Amazon FBA: What Is It and How Does It Work?

You run a business selling marked-up wiffle ball bats you find on clearance at sporting goods stores. Or maybe you’re a woodworker who crafts picture frames of high quality with a small staff of workers. If you’re a manufacturer of coffee machines, perhaps every day you receive a lot of orders.

No matter what products you move and how you obtain them, your plate is full. The product you are developing needs to be developed. Facebook advertising campaigns should be optimized. Managing your business’ finances is essential.

Essentially, you don’t have the time to handle inventory, pack and ship orders, and oversee customer service operations. Amazon Fulfillment by Amazon, or FBA, is an option whether you are already selling on Amazon or you are seriously considering it.

What is FBA?

FBA stands for Fulfillment by Amazon, a service that enables you to store and ship your products via Amazon’s huge warehouse network.

The Amazon FBA process is a very simple, yet powerful way to grow your online business without having to invest thousands of pounds in storage facilities or staff.

Let me illustrate the benefits of Amazon FBA in the following scenario. There are a couple of hot items in your Amazon store that sell well thanks to your research and sourcing. Business is picking up and moving forward for you.

A seller who is both entrepreneurial and motivated is likely to consider buying more stock at this point. However, depending on how many orders you need to fulfill, you may not be able to store the extra stock and dispatch more orders on time.

Are your expansion plans now over? In no way. You can benefit from Amazon FBA in this situation.

As Amazon Fulfillment is so streamlined, most customers aren’t even aware they are buying goods from a third-party seller using Amazon FBA.

The same delivery options, return policies and customer service levels apply whether customers purchase from Amazon directly or a seller using Amazon FBA.

Amazon sellers can certainly benefit greatly from this solution, and it can save them a great deal of time. Getting started with it will require an effort, though it is not a magic bullet.

Here’s How Amazon FBA Works

Adding your products to your FBA section on Amazon is as simple as using your regular Amazon selling account and following some simple instructions. Using the direct help of Amazon, you can expand your business entirely cheaply in just a few clicks.

FBA on Amazon works in a straightforward way.

What Amazon Does For You

  1. Amazon will let you know which warehouse to send your products to so you can send your products to one of their warehouses.
  2. Products are stored safely at Amazon’s warehouse.
  3. From the point of sale to inventory updates, Amazon handles the entire transaction.
  4. You ship your product to Amazon. The company packs and ships your product.
  5. You can return or refund items through Amazon for the most part.
  6. You receive your sales profit directly from Amazon every two weeks.

You have your own warehouse, pickers, and packers with Amazon FBA!

You just have to provide Amazon with the stock and earn the money; the Amazon team will handle all the orders, handle all the customer emails, including informing the customer that their item has been dispatched, handle shipping and payments; the Amazon team handles the logistics for you.

The fees for the FBA service at Amazon are reasonable as you’d expect, but the postage savings are also beneficial.

In addition, you will not be battling Post Office queues or having to contend with bubble wrap and sellotape, because you will be utilizing the power and convenience of Amazon when attempting to make sales!

Those are Amazon’s responsibilities, but the rest is yours.

What You Have to Do

  • Choose your products: Amazon does a lot of the heavy lifting in terms of the back end, but you’ll still need to do some research and find the right products.
  • Stocks must be replenished when necessary: Amazon tells you when your inventory is low, so make sure you replenish whenever your stock level drops.
  • List your products correctly and market your products effectively: Amazon is huge, but you must list your products accurately, use descriptive titles, and market your products so that they can be found.

The Costs of Amazon FBA

Amazon charges a per-unit product fulfillment fee based on weight and package dimensions plus a monthly storage fee based on cubic feet. In this section, we break down those fees into three categories: per-unit order fulfillment fees, storage fees, and long-term storage fees.

1. Per-unit order fulfillment fees

The Amazon per-unit order fulfillment fee covers picking and packing orders, shipping and handling, customer service, and product returns. This fee varies according to whether a package is standard-size or oversize.

