Why Amazon FBA is the right choice for Your business

Using Amazon FBA is relatively stress-free, but it’s not perfect. This means that your choice of whether to use FBA as your fulfillment method is not straightforward. On one hand, you’ll benefit from using a marketplace which receives millions of orders. However, if you sell bulky goods, or items with higher return rates, you’ll find that it can be quite awkward.

Today, we are going to be looking at exactly IF, and Why amazon fba is the right chice for your business. It’s a super-useful article, so feel free to bring a pen along and make some notes.

What is Amazon FBA?

Amazon FBA is a complete solution for sellers. This is a service where Amazon stores your inventory, packages it up and ships to customers without you having to get involved. In addition to this, Amazon provide customer service and handle any returns queries. All you do, is pay the FBA fees. You need a professional Amazon seller account in order to use the FBA program.

After you’ve signed up, all you need to do is ship your items to the Amazon Fulfillment centers, but this is also incredibly easy, as Amazon give you the labels pre-paid!

The reason that FBA is so popular amongst sellers, is the fact that their listings will qualify for the ‘Amazon Prime badge’. This means they customers can purchase your item, shipping is free and they’ll get it next day.

We’ve written a lot on the Amazon Prime Badge, and this goes hand in hand with the Amazon Buy Box. If you don’t use FBA program, you won’t be able to get the Amazon Prime Badge on your listing and you’ll struggle for the buy box.

Amazon Fulfillment Fees

There are various types of Fees that comes with Amazon FBA. It’s important to understand all of these, because although the fees do look quite hefty, you need to understand what you receive in exchange for them. I’ve broken them down so you can see these in depth.

FBA Fees

These are the fees for picking and packing your items. This fee is charged per unit and includes quite a labour intensive process. From grabbing your item from their warehouse space, packing it up, labelling it and shipping it. This fee is charged per unit, and is determined individually by the items size, weight and category that you sell in.

That’s right, you may end up paying more fees for one item compared to another, even if they sold for the same price. There’s a great calculator here.

FBA Storage fees

Although you can send unlimited amounts of stock into Amazon fulfillment centres, Amazon sellers have to pay to store their items. Amazon charge monthly inventory storage fees based upon the size of your items & the amount of space they consume. These fees are dynamic, and vary depending on the time of the year & the category that you sell on amazon.

It’s a little like supply and demand, where they increase the fees around Christmas etc, but that’s fair enough as they do employ more staff to deal with the demand.

The price based on cubic feet per month varies from £0.43 to £1, depending on the month. December being the highest rate.

Long Term storage fees

If you have aged stock on the Amazon FBA program that isn’t selling frequently, you will be charged a long-term storage fee. This makes sense as although the fulfilment centers are huge, they don’t want to waste valuable space on items that don’t sell… because they’re not getting their fees income.

If your item hasn’t sold in 365 days after being checked in, you’ll be charged a fee. If you stock a lot of the same item and replenish frequently, don’t worry as the Amazon marketplace deploys a First In, First Out policy to determine the age of the stock.

You’ll most likely be cutting your losses within the 365 day period though, so this may not be something that you ever end up paying.

Removal Order Fees

If you do end up removing an item from your Amazon marketplace, cutting your losses before you are charged long term storage fees maybe, you’ll be charged a fee.

This is a removal order fee, and you’re paying for Amazon to essentially ship the items back to you. This will include a staff member picking and packing, and labelling your item. Then, the driver has to deliver your item back to your chosen address.

The fees vary depending on the dimensions of your item. Depending on the value of the item, you may just be better off asking Amazon to dispose of your item.

Amazon FBA Disposal Order Fee

If you have an item that isn’t selling and it’s not cost efficient to return it back to yourself, you can ask Amazon to dispose of it. This will ultimately be a total loss on this instance, but it will stop you from racking up fees for long term storage, hoping it sells. There is a fee for this service.

When not to sell through Amazon FBA

There are items that undoubtedly aren’t suited to selling through FBA. If you have really expensive items that you couldn’t afford to handle a return on, it may be better suited to use another platform like eBay or your own Shopify site. Let’s use a GPU as an example, if a customer purchases this but then returns it, you’re going to be seeing huge losses.

You don’t really want to be selling this on Amazon, and besides, Amazon will also most likely be selling this anyway and will dominate your listing. If you have one-off items like this, it’s good to stick to eBay in my opinion.

Another thing that you may want to avoid is bulkier items. This will take up more of your storage allowance and ultimately have more fulfillment costs. You can stick to FBM or something else for this, if you need to sell on Amazon.

Easy-to-understand costs

We’ve already explained the main fees that you’ll be paying on Amazon when using FBA. The good thing is that Amazon explain all of their fees and they’re completely transparent. Yes, they aren’t the lowest fees in comparison to other platforms, but the traffic that Amazon will bring your listings definitely makes up for this.

What would Amazon FBA cost your business?

Registering for your account is completely free. From point of registration, you have the option to pay a monthly fee for your storefront, or pay per item.

If you choose to pay monthly for your professional Amazon seller account, you’ll be charged £25 per month.

As an individual seller, you’ll pay £0.75 every time that you sell an item in addition to referral fees.

Most sellers pay the £25 per month option, as it allows you to scale immediately, without worrying about paying any unexpected fees.

