon FBA?

Things evolve to adjust the needs. Keeping up with the trends, the requirements also need to change.

Amazon FBA has analyzed the needs of the time, and so it provides benefits that can make the experience of both the sellers and the buyers worth it. Following are a few benefits of using Amazon FBA.

Highly acclaimed platform

1. Highly acclaimed platform

Amazon is a highly acclaimed platform that provides value to both the customers and the sellers. It gives the seller access to the biggest audience from all around the world, and customers get a chance to get the best products from sellers around the world.

Amazon is among the four biggest tech companies of today’s world. It is a one-stop solution to all the problems.

Amazon FBA further provides you the facility of getting warehouses to store your goods. Fulfillment by Amazon is a very demanding service nowadays as it frees you from the hassle of finding a proper storehouse and then the maintenance of goods if stored for a longer time.

2. Higher ranking – higher sales

Amazon has a unique property of ranking the sellers according to their sales. The customers are asked to leave reviews when they buy products and add star ratings also.

Higher ranking – higher sales

Thus, based on the star ratings and reviews different sellers are ranked. A higher ranking means higher chances of exposure to the customers and hence, higher sales.

3. Amazon will take care of all your inventory and deliveries

Amazon FBA is a program that enables you to get rid of the hassle of finding stores and warehouses. It helps you in the maintenance of your goods.

You only have to shift your goods and inventory to an Amazon warehouse. Your inventory is safe at Amazon, and once you get the order from the customer Amazon delivers your order.

Amazon will take care of all your inventory and deliveries

If you have trust issues and want to take care of the delivery process yourself, then your 3rd Party Logistics Provider (3PL) can be your favorite choice. If you want Amazon to take care of the process then FBA service can serve the purpose.

4. No need for your warehouse

Fulfillment by Amazon (FBA) is the one-stop solution for all your worries. Being a businessman, one has to deal with a lot of things in daily life.

Keeping an eye on inventory, its packaging, shipping, deliveries, and return can add a huge burden to one’s life.

Taking advantage of FBA, you get rid of warehouses and matters related to them. Amazon warehouses are huge and offer many benefits like maintenance, packaging, deliveries, and returns if applicable.

5. You can be anywhere in the world and run your Amazon store

Running an Amazon store does not require you to be at a specific place. You can run your business from any place in the world remotely.

Amazon is a worldwide platform, so it makes access to customers in the other parts of the world easy for you. All the dealings are done through online mediums.

6. The global business market in your hands

According to a report the number of Amazon mobile app users has hit 150.6 million people. More than 80% of people trust Amazon for buying online products.

Hence, the reach of Amazon has increased over recent years. We have access to the global market all the time or, we can say that the global business is in our hands and only a few clicks away.

7. Amazon buy box

Amazon buy box

Every product displayed on amazon has its features and details. The buy now section present on the right side of this description helps you instantly buy the product.

The Amazon buy box section is also present on the right side of the product details. When a customer clicks on the option, add to cart the product of Amazon buy box winner gets sold. This is all about the algorithm. So, winning a buy box can multiply your sales.

Chapter 3: How does Amazon FBA work – Step by Step Process?

Amazon FBA is one of the favorite options of sellers around the globe. If you want to be a part of the FBA family, then you must know the step-by-step process of signing up and working on it. This section is all about the process of using Amazon FBA.

how-amazon-works

1. Setting up Amazon FBA

To set up your Amazon FBA accounts go to the official website of Amazon. You will see the options of get started and sign up.

  • Click on the sign-up option shown in orange color.

amazon-set-up-account

  • The next page will look like the one given below. This page is used for logging into a previously made account if you have any. If you don’t have an Amazon FBA account, click on create your amazon account

amazon account option

  • Fill in your name, email, and password in the next step.

amazon-seller-central

  1. Now verify your email through OTP.
  2. Add your business details.
  3. Add personal information.
  4. Add your billing information to verify the address you provided.
  5. Enter your Amazon store information.
  6. The last step involves verification. You will be sent a code on your address and you will have to add that code in the space provided to verify your account.

2. Product listing in Amazon FBA

Amazon works in a very organized fashion. The products are listed in categories and subcategories. Every niche has several products, all listed in a descending manner – from bestseller to the one not sold yet.

Product listing in Amazon FBA

The buyer is appreciated adding reviews about products, and those reviews are used to list best sellers on the top of product lists.

3. Preparation of products

The goods are sent to the inventory for preparation in bulk. The seller is responsible for the quality check of goods.

It is a very crucial step of selling on Amazon because it is directly related to product quality that can make and break a brand. You should pay particular attention to this step.