Additional fees may apply to specific items, such as the following:

  • Clothing: $0.40/unit
  • Lithium batteries: $0.11/unit for items containing lithium batteries

2. Storage fees

Storage fees are based on the daily average volume for the space occupied in Amazon fulfillment centers. Monthly storage fees for regular goods are charged per calendar month between the 7th and 15th of the following month. Rates vary according to regular storage, season, storage of dangerous items, and long-term storage.

Amazon charges a minimum per-unit storage fee of $0.15 or the cubic foot fee, whichever is greater.

Amazon may randomly verify product dimensions using samples. When a seller’s information differs from Amazon’s measurements, Amazon’s measurements are considered final for calculating the charges.

To calculate cubic feet of storage needed, take the following steps:

  1. Multiply length by width by height in inches to get the volume.
  2. Divide the volume by 1,728 (cubic inches per foot).

For example, a unit measuring 47-by-12-by-10 inches takes up 5,640 cubic inches of space: 5,640 cubic inches divided by 1,728 cubic inches per cubic foot = 3.26 cubic feet.

3. Long-term storage fees

Amazon charges long-term storage fee for all units stored more than 365 days in its fulfillment centers. The inventory cleanup date is the 15th of each month. If on the 15th of the month items have been in storage for longer than 365 days, Amazon charges $6.90 per cubic foot or a minimum of $0.15 per item, whichever is larger.

The long-term storage fee for items enrolled in the FBA Small and Light program are different. To be eligible as Small and Light, products in new condition must measure 16-by-9-by-4 inches or less, weigh 10 oz or less, and be priced at $7 or less.

Refer to Amazon Seller Central resources for current charges on these products and information on how to enroll products in the Small and Light program. (Click the magnifying glass icon in the Seller Central toolbar and search for “FBA small and light.”)

To avoid having to pay long-term storage fees, consider taking one or more of the following precautions:

  • Submit an inventory removal order prior to the 365-day mark. The deadline for submitting a removal order is 11:59 p.m. Pacific Time on the 14th of the month.
  • Set up automated inventory removals subject to long-term storage fees.

See the later section “Removing inventory from FBA” for instructions on how to have inventory removed from FBA fulfillment centers or to set up automated inventory removals.

What to send and not send to FBA

Amazon places restrictions on some products to protect customers and fulfillment center staff from any dangers, so honor these restrictions. Failure to do so can lead to loss of inventory or account suspension. Amazon reserves the right to refuse or dispose of any restricted items that reach its fulfillment centers without proper preauthorization and isn’t required to reimburse sellers for the cost.

In the following sections, we break down products into four categories: used/damaged goods, generally prohibited, hazardous, and date- and temperature-sensitive products.

1. Used or damaged goods

You can send used or damaged products to Amazon fulfillment centers as long as the products are accurately labeled to indicate their condition.

2. Generally prohibited products

Don’t send any of the following generally prohibited products to Amazon fulfillment centers:

  • Alcoholic beverages or non-alcoholic beer, wine, champagne, and so on
  • Fireworks, sky lanterns, or floating lanterns
  • Gift cards, gift certificates, and other stored-value instruments
  • Products that require refrigeration or air-conditioning
  • Products with unauthorized marketing materials, such as pamphlets, price tags, or non-Amazon stickers
  • Products that require preparation but that haven’t been prepped according to FBA packaging and prep requirements (see the later section “Prepping products to ship to FBA” for more about packing and prep requirements)
  • Loose packaged batteries
  • Products that have been illegally replicated, reproduced, or manufactured (knock-offs)

Amazon won’t accept pre-priced labels or products.

Apart from the list of prohibited products, Amazon restricts certain brands entirely that are more prone to get counterfeited or have exclusive licensing agreements in place.

