FBA is a service aimed at making it easier for Amazon sellers to run their business. If you sell on Amazon, you should carefully consider whether you want to use this service from Amazon.
In this post, we'll explain exactly what FBA is and how it works. We'll also give you tips on how you can increase your efficiency by using FBA.
What is Amazon FBA?
The acronym FBA stands for Fulfillment by Amazon. Amazon's service includes the storage, picking, packing and shipping of orders. Sellers and companies can therefore send their products to Amazon's fulfillment centers, and when a sale is made, all the necessary steps are carried out by Amazon.
With access to Amazon's logistics network, sellers have the opportunity to grow faster.
What are the advantages of Amazon FBA?
Shipping through Amazon takes a lot of work off sellers' shoulders and makes your products more attractive to buyers.
With FBA, you don't have to worry about sourcing warehouses and delivery trucks, hiring staff, or building logistics systems. Additionally, shipping costs through Amazon can be cheaper than shipping products as a private party. Returns, refunds and customer service are also handled by Amazon.
Since the Amazon algorithm prefers FBA products, using FBA can improve the placement of your products.
Another benefit of FBA is multichannel fulfillment. With Amazon's service, you are not limited to Amazon. You equally have the option to sell your products through multiple online channels, such as your own website, and still have Amazon pack and ship them.
FBA products are also automatically eligible for Prime. This means that your products will be marked with the Prime logo and shipped within two days. As a rule, many buyers prefer Amazon Prime products because shipping is free and fast that way. The customer service provided by Amazon is reliable and efficient. This strengthens customer loyalty, which in turn can have a positive impact on your sales.
What are the disadvantages?
In addition to the many advantages, there are some disadvantages with Amazon's service that you should be aware of before signing up for FBA.
Using FBA comes with various costs, such as handling and storage fees. Especially when dealing with products that are difficult to sell, the fees can accumulate quickly. There can also be fees for removing defective, damaged and unsaleable products, as well as for disposing of that inventory.
Amazon has detailed product guidelines for its FBA service, which you should be sure to follow when shipping to fulfillment centers to avoid incurring additional fees or having to return the products you send to fulfillment centers.
Amazon's inventory setting is designed to group together the same products from one manufacturer. So as soon as you sell exactly the same product as another Amazon merchant, your products will be mixed with those of the other merchants. This stickerless commingling can lead to incorrect deliveries.
Using Prime may not only work to your advantage, either. Since buyers can return your products quickly and easily, this may result in an increase in returns.
How does Amazon FBA work?
The FBA signup process is very straightforward. Below we explain how you can use FBA.
To use the FBA program, you should have an Amazon seller account. You can set up Fulfillment by Amazon in Seller Central.
The next step is to take care of the products you want to offer on Amazon through FBA. You have the option to have all your products managed via FBA. However, based on the disadvantages mentioned above and the higher costs, you should evaluate whether this makes sense for your business. If you choose products manually, it makes sense to do extensive research to select the most profitable products. After creating the product offers, the products should be prepared. Here, you can either choose a manufacturer to ship the items to you or a manufacturer to send your products directly to Amazon's fulfillment centers.
Once your products have been shipped to one or more fulfillment centers, Amazon takes over the storage of the products. When a customer purchases your product, Amazon processes the transaction. Amazon picks, packs, and ships the product. At any time, you can track your sales and inventory in Seller Central.
Amazon handles any returns and all customer service. Other customer-related tasks, such as providing tracking details and requesting ratings and reviews, are also handled by Amazon.
How much are the fees with FBA?
There is a monthly subscription fee of $39.99 excl. VAT for all Amazon Sellers that you have to pay to be active as a merchant on Amazon. Likewise, there is a selling fee, which is usually 15 - 18% of your product price. So in this case, the amount of the fee depends on your individual products. In addition, Amazon charges a referral fee for each item sold, which is based on the percentage of your sales price and varies depending on the product category.
In order to use the FBA program, you as a seller have to pay additional fees to Amazon. Basically, the more inventory you have, the higher the fees will be, as they are calculated based on the space your items take up in Amazon's warehouse.
