What is Fulfillment by Amazon (FBA)?: The Ultimate Guide

Posted on 25 April 2022

Increasingly, buyers make purchases online rather than going to a brick-and-mortar store. In fact, in 2020, over two billion people bought goods and services online.

The high street is by no means dead, but this shift does mean that there are more opportunities for sellers to leverage online channels. Particularly, Fulfilment by Amazon (or FBA) is an attractive option for businesses wanting to take advantage of this trend.

Amazon FBA is a great way to grow your business, especially internationally. It helps you reach a global audience, so more people can get access to your products.

In this guide, you’ll learn more about Amazon FBA, how it works, as well as its benefits and disadvantages. By the end, you’ll have an overview of the topic and better understand whether it’s the right move for your business.

What is Amazon FBA?: Definition and Meaning

Fulfilment by Amazon (or FBA) is where Amazon looks after your items’ storage, packing, and shipping. They take care of a lot of the heavy lifting, as Amazon team members will package and ship the products themselves, and your goods will be stored in Amazon warehouses until they’re sold.

This is one of three options you have when selling a product on Amazon. You can either ship the product yourself or use FBA and get Amazon to ship it for you.

The service automates order fulfilment, and Amazon also deals with returns and refunds. Essentially, it takes a lot of the hard work of selling on Amazon and eases your workload while helping you scale and grow.

How Does Amazon FBA Work

The Amazon FBA process is simple and effective. Here’s how it works:

  1. Sellers either make the products themselves or acquire them elsewhere.
  2. They then send their products to an Amazon warehouse.
  3. The products are stored there until a customer makes a purchase.
  4. Once a purchase has been made, Amazon team members pack and ship the items to the customer’s address.
  5. If the customer returns the item or wants a refund, Amazon deals with this too.
  6. Amazon updates your inventory.
  7. Profits are transferred into your account every two weeks (minus fees).

While Amazon takes care of many stages in the process, you’re still responsible for other areas. For example, sellers must:

What is the Difference Between FBA and Seller Fulfilled Prime?

Compared to Amazon FBA, where Amazon stores, packs, and ships your products, Seller Fulfilled Prime involves sellers taking on this responsibility themselves. You can take advantage of the Amazon Prime brand, but everything else is up to you. This includes handling your returns and refunds.

Not all sellers can opt in to this service, however. You have to prove that you can adhere to strict Prime shipping guidelines. For example, you need an order cancellation rate of under 0.5 per cent.

Choosing Seller Fulfilled Prime over Amazon FBA does require a lot more work. But it can be an advantageous option for some businesses. It works best for companies with low-cost or oversized items. These items have hefty storage fees through Amazon FBA, so it can help reduce some of these costs.

Benefits of Amazon FBA

Eligible for Amazon Prime

Amazon Prime has set new expectations for how quickly customers expect their products to arrive at their doorstep. If your products are eligible for Prime delivery, that’s an added incentive for people to choose you over your competitors. This, in turn, can positively impact the number of items you sell.

As an Amazon FBA seller, you automatically qualify for Prime delivery. This is a bonus and means your customers can get their items within mere days of ordering them.

Amazon Customer Service Team

When you become an Amazon FBA seller, Amazon becomes the point of contact for your customers. That means they’ll deal with all enquiries 24/7 and process returns and refunds, for example. This is a significant benefit if you don’t have the resources or time for your customer support.

Reduced Shipping Costs

Amazon has established relationships with major shipping companies. As a result of these contracts, this often means that your shipping costs will be reduced. Even though you have to pay a fee for Amazon FBA, it works out as being a worthwhile investment overall.

Grow Your Business

Since Amazon takes care of your storage, packing and shipping, it becomes easier to expand your business internationally. Amazon ships products worldwide, so becoming an Amazon FBA seller means you can take your first steps into international expansion without worrying about fulfilment.

Fulfilment is Taken Care Of

With Amazon FBA, Amazon takes care of a lot of the workload involved with selling your products on their platform. This can allow more time to focus on other areas, such as developing your products and marketing them. Although there is a fee involved, a lot of the heavy lifting is taken off your shoulders.

Pay-as-You-Go Pricing

If you choose an Individual selling plan, this is a pay-as-you-go service, which is very cost-effective. It means that you’ll only pay fees to Amazon if you sell items. That’s less money wasted on a monthly fee, as you only pay for what you use. However, if you’d rather pay a monthly fee, there is a Professional selling plan available.

Types of Amazon Seller Services

FBA Small and Light

If customers use your products frequently, with FBA Subscribe and Save, they can sign up for regular deliveries. They get a discount on their deliveries, which is an effective way to retain customers in the long term.

FBA Subscribe and Save

If customers use your products frequently, with FBA Subscribe and Save, they can sign up for regular deliveries. They get a discount on their deliveries, which is an effective way to retain customers in the long term.

FBA Pan European

Have you got customers in Europe? If so, Amazon’s FBA Pan European service is likely to be an attractive option for your business. Your products will be stored in fulfilment centres in a range of European countries. Then, when your customers nearby order from you, it’ll take less time for their package to arrive.

FBA Export

FBA Export is perfect for businesses looking to expand internationally. Consumers can buy products from Amazon.co.uk and deliver them to over 80 countries worldwide. There’s no additional charge, and you can bypass the usual complexities of selling internationally, as everything is sorted for you.

Let’s help you expand into new global markets

Considerations for Amazon FBA

Amazon FBA is a worthwhile option for many businesses, but there are some important considerations to think about first.

Low-Cost Items

If you sell low-cost items, Amazon FBA may not be worth it. The costs of Amazon’s services may not make you a good enough profit margin. If you’re not doubling your money after expenses, it may be worth considering different options.

Restock Delays

Restock delays can have a significant impact on your inventory levels and sales. However, if you choose a service like Zee, you can avoid any issues. We partner with global air carriers, as air freight is the fastest way to get your supply to Amazon fulfilment centres. Learn more about our FBA air freight solutions.

Returns

Amazon’s customer service and returns policy are great for consumers, as it means they can return items quickly and efficiently. But this can mean that you get more returns if they aren’t happy with your products. Make sure your product has been tested and is ready for sale before using Amazon FBA.

Stuck Shipments

Sometimes, your FBA shipment might get stuck in customs. This can be for several reasons, but often it’s because you don’t have an IOR. With a service like Zee, we act as your IOR. We have a proven track record of getting shipments unstuck with a quick turnaround. Learn more about our stuck shipment solutions to avoid Amazon FBA delays.

Storage Fees

If your products sell well, then storage fees from Amazon make perfect sense. But if you’re struggling to get items out of the warehouse, then storage fees can rack up over time. However, you can always send products back to your warehouse or facility in the worst-case scenario.

Product Requirements

Amazon expects that your products are properly packaged before they store, pack and ship them from their warehouse. For example, they need appropriate labelling. Ensure you can meet these requirements before paying for this service.

Sales Tax

Amazon has warehouses all over the world. This can make sorting out your taxes complex. With a service like Zee, you can be confident that import duties and taxes are taken care of for you. Learn more about our FBA compliance solutions.

Fees

Even if you aren’t making profits, you’ll still have to pay fees for storage. It’s important to consider this possibility before taking out these services. You need to be confident that you have enough funds to pay the fees no matter what.

Final Thoughts

Amazon FBA is an effective way for many businesses to save time and money on fulfilment and reach new international audiences. When done right, you can optimise fulfilment and scale your business.

However, you can still run into issues like stuck shipments and restock delays. To make the process as stress-free as possible, use a service like Zee.

Explore Zee Amazon FBA Services