3. Hazardous materials

Amazon categorizes certain products as hazardous and places them in the dangerous goods category. In general, Amazon fulfillment centers prohibit most products considered dangerous by the U.S. Department of Transportation, including the following:

  • Aerosol sprays
  • Airbags and airbag inflators
  • Alcohols
  • Bacterium cultures
  • Bleaches
  • Car batteries
  • Fireworks, explosives, anything with gun powder
  • Fuels (gas, diesel, propane, kerosene)
  • Hydrofluoric acid
  • Items containing carbon tetrachloride, such as fire extinguishers, refrigerants, and cleaning agents
  • Items containing mercury
  • Lighters and matches
  • Paints and thinners
  • Pesticides
  • Products containing Bisphenol A (BPA)

Click the magnifying glass icon near the top of Seller Central and search for “FBA hazardous materials” to track down a comprehensive list of items considered dangerous.

To ensure compliance with Amazon’s rules governing the sale of safe products, whenever you create a new product listing or convert a listing to FBA, Amazon requires that you answer dangerous goods questions.

Provide accurate and complete information, including, if required, a completed Safety Data Sheet (SDS) for your product, which should include a list of ingredients used in the product. If Amazon approves your request to sell the product, it processes any hazardous products in dedicated fulfillment centers properly equipped to address any dangers.

4. Date- and temperature-sensitive products

Amazon considers all tropical and consumable products intended for humans or animals subject to expiration, even if the expiration date isn’t mentioned on the product or its packaging. As a seller, you must ensure that all packages are labeled with proper expiration dates or Amazon may refuse and dispose of the products without reimbursing you for their cost.

When choosing and preparing products for FBA, adhere closely to the following rules:

  • Send only products that can withstand temperatures between 50 and 120 degrees Fahrenheit during the product’s shelf life without impacting quality.
  • Label all date-sensitive products with an expiration in the MM-DD-YYYY or MM-YYYY format, including those that require a best-by or sell-by date, which Amazon treats as the equivalent of an expiration date.
  • Assume a shelf life for food and beverages of no longer than 90 days. Within 50 days after the labeled expiration date, Amazon disposes of products without reimbursement or returning items to the seller. However, if you have a letter from the manufacturer stating that a product can be stored at a maximum of 120 degrees Fahrenheit for an extended period of time, Amazon may agree to store the product for a longer period of time.

Products requiring refrigeration or air-conditioning such as fresh fruits and vegetables are prohibited from FBA throughout the year.

Any temperature-sensitive products such as butters and chocolates are accepted into FBA only between October 1 and April 30. Any such inventory left after May 1 is marked as unfulfillable and disposed of. To avoid losing product, submit an inventory removal order before May 1. (See the later section “Removing inventory from FBA” for details.)

Signing up for FBA

Check to see whether you’re already enrolled in FBA. In Seller Central, open the Settings menu, select Account Info, scroll down to Your Services, and select Manage. If you see Registered next to Fulfillment by Amazon, you’re good to go. If not, follow the on-screen cues to sign up and agree to Amazon FBA’s service terms.

Preparing and shipping products to FBA

Now for the challenging part — getting your products to FBA fulfillment centers properly packaged and labeled. In this section, we walk you through the process.

Unless you’re exclusively into retail arbitrage (buying from other retailers and selling on Amazon), we strongly encourage you to negotiate with your suppliers to have your products shipped directly from their warehouses to Amazon fulfillment centers. Having products shipped to you so you can ship them to fulfillment centers is inefficient and sure to add to your costs. See our guidance on how to negotiate prices and terms with suppliers.

1. Enrolling products in FBA

Enrolling products in FBA is easy. You can add products to FBA when creating your product listings. To add a product, log on to Seller Central, open the Inventory menu, and select Add a Product. Follow the on-screen cues to create your product listing and be sure to choose as the Fulfillment option: Amazon Will Ship and Provide Customer Service.

If you’re uploading products in bulk, you can specify your fulfillment method when completing the product listing template/spreadsheet for each product before uploading your completed template to Amazon.