So, for the use of FBA, the storage and handling fees are essential. Storage fees are calculated monthly based on the storage space used in cubic meters. The cost can vary depending on the product size class and also depending on the calendar month. Handling fees are likewise dependent on several factors. They are calculated based on the size and shipping weight of the items. Fees are calculated per unit and, like storage fees, vary by product size class. Handling fees include picking, packing, shipping, processing, customer service, and product returns.
In general, you should be careful to rather include products in the FBA program that sell quickly. If your products are stored for more than 180 days, you will incur higher storage fees. Long-term storage fees are due if your goods are in storage for more than 365 days. You can find out about the status of your products in your inventory report.
In addition, there may be fees for removal orders, large quantity listing fees, hazardous materials storage fees, or administrative fees for refunds.
International process
International shipping is also possible through FBA and is essential for successful global expansion. When using FBA for international orders, a distinction is made between European marketplaces and non-European marketplaces.
If you want to sell your products outside the European marketplaces, you will need to import your products into that country so that they can be stored in a fulfillment center in that marketplace. When exporting and importing, you should pay attention to all laws and regulations of the country of origin and destination and pay any applicable fees.
However, if you are already selling on the European marketplace, you can process your orders from other European marketplaces with your FBA account. This option provides you with easy cross-border selling. Amazon offers three international fulfillment programs - Pan-European FBA, European Fulfillment Network, and Multi-Country Inventory.
When using Pan-European FBA, you only need to ship your products to one domestic fulfillment center. Amazon distributes, based on demand, your inventory to all European Amazon marketplaces.
With the European fulfillment network, you are given the option to ship your products to one center and list your products on various European Amazon marketplaces. Once a customer abroad purchases a product, it is shipped from the original fulfillment center in the domestic country to the customer abroad.
With multi-country inventory, you send your products directly to the country where they are most in demand. This way you can ensure that the products are shipped to your customer as soon as possible.
What is the difference to FBM?
FBM stands for Fulfilled by Merchant. With this method, the seller manages the storage, shipping, and customer support of their products listed on Amazon either in-house or through a third party.
By managing it themselves, Amazon Sellers have more control over their inventory and fulfillment operations. Likewise, merchants have greater influence over the customer experience as they manage customer service independently.
It should be noted, however, that using FBM requires experience in logistics and also sufficient resources. Packing and shipping products can be very time-consuming. In addition, FBM requires a great deal of knowledge around Amazon's policies. Especially if you want to sell abroad, these quickly become very confusing.
Tips
To increase your profitability, you should pay special attention to some factors.
For successful use of FBA, it is essential to follow all Amazon rules. Amazon has many guidelines and terms of service that you need to follow. In particular, you should make sure that your products are packaged according to Amazon guidelines before sending them to fulfillment centers. All of these guidelines may seem very onerous at first, but they are necessary to avoid additional fees and ensure a smooth process.
The Inventory Performance Index provides you with an overview of your inventory levels in the warehouses. You should definitely use this index as a guide in order to be able to replenish your products in time. You can also use the system to find out how long your products have been stored in Amazon's centers. This way you can avoid charges for long-term storage in time.
As mentioned earlier, the Prime status of your products may increase returns when using FBA. You may be charged for these returns. Therefore, you should try to avoid returns by describing your product in great detail on the product description page, for example, in order to avoid misunderstandings among customers. Answering customer questions regularly on the product description page can also help.
If possible, you should take advantage of Small and Light for your small and low-cost products to reduce your fees. Here you should try to reduce the packaging of your products to the most necessary..
Even for products you ship with FBA, ads are essential to stand out from your competition. Ads help you get noticed by potential customers.
Conclusion
Amazon FBA is a sophisticated process that can be useful for your commerce inside and outside Amazon.
For successful use, you should follow all of Amazon's rules and have a well thought out inventory and ads management. The FBA program can save you time in handling your products. With BidX you can also save valuable time in your ad management through automated bid and keyword adjustments, which you can use for other core aspects of your Amazon business.
