Amazon FBA Explained in 2021

Without a doubt, Amazon FBA is among the most popular and effective ways of making a living online. More than 2 million people are selling on Amazon across the globe. 

Amazon has made the FBA program quite straightforward, and almost anyone can list an item to sell on Amazon. It doesn’t matter if you purchase the product wholesale, manufacture it yourself, or simply select a product that many Amazon FBA sellers are already selling.

If you want to sell on Amazon FBA, you can automate the order fulfillment by rendering the advantages of fulfillment services and advanced shipping for Amazon sellers. Besides, you can earn more sales from coveted Prime customers of Amazon. 

You will be surprised to know that third-party sellers make about half of the Amazon sales. And 66% out of the top 10,000 sellers use Amazon FBA

What is Amazon FBA? 

Amazon third-party sellers have three options to fulfill their products while selling on the marketplace, which are:

  • Fulfillment by Amazon (FBA): FBA is a service where Amazon manages the inventory, product storage, packaging, shipping, returns, and even customer service on behalf of the seller. The seller is charged with FBA fees in return for the services provided by Amazon.
  • Seller Fulfilled Prime (SFP): Seller Fulfilled Prime is a service provided by Amazon to its third party seller where the sellers manage everything on their own from inventory to shipping of orders. But Amazon allows the sellers to add the prime badge next to their product listings.
  • Merchant Fulfilled Network (MFN): Using Merchant Fulfilled Network sellers manage their inventory on their own. The product’s packaging, shipping of orders, customer service are taken care of by the seller. As an MFN seller, your products will not get the prime badge on Amazon.

Now let’s discuss more on the Amazon FBA where FBA stands for fulfillment by Amazon.

The crucks of this are: you sell the product, Amazon ships it. 

You might be wondering how does it work?

  • You send your products to Amazon.
  • Your products are stored in their warehouses.
  • Whenever you receive an order against a product, Amazon picks it, packs it, ships, and tracks it on your behalf. 
  • Amazon also handles the returns and refunds for you. 

However, being an Amazon seller, you have to pay the price to Amazon for all these services. Amazon charges storage and fulfillment fees both.

Amazon FBA important stats you should know in 2021

There are more than 300 million active customers on Amazon, with around 90 million Prime subscribers only in the territories of the U.S. 

Brands that utilize Amazon FBA are available specifically to the Prime customers as they spend more money on Amazon.

The average customer on Amazon spends around $700 per annum. On the other hand, Prime customers spend approximately $1,300 a year. 

How Amazon FBA Works?

Amazon will handle all the hard work within FBA, so you will have ample time to focus on other things. Here is how it works:

  • Send your products to Amazon

There are roughly 100 warehouses across the U.S., and some are over a million square feet. You just need to tell them about your products, and they will guide you on which warehouse will cater to your needs. 

  • Amazon stores your products

Once you have shipped your products to Amazon FBA warehouses, they will take the hassles of sorting and adding them to the inventory. Amazon will reimburse you if any of your product gets damaged in the warehouse. 

  • Amazon ships your products to customers

Amazon will be responsible for the entire transaction process. From accepting payments to automatically updating the inventory, you have all sorted. 

After that, Amazon workers will grab the product against which you have got the order, pack it into a box, and ship it to the customer’s address. 

  • Amazon handles a lot of customer service 

Once the customer has received the product, Amazon will also follow-up to ensure that the customer is satisfied with the shipment. Besides, they also handle returns and customer queries. 

However, if you receive feedback on the product listing, you should be responsible for replying to them.

  • You get paid

Amazon totals up the earnings, cuts their fees, and pays you the payment they owe.

What Amazon seller is responsible for while using FBA 

Amazon will not be handling all the tasks of your Amazon FBA business; you will be responsible for the following things:

  • Choosing the products to sell

Yes, you can sell almost any product on Amazon as long as it is not restricted, however making a choice needs expertise. If you want to save on the storage fees, get good profit margins, and get good product sales you should invest quality time in selecting the product to sell on Amazon FBA.

  • Availability of products in inventory

As an Amazon seller, you will regularly need to check on the inventory levels to ensure that your products are never out-of-stock. 