You can also convert existing FBM product listings to FBA by taking the following steps:

1). Open the Inventory menu and select Manage Inventory.

2). Select the products you want to sell through FBA.

3). Open the Actions drop-down menu and select Change to Fulfilled by Amazon.

4). Take one of the following steps:

  • If you’re ready to ship products to Amazon fulfillment centers, select Convert & Send Inventory.
  • If you’re not ready to ship products to Amazon fulfillment centers, select Convert Only.

Although you can create listings for products that haven’t yet arrived at Amazon fulfillment centers, these products aren’t available for purchase. All listings have zero inventory until the stock is processed into the fulfillment centers.

When converting products from FBM to FBA, Amazon prompts you to answer product safety questions, including whether each product is a battery or includes batteries and whether any products may be considered dangerous or hazardous.

You can use both FBA and FBM to fulfill customer orders. Just be sure to create a separate stock-keeping unit (SKU) for each fulfillment method. Use the same Amazon Standard Identification Number (ASIN) for both FBA and FBM, but specify different SKUs. FBA will fulfill orders out of the FBA SKU, while you fulfill any orders against the FBM SKU.

2. Shipping products to Amazon fulfillment centers

When you’re ready to ship products to Amazon fulfillment centers, you can initiate the process for individual products or create and submit a bulk shipping plan. In this section, we provide additional guidance to navigate the process from the Manage FBA Inventory page or by creating and submitting a bulk shipping plan.

Initiate shipment from the manage FBA inventory page

If you’re shipping only a few products to FBA, consider using the Manage FBA Inventory page to initiate the process:

1). Log in to Seller Central and do one of the following:

  1. Select Inventory and then Manage Inventory to access all inventory, including FBA and FBM.
  2. Select Inventory and then Manage FBA Inventory to access only FBA inventory.

2). Select the checkbox next to the listing for each product you’re ready to send to Amazon fulfillment centers.

3). Select Send/Replenish Inventory from the resulting drop-down menu on the top left section of the page. Seller Central redirects you to a page for specifying your preferences and providing additional information.

4). Follow the on-screen cues to supply the requested details. Seller Central displays the main shipment page.

Initiate shipment via a bulk shipping plan

If you plan to ship tens or hundreds of products to Amazon fulfillment centers, you can save time and reduce complexity by creating and submitting a bulk shipping plan. Take the following steps:

  1. In Seller Central, open the Inventory menu and select Manage FBA Inventory.
  2. In the sub-menu that appears just below the primary menu, select Shipping Queue. The Shipping Queue dashboard appears.
  3. Select Upload Shipping Plan File.
  4. Press the Download Template button.
  5. Open the downloaded template in a program that supports Excel (XLS) files.
  6. Follow the instructions on the Instructions tab to complete the template and save it as a text (tab delimited, .txt) file.
  7. Return to Seller Central, click the Upload Now button, and follow the on-screen cues to upload the template.
  8. Under Review File Status and History, click Refresh; review the resulting report for any additional information, errors, or warnings; and address any outstanding issues.

After uploading the completed shipping plan file, you can access it from Seller Central by opening the Inventory menu, selecting Manage FBA Shipments, and then selecting the Shipping Plans tab. Open the desired plan and enter additional details, as we explain in the following sections.

The shipping plan consists of six subsections. After you complete these subsections, your products will be ready to be sent to Amazon fulfillment centers. Press the Continue button after completing each section to move to the next section. If you need to interrupt the process, you can revisit a section by clicking on its name.

Set quantity

Under Set Quantity, enter requested details for all products in the shipment (individual listings and case packed), including quantity, package dimensions, and weights, if not already provided. If any essential details are omitted or any listing is ineligible for FBA, FBA won’t allow you to proceed to the next step in the process.

Amazon distinguishes between one box of different products (individual) and boxes that contain all of one identical product (case packed). When creating your shipping plan, be sure to distinguish between individual and case-packed items because they’ll be handled differently at Amazon fulfillment centers.

