How Does Amazon FBA Work? An Inside Look

Fulfillment by Amazon, or “FBA” for short, is simply a service that is available to you when you sell on Amazon. Amazon will perform numerous tasks for you when using FBA, they will pick, pack, ship and track your products for you. In addition to these services, Amazon also provides great customer service. 

When you work with FBA, you are responsible for certain tasks in order to ensure that your products are able to be sold by Amazon. What exactly is your responsibility? How does the whole FBA process work? What are the benefits and drawbacks of using Amazon FBA? Let’s review and find out. 

Amazon FBA: What Are You Responsible For?

When you want to sell your product on Amazon and take advantage of their fulfillment services, there are certain things you are responsible for doing. The steps a seller is responsible for are listed below: 

Choosing The Products To Sell 

You can sell pretty much everything on Amazon. It is best to try to make products that sell quickly though, to avoid storage fees. If you sell items that are in low demand, or not well known, they may sit at an Amazon fulfillment center and accrue fees which will eat away at potential profits. It is best to pick something that will have a short shelf life at Amazon, whatever it may be. 

Keep Your Products In Stock 

You need to keep your inventory levels at a certain level at Amazon. Make sure you are regularly stocked. Amazon will send out a reminder notice, but it is your responsibility to ensure that the stock is replenished adequately. 

Marketing Your Products 

Advertising is key if you do not have a high-ranked name brand product. Someone may not be familiar with your product, so it’s best to write product descriptions effectively so that you can market your product easily. Ultimately, it is the seller’s responsibility to market the product so that people can find it and will actually want to buy it. 

How Fulfillment By Amazon Works

Amazon FBA is fairly straightforward to use. You use your regular selling account per usual and follow a few simple instructions to add your products to your FBA section. With this, you are able to have access to tens of millions of Amazon Prime customers in order to try to expand your business. Here is how Fulfillment by Amazon works: 

Send Products To Amazon 

Amazon has approximately 175 fulfillment centers across the globe. You just tell them what products your business is sending and Amazon tells you which warehouses to ship your products to. 

Product Sorting And Storage At Amazon 

After your product is received by Amazon, your products are sorted, added to their inventory and stored safely in their warehouses. 

Customers Purchase Your Products 

Customers will purchase your products from Amazon who will handle all of these transactions for you. 

Shipping By Amazon 

Once someone purchases your product, it is taken from storage, packed into a box and then shipped to customers. 

Customer Service Handling By Amazon 

Issues with your product are handled via Amazon’s great customer service. All returns and/or questions are handled by Amazon. They will even follow up to make sure customers are satisfied with the shipment. 

Getting Paid

Amazon handles your sales and directly deposits your profits into your bank account (This is after you are deducted seller’s fees of course). 

What Are Fulfillment By Amazon’s Benefits?

Working with Amazon has a certain amount of advantages, both directly and indirectly. Some of the main benefits you will see by using FBA are:

You Get To Increase Your Business’s Reputation

Amazon is recognized and trusted all over the world, if you are affiliated with them your business’s reputation gets a likely boost by association. 

Logistics And Shipping Are Done For You

Managing your own fulfillment can be troublesome, to say the least, if you are not experienced with it. FBA allows you to outsource the logistics, which allows you to focus on gaining more sales. 

Great Shipping Rates

Amazon has contracts with all of the major shipping carriers which provide them a reduced rate due to the amount of business they have. Some of these reduced shipping costs are passed along to sellers. Customers ultimately benefit as they could get free two-day shipping (if Prime members), which ultimately leads to higher sales on FBA products. 

Manages Returns For You

Returns can be a nightmare for a small business. Amazon handles all aspects of the return process, such as managing inquiries, creating the return shipping labels and the reverse logistics required. There is a fee associated for this as well, but could be well worth it. 

Handles Customer Service

Phone, chat or email, all of which are available 24/7 with Amazon’s renowned customer service. This provides customers with ease of mind if they are experiencing issues and would like immediate assistance. 

Quick Delivery Of Your Products

Amazon has hundreds of fulfillment centers around the world. No matter where your customers are located, Amazon can get your products delivered within days of the order being placed. 

What Are Fulfillment By Amazon’s Disadvantages?

Not everything is sunshine and rainbows in the Amazon. If you don’t move your product quickly, you may be saddled with extra fees that you probably weren’t accounting for. Some other possible disadvantages are listed below. 

Long-Term Storage Fees

Amazon is not in the business of storing items, if they sit idly for the long term, they will be charged storage fees. It is best to try to get your product off the shelf as quickly as possible in order to avoid looming storage fees. 

Packaging Is Not Branded 

Your company or brand logo on the shipping boxes, Amazon uses their own boxes. Therefore, even when it is your product, the only thing the customer (or potential customers) sees is an Amazon box. If brand awareness matters, this may not be what you are looking for. 

Potential Increase In Returns

While it is awesome that Amazon has great customer service, this may have an unexpected effect on your business. They have such an easy return process, which may drive up the number of returns you get from what you would normally expect. 

Is Amazon FBA Suitable For Your Business?

Utilizing Amazon FBA can be a rewarding experience for your business. FBA can be a simple way to outsource your logistics tasks associated with selling your products. Your business will be able to focus on growing your brand, expanding your outreach and focus on increasing profits. 

Is this the only option for your fulfillment needs? There are several lesser-known alternatives to Amazon that may offer similar benefits with potentially less fees. Mel offers very similar fulfillment services to what Amazon does, while adding a more personal touch. 

When you work with Amazon, you may never know who your customers are. Amazon does not provide you with customer’s information which makes it difficult to establish that relationship. Mel offers a personal relationship with the client. We are suitable for your business when the product you are looking to sell is custom/unique. As an added bonus, In certain cases, we offer free storage for your products depending on the quantity and length of storage time!