With the “Fulfillment by Amazon” (FBA) service, the world’s largest marketplace offers participating trading companies an additional service for storage and shipping. In this article, read who FBA is worthwhile for, how the service works and what costs can be expected.
Table of contents:
- What exactly is Fulfillment by Amazon (FBA)?
- The advantages of FBA
- This is how you can use FBA
- That costs FBA
- Start your own business with FBA?
- Get Amazon invoices faster with GetMyInvoices
The most common answers to questions about Amazon FBA:
FBA seller is a trading company that has its products shipped by Amazon.
The costs vary depending on the storage quantities and how frequently the service is used. There are monthly storage costs (calculated by cubic meters) as well as shipping fees per unit shipped.
This question cannot be answered across the board. Whether it is worth starting a business exclusively with FBA depends on many factors. For example: margin, quantities, return rate: an accurate calculation is essential.
When shopping online, neither customers nor retail companies can ignore Amazon. With over 480 million online views per month (in Germany alone!), Amazon is the largest e-commerce platform in this country. Even well-known brands and large retail companies use Amazon’s marketplace to sell there.
Amazon has put together a whole range of services for sellers around its marketplace. One of them is “Fulfillment by Amazon” (FBA).
What exactly is Fulfillment by Amazon (FBA)?
With its “Fulfillment by Amazon” (FBA) program, Amazon takes care of the shipping of products that customers buy on the marketplace from third-party retailers.
The trading companies do not store their goods at their company location or in their own warehouse, but rather access inventory that is located in Amazon’s logistics centers.
When an order arrives, Amazon employees assemble and package the products. After this picking, the packages go on their journey via Amazon Logistics.
The advantages of FBA
Using FBA offers trading companies several advantages:
- Time saving: Instead of picking an order yourself and getting it ready for shipping, Amazon takes care of it. This leaves more time that can be invested in marketing, customer service or other tasks.
- No own warehouse necessary or lower storage costs: Companies that ship via their own shop or use other marketplaces will probably continue to manage some of their goods in their own warehouse at the company location. However, the capacity can be chosen smaller because deliveries from manufacturers or intermediaries can also be made directly to Amazon. This means that overall storage costs decrease.
- Participation in Prime: With “Prime”, Amazon has launched a customer loyalty program that offers members a whole range of benefits. One of these is the particularly fast receipt of items marked with the Prime symbol on the marketplace. By using FBA, the products are eligible for Prime and also receive this feature.
This is how you can use FBA
The FBA program is only available to registered traders. The prerequisite is an Amazon seller account, which you have in the Amazon Seller Central , the central contact point for all sellers. All you need is a few details about your company. Once registered, you start listing your products and then use FBA to store the goods.
That costs FBA
Understandably, Amazon does not offer its services for free. If the company should also take over shipping, additional fees will be charged, which will be calculated on top of the remuneration that is already due when selling via Amazon. The costs for FBA consist of three items:
- A flat shipping fee depending on the size and weight per unit shipped.
- The monthly storage fee for the products delivered to Amazon. Amazon calculates this based on the cubic meters used in the warehouse.
- Additional fees for optional services you may book. This includes, for example, the processing of returns, the disposal of products or special packaging requests.
Amazon regularly publishes the exact fees and their scale in very comprehensive lists. Since Amazon’s storage capacity is not infinite, prices change seasonally. If Amazon itself needs more storage space for the Christmas business, storage will become more expensive. Amazon provides information about this in the documents for FBA.
To make it easier for sellers to decide whether shipping via FBA is worthwhile for them and how the costs compare to shipping themselves, Amazon provides its own calculator. You can also try out the “Revenue Calculator” with guest access without a merchant account. The tool is self-explanatory as it guides you through the entire process: from entering the dimensions and weight of a product to listing the costs incurred when selling and shipping via the platform.
In addition, consulting agencies for retailers often also offer such calculators. The actual overview can always be seen by looking at Seller Central.
Start your own business with FBA?
FBA can be the basis for a business model that is called drop shipping in business administration. Selling via FBA is a variation of this dropshipping model.
The basic idea is to buy goods cheaply directly from a manufacturer or wholesaler, then have them stored on Amazon and sold via the marketplace. The products therefore never reach the trading company’s location.
Since no own warehouse is required, the business model can be profitable, especially since Amazon has a huge customer base. The following speaks against dropshipping on Amazon compared to a traditional model:
- The fees due are charged to the margin.
- No development of real customer relationships: Customers shop on Amazon and receive the order in a box with the Amazon logo. It is difficult to build a reputation as a trading company or brand in this way.
