What is Amazon FBA? The Ultimate Guide (2022)

54

What is Amazon FBA?

So first, let’s discuss “What is Amazon FBA?”. Fulfillment by Amazon, or FBA for short, is a service that allows you, as an online merchant, to make use of Amazon’s many massive warehouses in order to store and ship the products you sell on Amazon.com. The service wants to indicate that there is no need to spend tens of thousands of pounds on new warehouse space and additional employees when you can use Amazon’s Fulfillment by Amazon (FBA) service to help your online business expand.

Here’s an example that illustrates the value of Amazon’s Fulfillment by Amazon (FBA) service. You’re an enterprising, motivated, and enthusiastic seller; at this point, and you have great ideas of what you want to sell on Amazon. The next step you might be considering is to buy  more inventory. However, you’re concerned that you don’t have enough space to store the goods and that processing and shipping will take too much longer. 

So, if you decide to adopt Amazon FBA services, how does Amazon FBA work to help your business? Based on Amazon FBA meaning, Amazon allows you to make use of their massive warehouses in order to store and ship the products. The main distinct advantage is that customers will hardly notice any distinction between traditional Amazon purchases and those made through Amazon FBA-enabled sellers. They surely will receive the same high standard of service, return/refund policy, and delivery options will be offered to them.

what-is-amazon-fba
How does Amazon FBA word?

What is the difference between FBA and FBM?

If you have been researching “what is Amazon FBA” for a while, you probably also encounter the FBM – Fulfillment-by-merchant. For orders marked as FBM, the retailer will handle everything from stocking shelves to dispatching packages. 

If you aren’t familiar with each method, making a decision can be challenging. Here, we’ll do our best to break down the differences between FBA and FBM, so you can make an informed decision about which fulfillment strategy is right for your company.

what-is-amazon-fba
The difference between FBA and FBM
FBAFBM
DefinitionThe sellers have their products stored in Amazon’s facilities and then shipped to customers. The customer’s order is then placed in Amazon’s warehouses, where it is kept until it is shipped.The sellers list their products on Amazon but handles storage, shipping, and customer support independently (or through another third-party).The seller may wish to use Amazon’s warehouse as a third-party service.
Fees chargedAmazon levies a monthly storage fee. Amazon also has a fulfillment fee, in which will include picking, packing, shipping, and handling customer service.The “returns processing fee”: Amazon imposes on certain product typesThe “long-term storage fee”: fee charged to sellers whose products sit on Amazon’s shelves for more than six monthsThe “stock removal fee” is charged when products are removed from Amazon’s warehouses.If a business’ fulfillment costs are less than FBA’s fees, using FBM can help boost profits.

Despite a variety of fees, saving money is arguably FBM’s biggest advantage. If a retailer has the necessary experience in picking, packaging, and shipping, they may be able to handle all of the logistics themselves and save money compared to using Amazon’s services. The Amazon FBA Calculator is a great resource to be used to compare FBA with FBM,  or to simply calculate FBA fees.

If you are wondering which fulfillment method is the best suited to your store, consider your business’s size and growth potential, the product categories you sell, and where you want to put the bulk of your investment. There are many sellers who combine two of them at a time, so it’s also worth looking at both of them.

Benefits of Fulfillment by Amazon

After having a basic understanding of “what is Amazon FBA” and its counterpart FBM, I’m sure you still have some concerns, so let’s start by discussing the many advantages of using Fulfillment by Amazon (FBA).

what-is-amazon-fba
Benefits of Amazon FBA

The process is simpler than ever

Amazon FBA’s user-friendliness is, by far, the service’s greatest advantage. Because FBA handles everything from stocking to payroll to accounting, you can put all your energy into expanding your business and generating more revenue. You can be located anywhere in the world and still make money as an Amazon FBA seller. All of your order needs can be met by Amazon’s round-the-clock service.

