FBA explained!

This blog post covers what distinguishes Amazon giant (besides huge annual turnover and the experience in the online trading) among other e-commerce websites, and makes it attractive to millions of entrepreneurs all over the world. I am talking about Fulfillment by Amazon Program (FBA). Many of the questions and concerns that arise before starting business on Amazon are debunked as soon as it becomes clear what FBA is.

A little bit of statistics

  • Over 2 million people use Amazon to sell their products
  • Sales of third parties (not of the Amazon itself) make up more than 45% of annual sales (as of 2015)
  • In 2014 third party sellers sold more than 1 billion. Items on Amazon
  • During 2014 the number of merchants using FBA warehouse program increased to 65%
  • Entrepreneurs from 185 countries, representing 480 000 cities across the world sell their products on Amazon

Steady growth in number of sellers on Amazon confirms the persistently high interest in this site. And Fulfillment by Amazon program plays a major role in this increase.

What is Fulfillment by Amazon

Often on the product page, next to the name of the seller, you can see the inscription Fulfilled by Amazon. This means that the seller uses an additional service, greatly simplifying his life, as well as customers’. Products involved in the FBA program are subject to special conditions of delivery. For example, free shipping on orders of at least $35.

FBA is a special paid service for sellers that lets you use Amazon storage capacity, shipping services and support services. This program can be selected for one or two, or all of your products. Your selected items will be stored at the modern warehouses on the shelves with the products sold by Amazon itself.

These warehouses are located all across the US, and their number is constantly increasing. This allows companies to reduce the time and cost of delivery. In addition to storage, the service provides labeling, delivery of goods to customers, the returning of goods that did not fit. Delivery is carried out by means of own fleet of ground transportation or with the assistance of UPS and FedEx Services. There are plans to start delivering by drones, and it is quite a real project, despite the way it sounds.

How does Fulfillment by Amazon work?

Everything is simple. You order a delivery from supplier of your choice directly to the warehouse of Fulfillment by Amazon program. At the same time, it will be necessary to ask supplier to label the products with special stickers provided to you by FBA service online. These stickers will help your product to be identified and taken to the warehouse.

Amazon warehouses work like a clock: all processes are automated, product loss never happens. The product itself and the cells where it is stored are marked with special codes. Despite huge storage areas, all products are located promptly.You, as a seller, just have to monitor the number of products in your online account and depending on sales, timely replenish your inventory.

With Amazon FBA your main job is to get stickers ready, regulate your pricing policies, promote goods on the site using Amazon marketing tools, and answer the questions of potential buyers, and, of course, source and research for new products to sell. At the same time Amazon will deliver your orders, taking away all the related headache. And rest assured – everything will be done at the highest level, even with the provision of additional services: combining orders into one delivery, managing returns. Objectives of Amazon are to reduce the delivery time even more, without losing the quality of services.

The most important thing in this whole process is that consumers do not even think about whose goods they purchase: Amazon products or a third party sellers’, whose representative may live in any part of the world. You have probably noticed that all the pages follow the same style and the name of the seller does not stand out. At the same time the credibility of the service is so great, that third party products are sold as successfully asAmazon products.

How much does it cost?

Of course, such a service cannot be free. Despite the extra fee retained by the FBA program, it is being used by roughly 80% of Amazon sellers.

FBA fees are based on and include:

  • The calculation takes into account the weight of the product (which is why we recommended to sell light products)
  • Storage costs (are calculated based on the product dimensions)
  • Packaging fees
  • Delivery costs

To accurately calculate and estimate your FBA fees you can use AZ Mobile, an advanced free fba fee calculator for iPhone or Android.

Facts:

  • The cost of the monthly storage products on Amazon warehouse (for goods of standard size):
    • –   From January to September – $0.51 per cubic foot
    • –   From October to December – $0.68 per cubic foot
  • The cost of order processing for the standard sized product: $1.0 per order
  • Packaging of goods of standard size: $1.04 for goods worth up to $300

What is standard-sized product in Amazon’s understanding?

  • Weight should not exceed 20 lb. (Slightly greater than 9 kg)
  • The size of the long side should not exceed 18″ (about 45.7 cm)
  • The size of the short side should be 14″ or less (approximately 35,5 cm)
  • Height of 8″ or less (approximately 20cm)

For everything that does not fit into standard sizes you will be charged special rates that are generally higher. Therefore, when choosing a product to sell, pay attention to its size and weight of the package.

If you are shipping large amounts via Amazon FBA, then be sure to check out this calculator here, which lets you calculate your freight rates according to your respective Amazon warehouse

FBA benefits for you and your customers

Does it make sense to pay additional contributions to Amazon, getting involved in Amazon’s FBA program?

  1. With FBA there is no necessity to interact with end consumers directly, or maintanining warehouses across the country. Everything is handled by Amazon: storage, delivery, returns management.
  2. Access to the Amazon Prime Membership program (guarantees free delivery within two days for premium customers).
  3. Super Saving Shipping, which allows free delivery for orders worth $35 or more. This makes your product more attractive to customers, compared to sellers not using FBA.
  4. Easy access to international customers, for whom FBA products are more attractive thanks to special delivery conditions.
  5. The ability to use FBA services for sales on eBay or through your own website.

Hope this blog post turned out to be helpful for those considering or just starting out on Amazon. Stay tuned to azgizmo.com for more blog posts and great new products for your product research and tracking.