- What is Amazon FBA?
- How does selling on Amazon FBA works?
- Who should be using Amazon FBA?
- What is an FBA business?
- How to start an FBA Business
If someone has told you about the Amazon FBA feature and you are wondering, if it is for you or not, well you are going to find out the same in this guide.
None the less, this is an extensive guide that will help you learn everything about Amazon FBA (Fulfillment by Amazon) business.
But wait, let me tell you something
Amazon has been at the forefront of e-commerce. It has always been a people-centric company and undoubtedly they offer the best customer support in the industry. This is why Amazon is a leading company globally.
Amazon offers many services that many of you may or may not be aware of and some of them are:
- Amazon Seller program
- Amazon FBA (We will be talking about this extensively today)
- Amazon Associate program
- Amazon AWS (Cloud hosting business)
and many more..
Now, depending upon where you are coming from, you may be using one or many of these Amazon services.
Let’s dive right in.
What is Amazon FBA?
Fulfillment by Amazon is a service by Amazon for users like you and me to sell more without worrying about logistics like shipping, delivery and customer support.
Think of yourself as a seller or someone who makes handicrafts or has access to the wholesale markets and always wanted to set up an e-commerce website for selling.
Or put simply,
you have inventory (Your hand-made or you purchased it from outside) and you want to sell. But you don’t have an e-commerce site nor do you intend to spend money and time for one.
Moreover, you don’t have money to invest in advertising. In that case, you sell your stuff through Amazon, by becoming a seller on Amazon. With an Amazon seller account, you can list your products on Amazon and you get access to billions of users who shop on Amazon on a regular basis.
Here is how Amazon FBA works:
- You list the product on the Amazon seller website
- You sign up for Amazon FBA ( I have discussed fees below)
- Amazon picks your stuff and stores it in its fulfillment center.
- A customer place an order online
- Amazon takes care of delivery, support and you get to focus only on inventory and promoting your Amazon store
Before I talk about how to start Amazon FBA business, Let’s watch this 1-minute video to learn more:
Amazon FBA fees ( How much Amazon FBA cost to you)?
To participate in the Amazon FBA program, you need to become an Amazon seller.
- Amazon charges 15-20% of the product cost as their fees.
- For Amazon FBA, you need to pay for pickup charges, which is based on the weight of the inventory. You can read more about this here.
Classification of Amazon selling concept
Let me broadly classify this Amazon core selling concept into two categories- ‘buying from Amazon concept’ and ‘selling from Amazon concept.’
1-Buying from Amazon concept
Imagine you don’t own any product, or you don’t have any stock. So what do you do? Here’s a way. You can still sell products of others already listed on Amazon.
For this, you have to open a seller account on some site other than Amazon, for example, say eBay. You list the Amazon’s product on eBay with your profit margin added to the price.
When your item sells, you buy it from Amazon paying Amazon the price of the listing, leaving behind your profit, that remains with you. You then mention the shipping address of your eBay customer while checking out at Amazon so that the item would be delivered directly to your customer.
Since you practically don’t own any goods and buy it from Amazon hence, the name-buying from Amazon concept. This is one way to profit from Amazon if you don’t have an e-commerce website or products of your own.
2-Selling from Amazon concept
If you have your stuff to sell or have invested in your stock, then it’s a completely different scenario. You don’t need to buy anything from Amazon. You only sell to your customer. In this case, however, you need not go to other sites to sell.
You can sell on Amazon itself signing up as Amazon’s seller. Amazon gives a shipping service to sellers those who opt for it, known as Fulfillment by Amazon or simply FBA.
This is a typical service in which you can store all your stock in Amazon’s warehouse also called Amazon Fulfillment Centers. When your product sells, Amazon pack the item from the warehouse for you and ships them instantly.
They handle all packing, delivery and customer service for you right after the sale confirmation. Sounds interesting? So it is.
This step eliminates any delay in delivery of goods to customers as Amazon has blazing fast delivery service. It builds trust between customers and sellers and helps Amazon to be the most loved brand worldwide.
If you don’t know this, I may add here that if you already have an e-commerce store, with your stock, and want Amazon to ship for you, then it can be done as well.
The Fulfillment by Amazon also ships for sellers and e-commerce owners who are not using Amazon platform to sell their goods. All you need is to send all your stock to Amazon Fulfillment Center, pay their monthly rent, and that’s all. When you get a sale, just inform them, and Amazon delivers the product to your customer’s address. Learn more about Amazon’s FBA program.
So we talked about the two broad classifications of Amazon selling concept which is more graphically illustrated in the picture.
How Fulfillment by Amazon is different from Dropshipping
People often mistake Fulfillment by Amazon to ‘Dropshipping.’ Dropshipping is a totally different concept. Dropshipping is a process in e-commerce in which seller don’t need to keep any products in stock. Instead the seller partners with a wholesaler who have his own stock and also ships for you. You promote the wholesaler product with your profit margin.
Now you must be wondering which category ‘Dropshipping’ falls out of the two I mentioned above. Well, it does not fall to any. As you can see in fulfillment, we have assumed we owned our goods and sent to Amazon warehouse and the contrast, in drop shipping we don’t have our goods.
Amazon doesn’t provide Dropshipping. It only provides Fulfillment.
Having known all these things you can now boost your own selling business with the e-commerce giant Amazon.