How does Amazon FBA work? In this article, we will take you through an introduction of selling on Amazon and using Amazon FBA though a step-by-step guide in which we also explain some important concepts where relevant. But first things first …
What is Amazon FBA?
Fulfillment By Amazon is a product from Amazon that allows you to leverage their global product delivery infrastructure to handle the shipment of your merchandise to your customers.
One of the biggest growing pains that small and growing businesses encounter is keeping up with the extremely demanding task of shipping products, dealing with customer complaints, and returns, and finding ever-increasing warehousing space.
Amazon already has systems in place to handle all of this and now they made it accessible to online seller hopefuls such as yourself. By letting someone else take care of these tasks, you can focus on running and growing your business. This is undoubtedly the biggest advantage of Amazon FBA.
The benefit for Amazon themselves is that they get more sellers and more buyers to use the Amazon platform and make money off the selling fees they charge sellers on their platform. It’s a win-win situation for all involved.
How selling on Amazon works
The first half of your journey being an Amazon FBA seller is actually selling on the Amazon marketplace. These steps will handle signing up for Amazon, listing your products, and calculating fees.
Create an Amazon seller account
First of all, you will need to create an Amazon seller account. If you already have an Amazon account, you can use this to set up a seller profile. Otherwise, you can create a completely new one if you want to keep them separate. It’s up to you.
Amazon has two seller plans that you can choose from:
- Professional Seller:
- $39.99 per month.
- Unlimited number of products and sales.
- Access to more seller tools.
- Can set your own shipping fees.
- Individual Seller:
- $0.99 per item you sell.
As you can see, the individual seller account will cost you less if you are going to sell less than 40 items per month. However, the professional seller account does give you more control and access to better selling tools.
You will need to provide some basic information about yourself and your business as well as your billing and payment information. The whole process shouldn’t take more than 10 minutes.
You can then access your Seller Central Dashboard by going to Amazon, logging in to your account, and selecting the “Sell” menu option.
List your products
Next up, you will need to create your product listings. Put some effort into doing this. The Amazon marketplace is a very competitive place and you will need to put in effort to compete with the other sellers.
Amazon will have certain required information based on the type of product you sell. If you sell a product that is already on Amazon, you can make the listing process much easier by looking for that product, clicking on “Sell this product,” and then create your listing with some information pre-filled in.
The description and product information areas will be left completely up to you. Be precise, honest, and use good language.
Be aware of any and all Amazon seller fees you might be subject to
A very important part of being a successful Amazon seller is being aware of all the fees you might need to pay. After all, how can you do the most basic of business functions, i.e. calculating profit/doing taxes, without knowing beforehand what you will get out of it?
Here is the entire Amazon seller fees schedule. Not all product categories have the same fees associated with them and certain product types, such as media products, have extra fees that aren’t present for other products.
How does Amazon FBA work?
Once you are an Amazon seller, you can then take advantage of the Amazon FBA platform to take your business to the next level. These steps will cover the entire process from the moment you register your products with Amazon FBA until they land in the customer’s hands.
Sign up for Amazon FBA
Once you have a seller account, you can sign up for Amazon FBA and manage which of your products you would like to be fulfilled through Amazon. You can also register any online store you might have separately from Amazon and have its sales or fulfilled through Amazon through their MCF (multi-channel fulfillment) program.
Here is a list of all the FBA related fees that you should be aware of as well as how size and weight of products factor into shipping rates.
Prep your products
You will need to properly prep your merchandise before shipping it to Amazon’s fulfillment centers. They will send you instructions on how to properly package and label your products. Every kind of product is slightly different so read the requirements in the link and watch the useful videos.
This is to make it easier for them to quickly organize and store your products. If they are not properly packaged, you will be subject to an “Unexpected handling fee.” However, this fee isn’t very high so don’t worry too much.
Send your products to Amazon
Unfortunately, as of yet, Amazon does not handle your product delivery to their Fulfillment Centers in any way. You will need to take care of this small part by yourself. What you can do is ship products to Amazon through one of their Partnered Carriers Options. You will need to create an account with the carriers and they will, in turn, communicate with the Amazon fulfillment center regarding deliveries.
We highly recommend that you sign up with one of these options as the shipping rates are nearly unbeatable. The whole point of Amazon FBA is to take unnecessary time-consuming efforts off your hands. They provide handy seller tools in your seller central dashboard to help you set this up and the discounts you receive for working with a partnered carrier makes it almost unbeatable.
Manage your inventory online
It would be pretty scary if you had no idea what was happening to your products once you dropped them off at the Amazon FBA center, right? Luckily Amazon provides fantastic tools to keep you informed on exactly what is happening with your merchandise and allow you to manage it to some extent.
For example, you can check how many products you have in stock, how many you have sold, get notified as soon as you make a sale, etc. This allows you to always make informed decisions based on when to restock, etc. Remember that if your inventory is in stock for more than a month you will need to pay warehousing fees and if they don’t sell for 6-months and then a full year you will be fined on each occasion.
This makes it very important that you carefully manage your inventory levels and Amazon makes it easy to do so.
When customers place orders
When visitors to Amazon buys one of your products, it will immediately start the process of being shipped to them. You don’t have to do anything except watch the dollars roll in!
If you have your own online store’s products fulfilled through Amazon, however, you will need to manually route these orders through to them using their online forms.
Amazon fulfills your sales
Once the warehouse gets a notification that one of your products have been sold, they will immediately pack, move, and ship it out to the buyer. In their own words “Amazon picks, packs, and ships them.”
Amazon supplies customers with a tracking number for their order. They also handle Prime orders by prioritizing them. Amazon has geared their warehouses and fulfillment process for speed and reliability and is one of the reasons they are simply the best.
Additionally, Amazon handles any customer service regarding the fulfillment of products. It’s on them if the product is late, delivered to the wrong address or damaged during shipping. They handle complaints and returns for anything unless it’s a specific problem with your product.
In the event that you want to liquidate your products, Amazon even handles the disposal of products. They give you a share of whatever they receive for them.
Amazon will automatically pay you for your sales. Their system will subtract any fees and shipping costs from the amount that was paid for your product by customers on the Amazon marketplace.
Through their useful online reporting tools, you can easily see where your money went and why you get what you get. It will be easy to track your sales and your growth to make good business decisions in the future.
And that’s it!
You now have a thorough answer to the question “how does Amazon FBA work?” That’s really all there is to it. The Amazon FBA platform is not so simple and straightforward by coincidence. The whole idea of Amazon FBA is to provide small-time sellers with the means to ship their products to customers all over the U.S. and the world!
For more help, tips, and information on everything Amazon, Amazon FBA, and getting your online e-commerce business up and running, read our other blog articles or join one of the Seller’s Playbook events near you.
Good luck and happy selling!