Prepare products 

This section provides an opportunity to indicate whether any products you’re shipping to fulfillment centers require special preparation, packaging, or handling. Also, specify who will be preparing the products — you or Amazon. If you choose to have Amazon do any of the product preparation, Amazon will quote a per-unit fee after you specify the preparation required.

Label products 

All products must have a bar code. If your product is eligible for tracking with the manufacturer’s bar code, you don’t need to print and apply Amazon labels to your items. If your product is not eligible, then it must have an Amazon bar code. To print and apply Amazon bar code labels, open the Who Labels? drop-down menu and select Merchant, then click Print Labels for This Page. To have Amazon print and apply the labels (for a fee), open the Who Labels? menu and select Amazon. In either case, specify the number of labels needed (typically one per item) and the label size.

Review shipments

The Review Shipments page displays the following details:

  • All costs for product preparation, labeling, and handling
  • A list of distribution centers where products will be sent, which is helpful for determining how to pack products and cases for shipment

After verifying all the details entered so far, select Approve & Continue. Though you have the option to edit the shipment contents one more time in the next step, usual practice is to approve the shipment. After orders are approved, FBA creates one or more shipments depending on the number of locations the products are being sent.

Prepare shipment

“Prepare shipment” is a bit of a misnomer. You’re not actually handling the product here; you’re just adding details about how products will be shipped. To prepare the shipment, take the following steps:

1). For one of the shipments FBA created in the previous section, select Work on Shipment. FBA displays the shipment’s contents.

2). Review the shipment contents. Check and, if necessary, modify the shipment quantities. Note that quantity modification can’t exceed more than 5 percent or six total products. For larger quantities, cancel the existing shipment plan and submit a new one.

3). Select shipping service. Select Small Parcel (individual boxes) or Less Than Truckload (LTL for pallets of at least 150 lbs) and a carrier (Amazon partner UPS or other available carrier).

4). Specify shipment packing details. Details include how the contents of the shipment will be packed into the master boxes (bigger boxes containing more than one SKU according to the details provided during the shipment creation process), number of boxes, box weights, and box dimensions. You can provide packing information here, on the shipment page, or by uploading it via a template file. After you provide the shipping details, FBA presents estimated shipping charges based on box weights and dimensions.

Make sure the weight of any box containing multiple units doesn’t exceed 50 pounds. For single units, if the weight exceeds 50 pounds, label each item “Team Lift” on the top and sides to ensure safe handling.

5). Review and approve or reject the proposed shipping charges. If you approved the charges, proceed to Step 6 to prepare your boxes.

6). Arrange your boxes and products for the different Amazon distribution centers they’ll be shipped to, so you’ll have a clear idea of the shipping labels you’ll need.

7). Select the option to print the labels for the boxes you’ll be shipping to Amazon’s fulfillment centers and use the labels as follows:

  1. Affix your shipping label to the outside of the box. (You don’t need to put the printed packing labels inside.)
  2. Don’t photocopy, reuse, or modify the labels. Each shipping label is unique and is used to track the box and its contents.

You have up to 24 hours to void the charges if you change your mind. You can delete the shipping plan by clicking on the “Delete shipment” button on the bottom left of the page.

Prepping products to ship to FBA 

1). With your boxes, products, and shipping labels on hand, you’re ready to pack. Be sure to adhere to all FBA packaging guidelines, including the following:

2). Apply a unique product label (or bar code) to each product box for easy scanning at Amazon fulfillment centers.

3). Create a unique SKU for each product item.

4). If the product has an existing label, cover it with an Amazon printed label wherever required.

5). Don’t include any marketing materials or flyers with packaging or products.

6). If you’re selling sets or bundles, pack them together and label them something along the lines of “Sold in sets; don’t separate.”