4. Sending products to Amazon FBA

After the preparation of products, they are sent to Amazon FBA. You can ship the products according to your choice.

Any route of shipping can be used for this purpose. Amazon will provide addresses of warehouses automatically through their seller central platforms.

5. Storing products in Amazon warehouse

When the inventory is sent to amazon FBA, it is stored in the warehouses. All your products are stored with other similar products at a fulfillment center that is allotted according to availability.

Storing products in Amazon warehouse

Your products remain in the warehouse until someone orders them or you take them back. Amazon charges money for the weight of your products and the volume they cover in the warehouse.

6. Customer orders goods on Amazon FBA

Once your products have been stored in the warehouses of Amazon, they are listed on the official website of Amazon. The products become visible to the audience so that they can order them.

Hence, customers order your goods on Amazon FBA. Once the customer orders the goods and you approve it from your Amazon Seller Central account, Amazon will handle the rest and ship the product to the customer.

7. Packaging of goods

packaging-of-goods

The goods are packed by keeping the safety rules in consideration. Different products need different kinds of packaging. Amazon makes sure that you get your goods in a safe and sound state. The packaging of goods is discussed further in the next section.

8. Shipping of goods from Amazon FBA warehouse

There are many modes of shipping products in use. You can choose the route of your choice because goods can reach you through air, water, roads, and rails.

All these have different features and rates. You should choose the one that suits you the most. You can hire a freight forwarder for this purpose.

Chapter 4: Packaging requirements of Amazon FBA?

Packaging is one of the most important parts of selling. Different products need different kinds of packages. Some are tightly packed, some loosely, some need extra coverings, and some are hazardous so, want special packaging.

Amazon FBA has some requirements regarding packaging that need to be fulfilled otherwise, the products will be sent back to the seller.

1. Why are Amazon Packaging requirements important?

Amazon has a specific set of requirements regarding packaging. All the sellers have to comply with these requirements and pack the goods as per amazon rules.

In case someone sends goods to the warehouse with inadequate packaging, amazon may refuse to store the product.

In some cases, amazon may also return or repackage the goods before delivering them to the fulfillment centers. Here it should be noted that amazon returns and repackages on your expenses.

Why are Amazon Packaging requirements important

2. What are FNSKU Labels

The FNSKU means Fulfillment Network Stock Keeping Unit, which is printed on labels. It is the way by which Amazon identifies the goods as unique to a seller. Each unique product must have a different FNSKU label.

3. What are FBA Product barcode requirements?

Barcodes help to track inventory during the fulfillment process. Each item present in the Amazon warehouse requires one of the three barcode types.

It can be Manufacturer barcodes, Amazon barcodes, or additional Transparency authenticity codes. The purpose of barcodes is to prevent counterfeit.

4. What are loose products, and does Amazon accept them?

Loose products are the ones that need assemblage or the units that do not have secure packaging. Amazon does not allow loose products in unassembled form.

You must first combine all the parts of a set and then pack them as one single unit. Footwear also follow similar instructions.

5. What is the meaning of Sold as Set in Amazon FBA?

sold-as-set-in-amazon-fba

Some units cannot be sold individually. They are sold as a set and have a clear instruction sticker that says “This is a set, do not separate”.   So before sending such items to Amazon you must back them together and also place a sticker mentioning “sold as set” or “do not separate”.

6. Boxed Units

Another packaging option available on Amazon is the box unit. It is a six-sided box with a tightly closed lid. It is used to ship products that pass the 3-foot drop test. The boxed unit is then placed in a polybag with a clear indication of suffocation warning.

7. Poly Bagged Units

Polyethylene bags are an economical shipping option that protects goods against humidity, dirt, and tampering. They are used to ship goods with protection. They must be sealed completely and have warning labels in readable fonts.

units

8. Bubble Wrap packaging. Is it acceptable by Amazon?

Some fragile or heavy items are at high risk of damage during shipping, so they require special packaging that can save the goods.

Bubble packaging is the best option available for such goods. The goods are tightly packed, correctly labeled, and checked through a 3-foot drop test after bubble-wrapped packaging.

9. Over boxing. What is it?

Over boxing, as the name indicates, means to place a properly packaged box of goods in another box for protection. For the products that weigh over 10 lb., double-walled corrugated boxes are used.

Sharp items that have a risk of puncturing packaging are frequently over-boxed. Hazardous substances, fragile items, and vinyl records are also over-boxed.

10. How about the expiry dates of products?

Amazon has proper guidelines about the expiry date. It should be mentioned in the format Month-Day-Year or Month- Year. It should be visible on the outer box in larger fonts.

