What Is Amazon FBA? (Cost, Pros and Cons)

Ronald M. Bieber

With FBA (Fulfillment By Amazon), Amazon Marketplace sellers can delegate order fulfillment to Amazon. Amazon will handle all logistics, including picking, packing, and shipping orders. If you are new to FBA and want to learn more about the service, this post is for you.

If you are an eCommerce vendor on any online marketplace, you know very well how vital logistics is. You dont want the products to arrive late, get damaged in transit, or even get lost. Therefore, it seems sensible that the majority of Amazon sellers are looking for shipping alternatives to assist resolve this problem.

Amazon FBA is such a solution in which Amazon takes responsibility for most of the logistics of your orders. All you need to do is mail the order to an Amazon Fulfilment center, and Amazon will take care of stocking, packing, and shipping the order to a customer. If this sounds intriguing, keep reading because this piece will tell you all there is to know about Amazon FBA.

Table Of Contents

What Is Amazon FBA?

As an Amazon seller, you have two options for delivering products to your customers. The first choice is merchant fulfillment, where you handle everything independently, keep your own inventory, and send goods straight to customers. Although this gives you all the freedom and flexibility, it can be pretty expensive.

Amazon FBA is an Amazon service primarily aimed at taking the burden of logistics off sellers. For sellers, Amazon FBA provides storage, packing, and shipping services. All sellers have to do is ship the products to an Amazon warehouse, and Amazon will take care of the rest.

Once a customer orders an item, Amazon will pick it up in the right quantities and ship it to the customer. This gives vendors more flexibility in how and what they sell. When determining which to use, you should weigh the advantages and disadvantages of both merchant fulfillment and FBA.

How Much Does FBA Cost?

Please be aware that there are two types of costs associated with FBA: fulfillment fees and inventory management fees. Each sold unit is subject to fulfillment fees, covering shipping, handling, and customer support costs. Inventory management fees are charged monthly based on the volume of inventory held in an Amazon Fulfilment center—the more you have, the more you will pay.

What Are the Benefits of FBA?

It is no secret that Amazon is a global leader in the logistics industry. To increase the effectiveness and speed of product distribution, the corporation has invested in a fleet of over 90 planes and thousands of vehicles. Amazon also provides a number of distribution services, such as Amazon Flex, that aims to expedite the delivery of goods to customers.

You gain all of these advantages if you decide to use Amazon FBA. With FBA, your products will be placed in Amazon warehouses in accordance with the terms of Amazon FBA. Amazon staff members will be in charge of stocking, selecting, packaging, and mailing the products to customers. Amazon FBA comes with a long list of benefits sellers can take advantage of. These benefits include

Amazon’s mission is to be the most consumer-centric company. Consequently, their Customer Service is exceptional. With Amazon FBA, Amazon’s customer support will handle inquiries, returns, and refunds. The service is free except for the Returns Processing Fee, which is charged for some product categories.

Even if you are not selling products on the Amazon Marketplace, you can still use Amazon FBA. If you run an online store, you can take advantage of this service. API connectors from providers like Shopify, ShipStation, and ChannelAdvisor make creating orders for Multi-Channel Fulfillment (MCF) simple.

The fact that FBA orders are handled in the same fashion as Amazon's own is what makes it such a viable choice. Therefore, Amazon will arrange for the item to be collected from stock, packaged, and shipped to buyers. With Fulfillment By Amazon, a vendor can highlight a product on his own website while the retail giant handles shipping and handling.

As an Amazon vendor, reaching Prime customers will be great for your business. Eligible FBA listings are marked with the Prime emblem to indicate their availability to Prime members. The Prime emblem prominently displayed helps the merchant attract new and returning customers looking for expedited shipping options.

Amazon's established relationships with carriers mean that sellers who utilize this service can offer their products at more competitive shipping rates than would be possible using a personal account. Since FBA products qualify for Amazon Prime and free Super Saver Shipping, sellers can provide free shipping on orders over a particular threshold.

What Are the Drawbacks of Amazon FBA?

Although Amazon FBA has many benefits, there are a few catches that you should be aware of before signing up. The following are some of the drawbacks of Amazon FBA.

When using FBA, you will be charged for both order fulfillment and inventory management. If you have slow-moving stock, inventory management costs can quickly pile up. Vendors will also incur disposal costs and expenses for removing defective, damaged, or unsalable products from a seller's inventory.

To guarantee that products arrive in perfect condition at Amazon fulfillment centers, the company has strict packaging standards for some items, such as poly bagging and bubble wrapping, which can increase costs.

At times, products in your inventory may get lost or damaged. This may be due to an error on Amazon’s end. However, if that were the case, Amazon would reimburse the seller. Some incidents, meanwhile, might not be recorded, costing retailers lost sales and damaged inventory. Just in case Amazon is missing a product, sellers should keep tabs on the products they deliver to Amazon.

Bottom Line

If you are an Amazon vendor with a considerable customer base and fast-moving stock, Amazon FBA is an excellent service to consider. Amazon will take care of all the logistics required to ship the product to the customer. Amazon FBA can be pricey for first-time vendors, and the return on investment may be meager. If you have a considerable customer base, Amazon FBA is a must-have for your business.

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