What is Amazon FBA?

Amazon FBA, or Fulfillment by Amazon, is a logistics and delivery fulfillment service that Amazon offers to e-commerce sellers. Using this service allows sellers to outsource the product storage, packaging, shipping, and customer service aspects of their business to Amazon.

How do sellers utilize Amazon FBA, and what are the requirements?

Taking advantage of the Amazon FBA service is relatively straightforward for e-commerce businesses.

In order to utilize the service, a seller must first register as a seller on the Amazon platform, choose a selling plan, and set up their seller account. During this registration process, Amazon requires sellers to provide their legal business name and address and to verify their identity. Once this is done, the seller can enrol in the Amazon FBA program, convert their listings to FBA listings, and begin setting up FBA storage and shipments to fulfil orders.

To use any aspect of Amazon’s FBA service, sellers must comply with Amazon’s FBA product and packaging requirements. All products are required to be packaged with Amazon-specific barcodes, known as FNSKUs (Fulfillment Network Stock Keeping Units), with a unique FNSKU used for each unit. Products must be packaged in a way that adheres to stated weight and dimension specifications, must not include items restricted or prohibited by Amazon, and must adhere to local safety certification and labeling legislation. In the case of imported goods, relevant customs documentation must be provided.

What does Amazon charge sellers to use FBA?

In addition to meeting the requirements above and the cost of their selling plan, sellers must also pay fees to utilize the Amazon FBA service. There are three main types:

• Category referral fees: Sellers must pay Amazon a percentage of the total price of every item sold. The percentage varies depending on the item category, typically up to 15%, with the exception of Amazon device accessories, which have a 45% fee.
• Fulfilment fees: Sellers must pay a flat fee per unit on orders fulfilled by Amazon. This is based on the dimensions and weight of each unit.
• Storage fees: Sellers must pay a fee for products stored by Amazon. This is calculated per cubic metre or cubic foot per month. Additional surcharges apply for inventory stored for over 241 days, and for sellers whose storage utilization ratio is above 22 weeks.

Depending on the nature of the seller’s operations, they may pay other fees for optional services in addition to these primary fees. These can include inventory fees, high-volume listing fees, and refund administration fees.

What are the benefits of Amazon FBA?

There is a range of benefits for those using Amazon FBA.  Sellers gain access to the Amazon Prime customer base and speedy delivery options, and can outsource all returns, refunds, and customer service queries to Amazon to reduce administrative burdens. Most crucially, sellers that enrol in the Amazon FBA program can take advantage of Amazon’s extensive logistics network, enabling them to scale without needing to invest in permanent infrastructure and facilities of their own.