7). Make sure any box containing a product can survive a three-foot drop on all sides. If a box is likely to fail the drop test, pack it in a polyurethane (poly) bag according to the following guidelines:

  • Use 1.5 mil thick clear polyethylene bag, so the bar code on the box clearly shows through for scanning. If the bag is likely to obscure the bar code, affix the bar code sticker to the outside of the bag.
  • Add a suffocation warning sticker to any plastic bag with an opening of more than five inches.
  • Pack any adult products in black opaque poly bags with the bar code affixed to the outside of the bag.

Removing inventory from FBA

To avoid paying long-term storage fees on products that aren’t selling, request that Amazon remove your inventory from its fulfillment centers and return it to you.

Removal order fees vary by service type (return or dispose of item) and product size (standard or oversize); the return fee is a flat fee charged per item to return products to the specified location:

Service Standard-size (per item) Oversize (per item)
Return $0.50 $0.60
Disposal $0.15 $0.30

You can submit an order to have products removed from fulfillment centers or set a date on which products will automatically be removed.

1. Submit an inventory removal order

To submit an inventory removal order, follow these steps:

1). Take one of the following steps:

  1. On Seller Central, open the Inventory menu and select Manage Inventory. Choose the items you want to remove, open the Action on Selected drop-down list, and select Create Removal Order.
  2. On Seller Central, open the Reports menu, select Fulfillment, scroll down to Removals (in the navigation bar on the left), select Recommended Removal, and click Begin Removal Process.

On the Provide Details page, under Method of Removal, take one of the following steps:

  1. Select Ship-to Address and enter the address where you want the inventory shipped (your address or the address of a supplier, for example).
  2. Select Dispose of to have inventory disposed of at the fulfillment center(s).

2). In the Set Order ID field, enter the customer order ID you want to use to track this transaction or leave the field blank to have an order ID generated automatically.

3). Save the removal order ID for tracking purposes.

4). Under Specify Ordered SKUs/units, enter a title, MSKU, ASIN, or FNSKU in the Search and Add Items text box, click Search, select the products you want removed from inventory, and select Add Selected.

Under Fulfillable Qty. enter the number of fulfillable units to remove from inventory.

5). Fulfillable quantity is the number of items that can be sold. The number of items you specify represent excess inventory to remove to avoid storage fees.

6). Under Unfulfillable Qty. enter the number of unfillable units to remove. Unfulfillable quantity is the number of items that can’t be sold for whatever reason, such as damaged product or packaging.

7). Click Continue. The Review and Place Order page appears. Check the details to ensure everything is correct and that you’re satisfied with the shipping speed and estimated removal fees.

8). Select Place Order to submit the inventory removal order.

An inventory removal may take up to 30 days to process, but as long as you meet the inventory removal request deadline, Amazon won’t charge you a long-term storage fee.

2. Set up an automated inventory removal

To have inventory removed from Amazon fulfillment centers automatically prior to sitting in storage for more than a year, schedule in advance to have the inventory removed:

1). Take one of the following steps:

  1. Open the Settings menu and select Fulfillment by Amazon.
  2. Open the Inventory menu, select Manage FBA Inventory, Remove Unfulfillable Inventory, and Auto Removal Settings.

2). On the Fulfillment by Amazon Settings page, locate Automated Unfulfillable Removal Settings, and next to that option, click Edit.

3). On the Automated Unfulfillable Removal Settings page, click Enable and select one of the following:

  1. Return to have products returned to you
  2. Dispose to have products disposed of at the fulfillment centers

4). Select your preferred schedule:

  1. Immediate
  2. Weekly (on the 8th, 15th, 22nd, and 28th)
  3. Twice a month (on the 15th and 20th)
  4. Once a month (on the 1st)

5). In the Email Address box, enter your preferred email address for receiving notifications about the inventory removal.

6). If you chose to have products returned to you (in Step 3), enter your address and phone number.

7). Select Update.

Amazon FBA Benefits

Fulfillment by Amazon is a powerful service, so let me explain a few of its advantages first.

