What is Amazon FBA Business? The Ultimate Guide for 2020

Amazon FBA Business

Start an Amazon FBA Business – A Complete Guide

Looking for an easy and legitimate way to earn money online? Many people are currently joining the Amazon FBA (Fulfillment By Amazon) program, and you might want to consider giving it a try too.

With over 350 million items in their inventory and upwards of 2.5 million sellers, you might want to give Fulfillment-by-Amazon a try.

The Amazon FBA program is opening up plenty of opportunities for third-party sellers. When you enroll in the program, you join as a third-party seller. You can then send your products to Amazon fulfillment centers. They will pick it up, pack, and ship them to buyers.

One of the most significant advantages of joining the FBA program is that you get to showcase your products in front of millions of potential buyers without having to do much work yourself. Your products are even qualified for Prime shipping. And buyers prefer Prime shipping as it is fast and free.

This detailed guide will arm you up with everything you need to know about Amazon FBA so that you can navigate the waters easily if you decide to join the program.

What is Amazon FBA?

Amazon FBA (Fulfillment by Amazon) is a program launched in September 2006 that gives the opportunity to merchants to sell their products on Amazon.

The merchants join as third-party sellers, and they are allowed to send products into Amazon fulfillment centers. The products are then picked, packed, and shipped to buyers by the e-commerce company, Amazon.

Amazon takes both storage and fulfillment fees. However, it is worth paying the fee as once you sign up, you will get access to Amazon’s 24/7 customer service and one of the most advanced fulfillment networks. The cost also includes shipping goods to customers.

How Does Amazon FBA Work?

Here is how Amazon works:

First, you join the program to start sending your products to Amazon. The company charges $39.99 per month for a professional selling account. The e-commerce company will then store your products in their warehouses. The company has around 100 warehouses across the US.

If someone is interested in purchasing your products, Amazon will pick, pack, ship, and track the order for you. The company also takes care of the entire transaction, including returns and refunds, making sure your customers are satisfied with the shipment.

Amazon sums up all your sales every two weeks, takes away your seller fees, and credits your bank account with the profits you make.

Amazon FBA is great for those businesses who want to scale more quickly as their service is reliable and the costs predictable.

What are your responsibilities when using FBA?

Though Amazon does the majority of the work for you, there are some responsibilities you will have to take up.

  • You will have to choose the products you will sell. It can be any product. But it is better to pick products that will sell fast in order to avoid storage fees.
  • You will also be responsible for keeping the inventory in stock.
  • And also, get engaged in marketing and advertising your products, especially if you are selling custom goods.

How do you get products into Amazon FBA?

Here are the steps you need to follow to get your products into FBA:

  • Already selling on Amazon? Just add FBA to your account, and you are ready to roll. Set up a selling account and select the FBA option. If you have an individual account, you can still sell via Amazon FBA, but you won’t be able to advertise or use other program features.
  • Next, create your product listings. You can either add your items in bulk through flat files or add them one at a time.
  • After that, you will have to prep your products. Strictly follow Amazon’s packaging and prep requirements. You will also need to follow the shipping and routing requirements.
  • Now, you can ship your inventory to Amazon FBA. You will have to first create a shipping plan and print your shipping labels. Use inventory management software for that. RestockPro is an excellent option. And send your items to the company’s fulfillment centers.

Pros & Cons of Amazon FBA

There are both pros and cons of joining the Amazon FBA program, but the pros outweigh the cons:

Pros:

  • Buyers trust Amazon: Since Amazon is an established name, your potential buyers already trust the company.
  • Painless logistics and shipping: Amazon manages fulfillment for you. You don’t have to spend time packing and shipping. Thus, you save both time and cost.
  • Returns management: Amazon will handle everything from customer inquiries to return shipping labels and reverse logistics.
  • Lower shipping rates: Since the company has contracts with the major shipping carriers, they offer discounts on shipping costs. It is not only the sellers, but buyers too benefit as many orders can be shipped for free. Plus, Prime members are eligible for free two-day shipping on all FBA items.
  • Excellent customer service: Amazon offers stellar customer service. Your customers will be receiving 24/7 support via email, chat, and phone.
  • Potentially limitless storage space: You neither have to pay for a warehouse or face apprehensions about the size of the warehouse you require. Plus, if you make fast sales, you will get limitless storage space.
  • Amazon will fulfill your orders from other channels: By using Amazon’s Multi-Channel Fulfillment (MCF) service, you get the opportunity to sell products on other channels, including BigCommerce. And Amazon will fulfill the orders.
  • Fast delivery: The Company has several fulfillment centers worldwide. Thus, your products can be delivered anywhere within a couple of days.