As ​​customer service and refunds are outsourced, all of your customer service issues will be handled by Amazon FBA. As an illustration, if a customer has a problem with their order, they can contact Amazon directly instead of you. No longer will you have to deal with customers directly, which will save you time, stress, and frustration.

The convenience of Amazon Prime Shipping

Amazon has earned the trust of customers all over the world. Consumers have faith that the items they order will be delivered to them. They are also aware that they can send it back if necessary. To a great extent, this determines whether they will buy from you. If a customer has an Amazon Prime membership, they can have their purchases delivered for free. You’ll be putting yourself in a much better position than your competitors if you choose to use Amazon FBA. After all, everyone appreciates a good free shipping offer, so reaching out to these vendors through Amazon FBA is a major plus.

In addition to being able to process and ship orders more quickly, Amazon Prime Shipping also allows for greater convenience. As a result, customers can get your products to customers much more quickly than you can.

Greater potential to include “Buy Box” button

Amazon’s “Add to Basket” button, or “Buy Box,” is featured prominently in all product detail pages. If you and Amazon both sell the same item, Amazon will, of course, always have the Buy Box. If you use Amazon FBA, you have a good shot at getting the Buy Box because Amazon favors sellers who use FBA as one of their shipping options.

You’ll have more exposure and a higher Amazon ranking.

It’s no doubt that a higher ranking will increase the possibility of gaining sales. While items from vendors who don’t participate in FBA are priced collectively (price of the product plus shipping costs), using the FBA program will help your product rank higher on Amazon’s search results page. 

FBA storage and fulfillment fees

The next concern you may want to know is about fees for Amazon FBA. As mentioned, when you ship your items through FBA, you won’t have to worry about any of the extra costs. The only two fees that you have to worry about are the fulfillment and storage fees. 

In cases where there are insufficient funds in your Amazon account, these fees will be deducted from your balance or charged to your credit card.

what-is-amazon-fba
Amazon FBA storages and fees

Storage fees

Every month between the 7th and 15th, Amazon goes through its warehouses and clears out old inventory, and they will charge you a cost named monthly inventory storage fee. Cost is calculated on a per-unit basis, relative to the average daily volume of storage space required to house your inventory at the fulfillment center. 

Next, Amazon keeps track of items that have been stored in its warehouses for a year or more during the purge. If you do contain them, Amazon charges a long-term storage fee of $6.90 per cubic foot of storage used, or $0.15 per unit, for items kept in storage for 365 days or more. Although this is a long-term fee, it is also charged monthly.

In addition to these, there is also an inventory storage overage fee if your current inventory levels exceed your storage limits for a given month. The number of days that your storage requirements have been exceeded will determine the overage fee. Although this is not always the case and not many sellers pay this fee, Amazon wants you to be better on managing your inventory. If your goods take up more room than allowed in the warehouses, you will be charged $10 per cubic foot, per month.

Note that these charges may increase during peak shopping periods on Amazon in an effort to get vendors to get rid of unsold stock.

what-is-amazon-fba
Pay fees for FBA

FBA Fulfillment fees

When you ship your items through FBA, you won’t have to worry about any of the associated costs. Amazon’s fulfillment staff will instead select, pack, and ship your items. To offset these expenses, you’ll be charged FBA fulfillment fees based on the dimensions and weight of your product. 

Unlike storage fees, fulfillment fees are only charged after the order has been packed and ready for shipment. Pricing of this fee varies by item type, dimensions, and weight. For products enrolled in the FBA Small and Light or Multi-Channel fulfillment programs, the specifics, calculations, and rates of this fee may differ.

Conclusion

Through this article, Janbox has explained “What is Amazon FBA” and other relevant information. Visit the Amazon FBA website and read up on the sign-up process if you’re ready to give the FBA platform a try. Amazon does a good job of explaining its offering, with videos and other content, as well as an entire learning section, to help sellers become familiar with the service and establish their own online sales success. 

If you liked this article on Amazon seller tutorials, you may want to join our mailing list to receive future updates.