Perishable items are not allowed as they expire soon. If the products require extra care, then the seller has to add suitable labels along with expiry dates.

Chapter 5: Essentials to know about Amazon FBA

help-grew-your-business

The essential things you must know about FBA for the sake of your ease are being discussed in this section.

1. What are the pros and cons of using Amazon FBA?

Before deciding that if amazon is the solution, you are looking for or not, you must look at what it has to provide you.

You should learn all the pros and cons of Amazon FBA before deciding on it. So, some advantages and disadvantages of Amazon are discussed below.

Before deciding that if amazon is the solution you are looking for or not, you must have a look at what it has to provide you.

You need to learn all the pros and cons of Amazon FBA before deciding on it. So, some advantages and disadvantages of Amazon are discussed below.

Sr. No. Pros of using Amazon FBA Cons of using Amazon FBA
 1 Amazon provides you an effortless shipping process by doing maximum work by itself and leaving the least for you. Amazon FBA is bit costly and not suitable for the people who are just starting. It is handy to use but, if you are starting with small investments, then it might be difficult for you to pay the Amazon fee.
 2 Amazon provides discounted rates of shipping to its subscribers. Your shipping costs are overall lesser than the amount you would have paid if you did everything by yourself. Amazon FBA does not accept all your goods into the warehouse. You have to prepare products according to the directions of amazon otherwise, they will not be accepted.
3 Amazon FBA considers the handling of the return and refund issues as a part of the fulfillment process, so Amazon has got you covered in such cases. Amazon FBA charges an extra fee if your products do not get sold and stay in their warehouses. These extra charges might cause you loss.
4 The products stored in amazon FBA are eligible for prime shipping hence catalyzing the process and decreasing the delivery time. Amazon FBA has an open return policy so; frequent returns are observed. It may cause you a loss in business.
5 Amazon FBA provides you huge warehouses and a lot of storage space which you could never have managed yourself. With Amazon FBA, you have access to unlimited storage. Amazon does not put off the fee you owe them. If you do not pay the charges, they will be deducted directly from your sales. If you have no sales, then Amazon will ask you to provide your credit cards to pay the bills.
 6 Amazon does not limit your reach by asking you to be specifically linked with amazon (and leave all other such platforms) to enjoy Amazon FBA benefits. You can have no physical stores on amazon and still use amazon FBA. The multi-channel fulfillment service of Amazon allows you to keep selling your products on other websites, and amazon FBA will still keep filling them for you. The tax policy of amazon regarding the state is confusing. If your products are placed in the warehouse of one state, and you are running a business in another state, then you may get confused about which tax you have to pay. You can use various tools available online to clear this confusion.

2. Is Amazon FBA better than non-FBA?

Amazon FBM – also known as non-FBA refers to the situation when the seller is responsible for storing and shipping goods.

In Amazon FBA the warehouses of Amazon serve the purpose. FBM stands for fulfillment by Merchant. The seller uses his/her resources to manage the products.

Those who use amazon FBM are not liable to pay the FBA fee but, they must consider the charges of shipping, packing and all other expenses by themselves.

In some cases, the seller has bulk products, and FBA warehouses are the safest option to keep them.

On the other hand, if the products can be handled by an individual himself, then FBM is a better option. Hence, what is better depends upon the needs of the seller.

3. How to maximize amazon FBA sales?

How to maximize amazon FBA sales

To minimize the cost, you should have a lot of valuable insight into the platform. You can get the idea of cutting down extra costs and saving money over time and through some tips mentioned below.

  • Stay alert about high-ranking products so that your inventory does not go into stagnation and add the extra cost of FBA. The low-ranking products are sold at a very low percentage, while high ranking products, even though they have high competition, are sold quickly.
  • Use all the online tools to research the most profitable products so that your investment does not go to waste.
  • Be communicative and answer the questions asked by buyers for increasing sales and thus profits. It will boost their confidence, and they may shop again.
  • Focus on building a brand by selling high-quality products, and increasing the trust relationship between customers and your products so that you can keep growing.

4. Most significant resources of Amazon

Amazon is a huge platform that provides a lot of resources to consumers. You can use Amazon FBA, Seller Fulfillment Prime, and Amazon Marketing Services to boost your sales. All of these have different features that make them special.

5. Documents needed for Amazon FBA

Documents-needed-for-Amazon-FBA

Amazon needs you to provide legal documentation so that the process of selling and buying can be trustworthy and smooth. Among all the documents following are the few most important ones that you might need to show.