1. You can benefit from Amazon’s reputation

Worldwide, Amazon is trusted. They know they will receive a product when they order it. If they need to return it, they know they can. Customers depend heavily on this when deciding whether to purchase from you.

2. You will be able to provide a super-fast service

Faster processing and dispatch is part of Amazon’s award-winning online ordering service. This enables them to ship products faster to your customers than you could.

3. Increase your ranking and visibility on Amazon

FBA allows you to rank higher in search results when you use the programme. Sellers who do not use FBA market their products based on their total price (the product price plus shipping costs). You will however be listed by price alone as an Amazon FBA seller, making it appear first in the search results.

4. You are more likely to secure the Buy Box

On all Amazon product listings, there is a large button that says ‘Add to Cart‘. Whenever Amazon and you both sell a similar product, they will always have a Buy Box, of course! However, you can still compete by using Amazon FBA.

It is highly likely that you will win the buy box on your other listings if Amazon can see you’re using FBA for your shipping method.

5. Free delivery can be automatically offered

 Your products will be delivered for free to Amazon Prime members. During the busy shopping season, Prime customers tend to purchase a great deal of items from you.

If you don’t use Amazon FBA, you are disadvantaged. Free shipping is one of the most attractive features of Amazon FBA, so reaching these sellers is a great advantage.

6. You will experience a significant drop in overhead

 By using FBA, you won’t have to worry about employees, storage, or administration, so you can focus on selling more products!

7. Increased productivity is a benefit

Increased productivity is one of the biggest benefits of FBA. Your time can be spent building your business instead of dealing with Amazon’s customer service, returns, storage, packing and shipping.

8. Your business can run from anywhere!

With Amazon FBA, you can be located anywhere in the world and still generate consistent sales. Your orders will be handled by Amazon 24 hours a day.

Client queries won’t be as frequent.

Customer service is handled by Amazon FBA. Customers can contact Amazon’s customer service department if they have a problem with their order, rather than you dealing with it directly. In addition, you won’t need to interact directly with the customer, saving you valuable time.

9. Ease of Use

 One of the biggest perks of Amazon FBA is its overall ease of use. Consider not having to handle any more packaging materials, queues at the post office, or dealing with customer service issues! FBA is operated by Amazon in this way.

Amazon FBA allows you to free up your time so you can devote it to other vital things in life, like finding new inventory and building your brand.

It seems as if these benefits are too good to be true! Do Amazon FBA’s disadvantages outweigh its advantages?

The Disadvantages of Amazon FBA

FBA on Amazon helps all Amazon sellers, without a doubt, as the company has a strong reputation. Having already touched on the benefits, of which there are plenty, it’s only fair to mention any potential disadvantages as well.

Here’s where we start!

1. Amazon FBA is expensive

Like everyone else, Amazon is a business, so they charge both storage fees and fulfilment fees just like you. Storage fees can mount if your inventory is not moving as quickly as you would like.

Thus, to minimize Amazon storage fees you will need to ensure that your inventory has a forward motion. If your inventory is not sitting around, and you are making sales, extra fees won’t apply.

Also, take into account your FBA fees to determine whether your products will still be profitable.

Here you can see a full list of fees and a fee calculator.

2. It can be challenging to prepare your products for FBA on Amazon

If you register for FBA with Amazon, you will have access to Amazon’s guidelines for preparing and shipping your products to their warehouse.

It is extremely important that you adhere to these guidelines. It will cause delays and frustration if your inventory is not properly labelled at the warehouse. Following the directions carefully is important.

3. Your logo is not on the product packaging

Amazon’s branding will appear on the packaging of your customer’s order delivered by Amazon FBA. Therefore, building your brand awareness will be more difficult, since your identity will not be on your packaging.

Brand awareness won’t benefit you, so you should weigh up how much of a disadvantage this is compared with the other benefits of Amazon FBA.

4. Your returns may increase

When using Amazon FBA you might experience an increase in returns due to the ‘easy returns process’. However, this risk can be mitigated in some way by always ensuring you supply quality products and customers don’t feel the need to return their products.