  • Product marketing

If you are a new seller you have to implement a good marketing strategy to outrank the competition on Amazon and rank your products high on search results.

Benefits of Using Fulfillment by Amazon (FBA)

If you want to grow your business, or you are an individual seller you should sell on Amazon FBA. This program is among the top ways to grow a business and market the products to an already built customer-base. 

Some of the most significant benefits of being an Amazon FBA seller are: 

  • Simple logistics and shipping

Amazon FBA sellers who have been managing the fulfillment on their own might know the hassles attached to it. 

Higher sales will result in spending more time packing and shipping the products, thus putting more money on resources. As an Amazon seller, you can outsource the entire process to FBA, taking advantage of their experience and expertise. 

  • Discounted shipping rates

To ensure Amazon FBA sellers have to pay minimum shipping rates, Amazon contracts with major shipping carriers who offer steep discounts on the overall shipping cost. 

Amazon passes these discounts on to the seller by offering reduced shipping fees when you choose to send the inventory to Amazon’s fulfillment centers. 

Customers also get the benefits, and Prime subscribers are eligible for free two-day shipping on all the products listed under FBA. 

  • Returns and refunds management

Handling return requests and processing refunds can be daunting. 

From listening to the upset customers to dealing with returns and all other administrative tasks, Amazon takes the hassle off your shoulders. 

They will be responsible for managing customer inquiries as well as reverse logistics. 

However, you should keep in mind that they do charge a returns processing fee for handling all the tasks. But the cost is totally worth the amount of time and work they do on your behalf. 

  • Customer service management

As we all know that Amazon has earned a stature for providing top-notch customer service- 24/7 support via chat, phone, and email. 

This brings the customer at ease and also takes a huge load off the Amazon seller’s plate.

  • Potentially unlimited storage space

When you opt for using FBA, you don’t have to worry much about the storage space needed for products. 

You don’t need to rack your brains about the cost of the warehouse. Whether you are a non-Amazon or Amazon FBA seller, there is no minimum inventory limit. 

So, you can send in as few products as you want. Besides this, sellers who have high-performance scores (meaning their products are sold a bit quickly). 

  • Quick delivery

Amazon has a lot of fulfillment centers across the globe. So, it doesn’t matter your target market; you can get the products delivered to them reliably within a few days.  

Once an Amazon FBA seller has placed an order, Amazon will automatically figure out which fulfillment center is closest, and your products will be shipped from there. 

Cons of Using Amazon FBA

Despite the fact that Amazon is an amazing marketplace, there are a few drawbacks. 

  • FBA costs money

Amazon will charge both fulfillment fees and storage fees. 

You have to understand how quickly the inventory moves to save on the storage fees. 

Additionally, you will also want to make sure that your products bring enough products to get costs covered. 

  • Long-term storage fees 

If you are starting an Amazon FBA business, you should know that storage fees aren’t too bad unless you have your products in there for over six months. 

Amazon is not in the business of storing products but selling them.

So, they ensure that there aren’t any products sitting for too long in the inventory as it will bring sky-high storage fees. 

  • Difficult product preps

Amazon has set guidelines for preparing and shipping the items, and if you sell on Amazon FBA, you should abide by these rules. 

You should enter the products correctly into their database and get them shipped to the right warehouse. 

  • Tracking inventory 

It can be challenging for an ordinary person to stay on top of the products available in inventory. 

A product out of sight can easily be out of mind. 

Wrapping Up!

Amazon FBA business program allows anyone to sell their products, no matter how small the product is. You will get to keep your products in front of millions of customers to get the benefits of one of the biggest marketplace. 

In addition to this, customers can trust the products if you are an Amazon FBA seller as they are backed by Amazon. So, it is a great method of closing more deals and getting more sales through brand recognition. Amazon will take a huge load off your plate, and the fees they charge are worth it. 

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Kevin David

Kevin David

Kevin David is a self-made entrepreneur, an expert in eCommerce, and a leading Amazon FBA seller. He has hustled his way from working at a corporate job to building his own multi-million dollar business from the ground up. After achieving financial independence himself he has been helping hundreds of thousands of aspiring entrepreneurs from all over the world to achieve the same glory and success through his Amazon FBA course.

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