Fulfillment by Amazon (FBA) – Amazon FBA Business Basics

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Fulfillment by Amazon (FBA) is a storage and shipping service that Amazon offers to help business owners sell their products. Businesses ship their products in to Amazon’s fulfillment centres, which are specifically designed for FBA services. Amazon then handles receiving, picking, and packing the products in the center before shipping them to the customer. Post-sales processes like returns, refunds, and customer service are also taken care of.

What aspects can the business-owner control?

With every guide focusing only on how much FBA takes care of for you, it is difficult to know what you remain responsible for. There are three important aspects of selling through FBA that you are in complete control of:

Picking what products you’ll be selling

Since Amazon offers a wide variety of products to purchase, you can sell just about anything you want. What’s important here is that you make sure to sell products that sell fast so that you don’t end up with slow moving products.

Keeping your inventory well-stocked

Once you sign up for Fulfillment by Amazon, you’ll be allowed to store your products in Amazon’s fulfillment centres. However, it is your job to keep an eye on the stock you’ve stored and replenish it so you can avoid a stockout.

Marketing your products

FBA on its own does not offer any advertising services, but Amazon has a separate advertising program, Sponsored Products, to promote products that are being sold on Amazon. You can either use this service, or take care of marketing your products and attracting potential customers on your own. 

What benefits does FBA give you?

Fulfillment by Amazon can do the following for your business:

Handle your fulfillment process

Order fulfillment consists of all the processes necessary to complete a customer’s order, like

  • Picking and sorting products in the warehouse

  • Packing them appropriately

  • Shipping them to the customer

  • Ongoing customer support

  • Package tracking

  • Dealing with returns

  • Managing refunds 

Managing all of these processes by yourself would require that you shell out a lot of money in terms of capital and put in the necessary time and effort. Fulfillment by Amazon is not as capital-intensive. All you have to do is send your inventory to the fulfillment centres. You can get your entire order fulfillment processes taken care of for you, from receiving your customer’s orders to delivering the right products to them. This means fewer upfront costs to doing business, which is especially good for smaller companies looking to expand.

Manage your returns

Handling returns isn’t easy. You might have to coordinate with frustrated customers, figure out why they are returning products in the first place and check if it’s for a valid reason. If it is, it’s up to you to ensure it doesn’t happen again. You have to pay the cost of a replacement or refund and notify the customer after every status update. If the job is too big for you alone, you will also need to employ extra staff. But with FBA, Amazon employees can receive these return requests, replace the items, and keep your customer informed during the process.

Reduce shipping costs

Typically, paying shipping companies to deliver products is expensive. If you opt to charge your customers for shipping, you may drive some of them away. And if you don’t do either of these, then you are restricting your sales. FBA not only gives you access to Prime delivery service, but the costs are reduced since Amazon has partnered with several of the world’s top shipping companies.

Eliminates the need for a warehouse

Every business that sells products needs a warehouse to store them in. Some choose to rent or purchase their own, but doing this can be expensive since you would not only have to pay for the space, but also pay employees to manage it. Even if you’ve set aside a budget for that, it can be difficult to determine how much space you need. You risk getting a warehouse that is too large or too small. To avoid these hassles, Fulfillment by Amazon offers their fulfillment centres. You are given as much space as you need to store your products, and overhead costs are included in an affordable monthly inventory fee.

On top of all this, high-performing businesses with fast-selling products are rewarded with unlimited storage space.

Sell worldwide

If an independent business was to expand internationally, they would have to set aside a huge budget, time, and resources that are necessary to start selling in a different country. Even though expanding is a good idea for most businesses, not all can afford it and even if they can, it’s not always certain that the attempt would be successful.There is also a risk that the venture would be unsuccessful. With all of these challenges, many businesses simply avoid selling internationally. FBA fulfillment centres are set up all over the world, so there is less to lose. You could expand to a global market at your own pace with fewer financial consequences if it doesn’t work out.

Is Amazon FBA right for my business?

Before you decide to switch to Fulfillment by Amazon, it’s important that you figure out if it’s the right decision for your business. Here are some questions that will help you decide if FBA is right for you:

How many sales orders do you receive?

If you’ve only started your business recently, then you are more likely to be able to handle your customer’s orders on your own. In this case, the cost of FBA may not be worth it. However, the bigger your business gets, the more recognition it starts to gain, which in turn increases the amount of sales orders you’ll start to receive every month. Once you reach around 40 to 50 orders a month, it may become difficult to manage all these orders on your own. This is when you should start using FBA.

Do you have enough employees?

If your business sells trending or seasonal products, then there are periods of unusually high demand. In times like these, you may not have enough employees to help you manage all the orders you receive. It would be a good idea to start using FBA, since Amazon employees handle packing and delivering orders to your customers.

What type of products do you sell?

When you’re contemplating using Fulfillment by Amazon, keep in mind that it’s best if you sell products that are small in size and pricey, so that you don’t round up skyrocketing FBA fees. This is because it costs a lot to ship products that are larger and weigh more, and FBA fees are determined by size categories. Furthermore, if you’re shipping products that are large, heavy, and inexpensive, then you may not make enough profit to justify using FBA. FBA is ideal for companies that sell small items with higher retail prices.

How does Amazon FBA work?

Let’s break the FBA process down into steps:

Step 1:

Start by setting up a Selling on Amazon account. This will allow you to sell your products on Amazon. If you already have an account, then include Fulfillment by Amazon to your current account.

Step 2:

Add all the products from your inventory to Amazon’s catalog. You can do this by adding your products either individually, in groups, or by integrating your inventory management software with Amazon’s API.

Step 3:

Once you’ve added your products, pack them well so they can be safely shipped to Amazon’s fulfillment centres. Create shipping plans along with Amazon’s partnered carriers so you can be charged less.

Step 4:

Your products are now ready to be purchased! Amazon takes care of receiving orders, packing them again with Amazon’s brand packaging, and then shipping them to your customers. They also handle all inquiries with their 24/7 customer support service.

 

Overall, Amazon’s FBA program is a comprehensive fulfillment program that can help almost all businesses sell their products and turn a profit. Take a look at the amount of sales orders you receive, the number of employees you have, and the type of products you sell to figure out if Fulfillment by Amazon would be a good fit for you.

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