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Amazon Explained: What is Fulfilled by Amazon (FBA)?

Podean : Jun 6, 2019 7:32:49 AM

Amazon Explained amazon amazon FBA amazon advertising amazon fulfillment
Amazon Explained: What is Fulfilled by Amazon (FBA)?

Amazon offers a unique service that has helped create massive amounts of savings for its users since its launch in 2006. FBA, or Fulfillment by Amazon, has been a cost-effective and straightforward service provided by Amazon that offers warehouse and shipping services to Amazon sellers. Sellers who choose to use FBA can pay to have their inventory shipped to and stored in an official Amazon fulfillment center. The seller is still responsible for marketing and selling the product on Amazon, but from there, the Amazon fulfillment center takes care of essentially everything else – as the company often says “You sell it, we ship it.”

The start of FBA marked a groundbreaking turning point for the e-commerce seller – not only can online sellers save the overhead it takes to store their inventory in a warehouse, but they can also save time and resources by allowing Amazon to handle the shipping process, customer service, and return needs! 

Amazon has one of the most advanced fulfillment networks in the world, and as such, it is a great way to keep your Amazon business running smoothly while saving your valuable time so you can spend it on the things that you really want to be doing for your business.

FBA really is an incredible asset to many Amazon sellers. However, just like any service, it must be used strategically and tactfully. FBA is not a guaranteed money maker for your business; it is simply an option for your storing and shipping needs. It is not for everyone, but for many businesses, it is a godsend asset!How is it charged?

So you’re considering the use of FBA for your business? It can be exciting to imagine your business in a world where you don’t have to store, pack, or ship the products you sell. But don’t get ahead of yourself yet! The first thing you need to do is sit down and calculate the costs, compare that to your sales, or projected sales, and make an educated decision for your business on whether it is worth using or not. Pay attention to the numbers; after all, at some point, in order to be successful, you have to turn a profit that is capable of driving your business forward.

So here is a general outline on how Amazon charges for FBA services

 Monthly Inventory Fees

Amazon charges a monthly price per cubic foot for storage in their warehouse. The cost for inventory storage fees with FBA runs from $0.48-$0.69/cubic square foot (depending on the size and weight of the item.) But there’s a kicker, FBA charges more per month for storage during the holiday season. Through the months of October-December, the inventory storage fees run from $1.20-$2.40/cubic square foot.

Fulfillment Fees

This price includes the complete fulfillment of your orders from start to finish. The cost is structured around the weight of the item being sold. Below is the current listed price per weight class on Amazon.com.

Standard-size items

  • Small (10 oz or less) $2.41
  • Small (10+ to 16 oz) $2.48
  • Large (10 oz or less) $3.19
  • Large (10+ to 16 oz) $3.28
  • Large (1 lb to 2 lb) $4.76
  • Large (2 to 3 lb) $5.26
  • Large (3 to 21 lb) $5.26 + $0.38/lb above first 3 lb

Oversize

  • Small oversize (71 lb or less) $8.26 + $0.38/lb above first 2 lb
  • Medium oversize (151 lb or less) $9.79 + $0.39/lb above first 2 lb
  • Large oversize (151 lb or less) $75.78 + $0.79/lb above first 90 lb
  • Special oversize $137.32 + $0.91/lb. above first 90 lb

The prices above are inclusive to most things excluding clothing and lithium battery items and were current at April 2019.

All up-to-date Fulfillment Fees can be found on the Amazon Fulfillment Page

Common Issues

Sales Tax Filing

Amazon is infamously secretive of where your products are being stored and shipped from; this creates a sort of a grey area for filing state sales tax, many companies simply file sales tax in their home state, whereas others wait until the package is shipped, identify the state and file with that state. Regardless of your solution selling on FBA does require greater attention to this issue than would otherwise be necessary.

Getting Inventory to Amazon

Although FBA takes care of the entire fulfillment process for you, you are still responsible for delivering the product to the fulfillment center. This means that you must project your sales and ship the right amount of inventory to an FBA center as to not overpay for unneeded storage. You also must have your product shipping ready for Amazon to pull and ship. Essentially, however you ship your product to Amazon is how Amazon will send it to the customer (as far as the product itself goes.) This doesn’t have to be an issue, but it is a commonly overlooked aspect of using FBA, and therefore can create unforeseen issues.

Profitability

Like we mentioned earlier in this article, FBA is not a guaranteed cash-cow.Make sure you carefully keep an eye on your numbers and adjust your FBA use when necessary! FBA can be a wonderful tool to utilize in your business, but when used in the wrong situations it can altogether remove any profit margins that were available on your product.

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