Fulfillment by Amazon
Fulfillment by Amazon (FBA) is a service provided by Amazon that allows sellers more flexibility in their selling practices. The service provides storage, packaging, and shipping assistance, taking the burden off of the seller. The program allows sellers to ship their merchandise to an Amazon fulfillment center, where items are stored in warehouses until they are sold. When an order is placed, Amazon employees physically prepare, package, and ship the product(s).
The Benefits of Using FBA Services
Sellers can take advantage of all of the resources and benefits associated with Amazon when they sign up for Fulfillment by Amazon. These include:
- Having Amazon’s name associated with their products. This is a quality guarantee that most buyers will appreciate, making them more prone to patronize a seller because of it.
- Subsidized shipping fees. Because Amazon has a relationship with the shipping companies, sellers using this service will be able to pay less in shipping than if the items were being delivered from an individual’s account. Also, sellers can offer free shipping over a certain amount since products sold through FBA are eligible for Amazon Prime and FREE Super Saver Shipping.
- Multi-Channel Fulfillment. Amazon can ship and handle inventory that is being sold on multiple channels, and not just through the Amazon marketplace.
- Shipping standardization. All FBA orders are processed in exactly the same way Amazon handles its own merchandise. This means that when someone purchases an item, Amazon picks the item from their inventory, packs the item, and ships it to the buyer. A seller can feature an item on his own website, and, through the Fulfillment by Amazon service, still have Amazon take care of all of the heavy lifting.
Amazon charges several kinds of fees to FBA members.
- Standard seller fees. Amazon takes approximately 15-18% of the product price as a seller’s fee when an item is sold. How much will vary depending on the product. Amazon says they charge 15%, but there are some hidden costs such as refunds that are not fully charged back, which increases the overall charge to the seller.
- Storage fees, pick and pack fees, and weight-handling fees. Amazon charges the seller a fee to store all the items, another fee to pick the item, and a weight-based fee when an order ships.
- International shipping. Amazon now offers Global Export, which allows sellers to send their inventory all over the world.
Fulfillment by Merchant (FBM)
Sellers are encouraged to compare the FBA service to manually storing, packaging, and shipping inventory to see if this is the right choice for them. There are many differences in practice between the Fulfillment by Amazon and the Fulfillment by Merchant services. For a comprehensive discussion on the topic, see the FBM or FBA page.
Today many other service providers are entering joint ventures with Amazon. These online retailers want to be able to take advantage of the convenience provided by this fulfillment service. By entering into an agreement with Amazon, these third party retails can have Amazon automatically ship their products that they have sold through multiple marketplaces rather than dealing with the entire process themselves. Since FBA launched its Beta in 2004, the most noticeable trend is its consistent and steady gain in popularity. Now, rather than giving a business a competitive advantage, most businesses will agree they must have FBA to stay competitive. Promoting FBA has become a business in and of itself.