If you plan on selling high-volume products on Amazon, you may want to choose the Fulfillment by Amazon shipping plan. Under the FBA process, you send your inventory to Amazon. Upon each order, Amazon stores, picks, packs, and ships your stock from its warehouse.
It can save you a significant amount of time and reduce the burdens of storing and shipping your product. However, that doesn’t automatically make FBA the right choice for every new Amazon seller, so we’ve outlined a few of the most important things you need to know before starting the FBA process.
Calculating Your Amazon FBA Costs
In many ways, FBA is the most convenient shipping option, though there are a few fees you should be aware of. For example, FBA’s fulfillment fee is a flat, per-unit fee based on the size and weight of each item (e.g., standard or oversized).
You’ll also be responsible for a monthly inventory storage fee, which is based on the average amount of space your inventory takes up in the warehouse. This volume is calculated when inventory is fully packaged and ready to ship, according to Amazon FBA requirements.
Before you choose, you can use Viral Launch’s Amazon FBA Calculator to estimate fulfillment fees for listed items that are similar to your product. You can compare them to the costs of fulfilling orders yourself by using Amazon’s FBA Revenue Calculator.
Weighing FBA Pros and Cons
There’s a certain amount of convenience that comes with having Amazon keep, package, and ship your inventory to your customers on your behalf. For example, when you opt into the FBA process, you instantly gain access to lower overall shipping rates, hands-off purchase fulfillment, and several other benefits. You’ll also get to:
- Make your products Prime: An analysis of buyer shopping patterns for Amazon revealed that Prime members spend about twice as much as nonmembers (an annual average of $1,400 versus $600, respectively). When you sign up for Amazon FBA, your products automatically become part of the Prime marketplace.
- Win the Buy Box more often: When buyers search for an item that multiple sellers have available, most purchase the item from the Buy Box. Sellers that sign up for FBA have a higher chance of winning the Buy Box than other sellers, even if their items have a slightly higher price tag.
- Fulfill orders from other websites: Many Amazon sellers have stores on more than just Amazon’s marketplace. If you do, then multichannel fulfillment may be the greatest benefit to choosing FBA. You can take advantage of Amazon’s lower-than-average shipping rates to fulfill orders from your own website and other e-commerce sites.
These advantages (among others) can make running your e-commerce business a breeze, but FBA also comes with a few cons. For instance, the fees and fulfillment costs associated with the FBA process include having your items shipped to the fulfillment center, and you don’t get to choose the warehouse. Consider that you’ll also have to:
- Take a step back from inventory: Having Amazon fulfill your orders also means giving up much of your physical access to your products. This may make it more challenging to track specific items and orders, and you’ll have to rely on Amazon to resolve any issues involving inventory or order fulfillment.
- Keep up with tax obligations: Until you enable and set up Amazon’s sales tax collection, Amazon won’t automatically collect sales taxes for your products. You’ll have to collect sales tax from buyers in and out of the state in which Amazon stores your products. Therefore, it’s important that you fully understand your tax obligations.
- Prepare and label your items: Part of handling your inventory includes assigning appropriate barcodes to each item so Amazon knows what to pick. You may have to opt for Amazon’s FBA Label Service to ensure accuracy. Or you can speak to your manufacturer about providing labels at a lower cost.
Enrolling Your Products in Amazon FBA
Perhaps you’ve weighed the pros and cons and decided Amazon FBA is the right process for your products. Now, it’s time to put that process into action. After you’ve added a product to Seller Central and created its listing, you can enroll it in FBA by first going to “Inventory,” then clicking “Manage Inventory,” and finally selecting “Send Inventory.”
From here, you can enter your ship-from address — likely your manufacturer’s address. You can also enter the number of units you’re sending to Amazon and who will be responsible for preparing and labeling them (you or Amazon). Then, print labels to send your manufacturer, and you’ll be assigned a warehouse to ship your products to.
Keep in mind that some products require specific preparation so that they arrive at the Amazon fulfillment center in good condition. You can provide specific prep guidance and instructions in the “prepare products” step when creating your shipment, with the option of having Amazon do the prep work for a per-item fee.
For more detailed instructions or for help finding a winning product to sell through the Amazon FBA process, start a free trial today.