  • Verification proof of seller (driving license or ID)
  • EIN (employee ID number)
  • Proof of your physical address (utility bills)
  • Verified business account
  • Tax registration details
  • Contact detail with verified contact number
  • VAT costs

Chapter 6: Amazon FBA Freight Forwarding

Amazon FBA Freight Forwarding

Amazon is one of the largest online marketplaces in the world. It is often listed among the big four tech companies. It makes the reach of sellers to global buyers very easy. The extended reach helps the seller increase sales and flourishes the business quickly.

1. Rules of Amazon FBA freight forwarding

Amazon FBA service comes with certain obligations, and every seller is bound to follow these rules and regulations. The most important of them are discussed below.

  • Amazon is not liable for any damage done to goods before they reached its warehouses.
  • Loss of the goods after freight forwarding will not be the concern of Amazon.
  • The companies that have no registered street address in the USA cannot use Amazon.
  • The products that reached the warehouses in bad condition can be returned.

2. Charges for Amazon FBA freight forwarding

The charges of Amazon FBA freight forwarding include;

  • Carrier charges (transport fee)
  • Container fee (LCL/FCL)
  • Charges of Volume and weight of cargo
  • Packaging costs
  • Documentation cost
  • Destination cost (customs and terminal charges)
  • Administration cost
  • Insurance of cargo

3. Shipping methods used for amazon FBA freight forwarding

Shipping methods used for Amazon FBA freight forwarding include sea freight, air freight, rail, and road freight. You can use FCL (full container load), and LCL (less than a container load) shipping modes according to the requirements.

Shipping methods used for amazon FBA freight forwarding

If you want to transport goods early, then air freight is the best option, while if you wish to save your money, you can use other modes of shipping.

4. Incoterms used in Amazon FBA freight forwarding

You can use any type of incoterm for amazon FBA freight forwarding. Delivery Duty Unpaid is the favorite of all sellers.

Also some sellers also prefer DDP, Delivery Duty Paid so that they do not have to worry about issues like customs clearance etc. Other better options that can save your money include EXW and FOB.

5. Amazon FBA warehouses

Amazon FBA warehouses are the huge storage areas that amazon uses to keep your goods. There are many warehouses, and all of them are located in different places.

You are allotted the warehouses according to their availability. There might be a warehouse next to your building, but you cannot get that to store your goods if amazon does not allow you.

6. Shipping from Alibaba to Amazon FBA

While shipping goods from Alibaba to Amazon FBA, you must take care of labeling. Your goods should be labeled according to amazon rules.

The goods also have to comply with US patent laws. You will have to hire a customs broker to deal with customs.

The Customs broker is responsible for delivering the goods at the warehouses. If your goods stay at the warehouses for long, amazon will charge an extra fee from you.

Chapter 7: Frequently Asked Questions about Amazon FBA

FAQs

1. Is Amazon FBA suitable for all businesses?

Amazon FBA offers a whole package of services that make e-commerce easy. However, it is not free and charges money for the services. Hence, it might not be suitable for all businesses.

For instance, small businesses do not have enough resources to pay amazon FBA charges. Some goods require special handling, so it is not suitable to keep them away from gaze.

2. What is Amazon FBA Warehouse?

The place where all goods being sold on amazon are stored is called Amazon FBA warehouse. Warehouses are huge storage locations meant for keeping the goods and dealing with packaging, shipping, and deliveries of goods along with returns if any.

3. Why is Amazon FBA significant?

Amazon FBA has provided a lot of facilities to the sellers. Most of their worries have gone due to Amazon FBA.

It is very efficient for large businesses which need more space for storage. Hence, Amazon FBA has revolutionized the whole experience of selling on Amazon.

4. How can I ship goods from China to Amazon FBA?

Once the goods get prepared and are all set to be sold, you can look for various shipping options available.

You can yourself pack and ship the products if you want or get help from a middleman i.e., the third party for the purpose. They are commonly known as 3rd party logistics.

5. Is it worth selling on Amazon FBA?

Definitely, selling on Amazon FBA is worth all the efforts and investments, but not for all.

As Amazon charges a fee for storing your products in the inventory and frequently updates the policies increasing the FBA fee every time so, it may not suit the small business owners and people with a low range of investment.

If you feel the rates are affordable for you, then Amazon FBA is worth it.

Conclusion

Amazon has 150.6 million active mobile app users. The number of prime subscribers of Amazon has hit 150 million.

Utilizing Amazon FBA increases your visibility to the prime buyers. It brought 125.6 billion dollars in sales revenue. So, it is one of the most promising online trade platforms.

Getting yourself signed up with Amazon might prove to be your next life-changing decision. This blog motioned all the crucial details you needed to know about Amazon FBA so that making a decision can be easy for you.