Cons

The cons of Amazon FBA include:

  • FBA fees: You will be paying for storage and fulfillment fees (including long term storage fees). You will also be required to pay for removal fees in case of defective items.
  • Product prep isn’t easy: It is a challenge for newbies to follow the strict guidelines on how to prepare and ship your items to Amazon.
  • Tracking inventory can get complicated: It is difficult to always check what products are available, what products need to be ordered, and what’s not selling. It is especially tricky if you are selling on several channels.
  • Managing the sales tax is not easy: Each state in the US has different sales tax collection rules. And since Amazon has fulfillment centers in all the states, and they keep regularly shuffling inventory between warehouses, things can get complicated.
  • Commingling merchandise might yield negative results: The default inventory setting commingles the same products from the same company. However, counterfeit versions of your product could be commingled with your products, and it can ruin your reputation.

Amazon FBA fees

There is a specific fee you need to pay if you are selling on Amazon.

Fees for all Amazon sellers

  • Amazon charges a commission for each item sold, depending on the category your item is listed. The cost is taken out post-sale. You can refer to Amazon’s list of referral fees for more details.
  • Amazon also charges for refund fees. You will be paying either 20% of the charge refunded or $5.00, whichever is less.

FBA Seller Fees

  • Depending on the size and weight of the item that is sold, packed, and shipped, Amazon will charge you your FBA shipping fees. Refer to Amazon’s current FBA fees, which are subject to change.
  • The storage fees are paid monthly. The company also charges long-term fees. Monthly storage fees will also depend on the amount of storage you’re occupying, in cubic feet.

In the case of oversize items, the storage fee will be higher. You will have to pay long-term storage fees if your item is in the warehouse for 180 days or more. In case it stays longer than a year, you will be paying higher charges. Refer to the list of long term storage fees for more details.

Miscellaneous FBA Fees

  • If you have over 100,000 ASINs, you will be charged a monthly flat fee of $.005 per ASIN.
  • Closing fees are charged for certain media products like CDs, DVDs, and books.

Best products to sell on Amazon FBA

It is best to choose the Amazon FBA products to sell depending on the type of business model you can support.

1. Resellers

Conducting product research will help you to pick the best products to resell on Amazon FBA. Get an idea of what products sell and identify the trends in your niche.

Also, read product reviews, including those of your competitors. You can use the information to make more informed business decisions.

Using tools such as MarketScout can help you in gathering the data you need.

2. Wholesale

You can buy branded items from manufacturers or suppliers and resell them on Amazon. For that, you will need to reach out to companies and build a relationship. Trade shows are great for sourcing. You can negotiate the rates and shipping costs. Try to keep your margins in a profitable and sustainable place.

3. Brands

Many established brands are doing well in Amazon. You can quickly get Brand Registered and gain access to branded storefronts and more.

Once you are Brand Registered, you will have more control over your product listings. You can also gain access to special features like A+ content and product videos.

Strategies to become a successful seller on Amazon FBA.

  • Know what your competitors are selling

By researching Amazon’s best sellers and researching your competitors, you will come to know which products get sold fast and are profitable.

  • Create bundled listings

When everyone is selling the same products, the chances of getting your products sold become less. Try bundled listing to create a unique listing that will still show up when people hunt for the main product.

  • Start small

Having only a few products will make it easier to create an organized, streamlined process. Once established, you can scale up and add more products.

  • Create a unique brand

Creating a unique brand allows you to stand out from the competition. Using a popular ecommerce platform to create our online store is a perfect way to do this. You will also be able to understand your potential buyers better and thus create styled product images, titles, and descriptions consistently.

  • Optimize your SEO

To get easily discovered, you will need to rank higher on search engines. Research which keywords people type when searching for your products. You can use those keywords all through your product listings.

  • Optimize your images

Make sure that you are uploading only high-quality images. First impressions do matter. And since your photos are going to be the only thing that your customers see, make them as detailed as possible. Show them from all angles. Creating 360-degree images and videos can also help engage customers.

  • Optimize the product titles

Amazon allows up to 250 characters for titles, but it also suppresses product listings with titles that are too long. Though you want your headings to be descriptive, keep it to the point and insert your main keyword into the title. Consider starting with a brand name, product name, and key features.

  • Use bullet points

Customers will be looking for bullet points once they click through your product. They are easy to read. Make sure that they contain all the details needed by your customers to make a purchase.

You can answer common questions, talk about your product’s benefits, and add vital product details.

  • Craft detailed product descriptions

Your product descriptions should offer complete instructions. Also, add more product photos and some videos. And don’t miss to tell your brand story.

Moreover, your customers should be able to understand precisely what they’re getting and from whom they are getting when they buy your product.

  • Get reviews

Having positive reviews can increase the chances of getting your products purchased. So try to get Amazon FBA reviews from customers who have already used your products. If your customers are not sure about which product to buy, they will always look for reviews.

Closing Thoughts On Amazon FBA Business

Hopefully, this guide will help you to sail smoothly and scale your business if you decide to join this amazing Amazon FBA program.

Since Amazon is an established company, people trust them. It will be easier to sell your products on this platform than trying to set up your own store from scratch and start selling.

Plus, Amazon is known for providing stellar customer service. So if any issue arises, you can always resolve it. And you don’t want to miss out on the millions of potential buyers out there on the platform, do you?

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