Benefits of selling with Amazon FBA

Without a doubt, the biggest benefit of selling on Amazon, is the coverage that you’ll get. There are literally billions of customer that browse Amazon on a daily basis, there is no better storefront to have your item listed.

Another benefit is the fact that Amazon will be completing most of the hard work for you. This means that you can utilize your time elsewhere, whether it be doing other business tasks or simply having some free time!

FBA vs FBM – what to choose?

FBA is where Amazon’s fulfillment centers will deal with the packing of the item, so FBA sellers have nothing to do after they’ve shipped the item into Amazon.

FBM is where third party sellers, such as yourself potentially, will ship the listings. This means you package the item, deal with customer service and pay amazon their fees.

I prefer the FBA platform and haven’t once considered the FBM merchant fulfilled network side of Amazon. I like the fact that my items enter the amazon warehouse and then I don’t have to ship the items, infact I don’t have to deal with them at all.

It will depend what suits your business model better, but FBA services are definitely the most popular method. When most online sellers compare fba, they notice there are significant benefits to fulfillment by amazon and choose that one.

Shipping costs may also be more if you use FBM, than if you combine the parcel and send it via Amazon FBA.

Preparing and labeling the products

If you do choose to operate an Amazon FBA business, you’ll be responsible for preparing, labelling and shipping the products to Amazon’s warehouses. This sounds like hard work, and in all honesty, it depends on the amount of items you have.

If you have a label printer, which is one of my recommended tools to grab, it’ll make things a lot easier. Then you can simply stick them to the outer box, covering the original SKU Label and box the items up.

One of my FBA Tips is to make sure that you track the cost of your labels, because when you grow you’ll be getting through a good amount of these. At least that means your online business is working, but it’s important that you aren’t losing more money than you anticipate on supplies.

Once you have labelled the items up, you can then schedule your UPS collection. Remember to use the partnered programme, where you will pay reduced postage fees. You can also get a free collection.

What is the Amazon FBA return policy?

This is one of the cons about Amazon FBA. Customer returns. However, in order to be able to offer the service that they do, returns is a huge part of Amazon’s policy. This increases customer experience, customer satisfaction and helps them to offer rapid delivery times for customers.

The problem is, when you get a return, it will affect your profit margin. When you do get a return it will also be quite frustrating, especially if it’s an expensive item.

However, that’s not the end of the road for the item in question though. The Amazon FBA service includes them inspecting the returns that are received, and they will assess if this item can be re-sold on their platform. If so, it’s placed back on the market. Amazon customers purchase as though it’s brand new in it’s original branded packaging.

If not, you can get this returned and re-sell on eBay.

The standard return timeframe for all Amazon products (including FBA) is 30 days after receiving the item.

More storage space

If you’re a seller that’s currently using eBay or another platform, you’ll likely be using your own Garage or storage locker. Not only can you take your online store worldwide with the global fulfillment giant Amazon, but you can also utilise their storage space.

This may mean that your partner gets the spare room back, or you can finally stop paying the ludicrous monthly payments for a storage unit. Although it’s a cost, many amazon sellers see their profit margins increase purely because of the power and reach of the amazon platform.

The FBA Small and Light program

If you’re a seller of smaller items, you might be eligible to convert your product listings to Small and Light, which lowers your overall costs. If you sell products that are within the dimensions for the FBA Small and Light UK program your fees will be less. This is great for many sellers, who will be able to ship their own products to Amazon warehouses and sell more items.

It’s great for amazon sellers too. It means we can look for cheaper, smaller items and make the business decision of whether to stock these in your Amazon FBA store.

Fulfillment packaging typeDimensionsShipping weight Maximum (grams)
Price in GBP (£)
Small envelope≤ 20 X 15 X 1 cm80g£0.65
Standard envelope≤ 33 X 23 X 2.5 cm60g£0.86
Standard envelope≤ 33 X 23 X 2.5 cm61-210g£1.00
Large envelope≤33 x 23 x 4 cm225g£1.69
Extra large envelope≤ 33 x 23 x 6 cm225g£1.76
Small parcel≤ 35 x 25 x 12 cm400g£2.51

How much does an Amazon FBA seller make?

Selling on Amazon isn’t a fixed journey. When you become a seller, your profit will be linear to the effort that you put into it. It’s not an easy way to make money, but it’s a way to make easy money. Providing you have a good starting fund to purchase your stock, you should be able to scale and make a good living from your amazon fba account.

Selling on Amazon is becoming increasingly popular, and it’s relatively low risk providing you use the relevant data when purchasing your stock. Within no time, you can have a legitimate business running, potentially employing staff to purchase your stock.

Should You Use Amazon FBA?

I think that any aspiring individual that wants to earn money online, has no reason not to start Amazon FBA. An Amazon business might sound a little strange at first, but it’s honestly a good way to earn money.

I know lots of people that started with Retail Arbitrage, moving on to becoming a Wholesaler working with some well known distributors. Although wholesale is a completely different article altogether, it shows you the possibility that this comes with.

I don’t earn money from Amazon for recommending people to start Amazon FBA. I want to be completely transparent and advise that anyone can get started selling on amazon.

The question; Will I be seeing you open your own Amazon Business? Let me know in the comments below.

Author
Tom P
Hi, I'm Tom Paddock! An Amazon & eBay seller, who has helped over 10,000 people start their own online business. I provide cutting-edge techniques to help sellers with Online Arbitrage, Retail Arbitrage & Wholesale on Amazon.

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