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8 Important Facts You Should Know About Fulfilment by Amazon (FBA)

August 31, 2022 eCommerce TipsEntrepreneurs

Are you into e-commerce or dropshipping? The Fulfillment by Amazon (FBA) program helps you to focus on the entrepreneurial part of your business. It eliminates the day-to-day operations that can cause burnout. FBA means that your inventory has been fulfilled by Amazon. Here’s how it works. Amazon sellers register with Amazon’s FBA program and create their product listings on Amazon. Then, they prepare their products and ship them to an Amazon warehouse. So, when someone purchases a product, Amazon selects the product from their inventory, packs it, and ships it to the customer. If you’re thinking of using FBA services to handle your orders, here are 8 important facts you should know about them before getting started.

FBA Is Costly

I’m not going to sugar-coat it. You’re going to spend money when you use FBA. Amazon charges FBA sellers for both storage and fulfillment. Even with the fees, Amazon reports that 64% of sellers earn profits in their first year, and 20% of them earn a profit within the first 3 months. Like any other business, fees and costs will occur. Consider FBA fees as an investment in inventory management, operations, and marketing.

There Is No Sales Quota

Amazon doesn’t require you to move a certain amount of merchandise every month if you want to be part of the FBA program. They understand that not all products are created equal. The demand for some products is different than for others. Therefore, the company offers FBA services to all business owners, even those who don’t move inventory quickly. Most FBA sellers make $1,000 to $25,000 per month in sales. It all depends on what you are selling and how much.

Inbound Transportation Has No Limits

Amazon has neither minimum nor maximum limits on the amount of product you can send to a fulfillment center in a single shipment. This is encouraging news, particularly given the greater transportation costs coupled with restocking with smaller, more regular shipments rather than a single big supply. If you’re an Amazon FBA seller, you may send as much of your product line as you like in a single shipment.

Amazon Uses FIFO Method To Determine Storage Fees

Amazon charges for storing your products in its warehouse. These fees change seasonally or depend on volume. You’re likely curious about how Amazon charges for storage space. It uses the First In, First Out (FIFO) method. Your first batch of products that arrived at the warehouse will be the first to go out when customers order them. Once they’re gone, storage fees aren’t needed. New products that arrive to replace old ones are subject to a storage fee until they’re sold. You are also subject to varying FBA fees if you send in some inventory during a lower-rate season and send an additional shipment during a high-rate season.

Amazon FBA Fees Are In Addition To Commissions

Amazon fulfillment and storage costs are in addition to your commission expenses and other selling fees. If you decide to handle shipping on your own, you’d still owe Amazon a percentage of your sale as a commission regardless of the sale plan you operate on. That sale plan doesn’t vanish away just because you’re using FBA. Ensure you factor in commission in addition to all the other expenses associated with selling products on Amazon and using Amazon fulfillment services.

You Can Save Money By Creating Your Shipping Plan

When you ship products to Amazon for the fulfillment, the company will decide which warehouse is best suited for your products. After a while, Amazon might think it’s a better idea to move your products to another warehouse. When that happens, the seller is responsible for the shipping costs. Amazon doesn’t cover freight to the new warehouse. You can avoid these warehouse changes and unexpected fees by requesting your shipping plan.  If you want to develop an effective shipping plan, you need to understand your target demographics and where most of your orders are being shipped.

Amazon Charges A Long-Term Storage Fee

If your inventory moves slowly, you might be slapped with a long-term storage fee, in addition to the other FBA fees. Products left in the warehouse for longer than six months are subject to a long-term fee. If you have products that are in very low demand, you will have to factor that fee into your cost-benefit analysis. You can use Amazon’s Inventory Age and Inventory Health reports to identify which products in your inventory may be subject to long-term fees.

Your FBA Account Can Be Suspended

When you sell on Amazon, you’ve to play by the company’s rules. Or else, you lose your account. Some infractions that can cause you to lose your selling privileges on Amazon are having more than one seller account except you take permission and it’s approved, manipulating or falsifying reviews, poor quality products, violating intellectual property laws, and so on.

Final Thoughts

FBA is a great way to delegate a lot of hassles associated with e-commerce or dropshipping to a company with an outstanding reputation online. If you’re building your business, it can be hard to ignore the giant that is Amazon. No matter what you’re selling, someone is likely searching for it on the site. You should take advantage of the built-in audience and brand awareness behind the large Amazon name. However, there are times when selling your products elsewhere may be a better idea. When you enlist Amazon’s aid, you’ll pay the price. Ensure you calculate the cost and factor it into your potential profit margin before you enroll in Amazon FBA.

Contact us today at Fulfillman to know more about our services. We are dedicated to offering outstanding services, including Amazon FBA, Dropshipping, Product Photography, China Sourcing, Warehouse Fulfillment, Private Label Dropshipping, Third Party Logistics, and so forth. Our reliable team will be happy to speak with you and discuss your available options. With Fulfillman, you are guaranteed to get quality and excellent services that give complete customer satisfaction.