It is true that customers will sometimes make impulse purchases, have buyer remorse and return products.

The Amazon FBA program makes this possible. In addition, you may be out of pocket if Amazon finds a returned item is unsellable. The fact that this may not deter you from using Amazon FBA should not necessarily make you avoid it.

It’s the few disadvantages of Amazon FBA that will trump the benefits for many businesses and your success will also depend on other factors, many of which are up to you, the effort you make and the knowledge you have to successfully use Amazon FBA.

5. Sales Tax Compliance

FBA also faces the issue of sales tax compliance. If your business has sales tax nexus, which is when you store inventory in a state, you’re required to collect sales tax in those states. Amazon fulfilment centers store their inventory in states where they are liable for sales tax. 

Amazon hasn’t always been transparent about where their inventory is located with sellers before. Your seller account now includes this information in the Amazon Fulfillment Reports. It’s on the Fulfillment > Inventory Event Detail report

In most states with an Amazon fulfilment center, Amazon now collects sales tax on behalf of sellers. 

It is the seller’s responsibility to ensure they are sales tax compliant in states that do not require Amazon to collect sales tax for them. The Amazon Business page has an overview of each state and what it means.

Is Fulfillment by Amazon Worth It?

The answer to this question really comes down to three factors: how much you’re shipping per month, how big your profit margins are, and how niche your market is.

To qualify for FBA, you must move at least 40 items per month. It probably isn’t worth the hassle (and the fees) to prepare your inventory according to Amazon’s strict requirements if you’re barely meeting that minimum threshold. These responsibilities should be handled by yourself or by a more flexible fulfilment company.

Small margin eCommerce sellers should avoid FBA. With low profits per sale, it’s safe to say that FBA fees will reduce your margins to zero, if not negative. In spite of the fact that shipping everything on your own isn’t free – in terms of money or energy – you shouldn’t incur any fees that aren’t essential to your business.

FBA isn’t necessarily necessary for sellers of super-niche items (e.g., vintage zines geared towards old-school goth music fans). FBA’s prime eligibility is one of its biggest advantages. One thing a shopper will do if she sees a bunch of nearly identical products, but only a few of them are Prime eligible, disregards those that aren’t.

Amazon is not too common for selling ‘70s goth zines. Your niche product’s target market likely doesn’t care about Prime eligibility; they’re just glad to have found what they were looking for.

FBA can be a fantastic investment if you sell tons of items per month and drive sizeable margins in a competitive market. With this simple practice, you will gain the confidence of prospective buyers and earn more sales on the product details page.

Is Amazon FBA Suitable for All Businesses?

Amazon FBA is used by millions of eCommerce entrepreneurs, but like everything else, it isn’t perfect for everyone.

This is a great option if you’re primarily an Amazon seller and are looking to step up your brand rather than becoming bogged down with daily fulfillment tasks. It’s a great solution for anyone who’s stuck between a kitchen table business and an expanding online brand.

It can be worthwhile and profitable to use Amazon FBA. To decide if Amazon is right for you and your business, it’s essential that you learn about the company’s rules and regulations, and most importantly, understand your customers – your target market.

It will ultimately come down to your products and business goals as to how Amazon FBA works for you. Certainly, Amazon FBA is a simple way to outsource many tasks associated with running a business, but it’s important to ensure the benefits outweigh the additional costs.

Amazon FBA Courses

If you are new to Amazon FBA, you might be interested in some Amazon FBA courses.

There are many Amazon FBA courses, but some are scams. To help you avoid the scams, I have done thorough research about the most popular Amazon FBA courses.

Here are the Amazon FBA course reviews for you to make references and see which course you should choose:

  1. Amazon FBA Heroes Review
  2. Proven Amazon Course Review
  3. The Last Amazon Course Review
  4. Blue Sky Amazon Course Review
  5. Amazing Selling Machine Review
  6. The Wholesale Formula Review

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