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Fulfillment by Amazon (FBA) Overview

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I use Amazon's fantastic service, Fulfillment by Amazon, to house and ship my goods to my customers.  I am a low volume seller and send in small shipments when it is convenient to me, but Amazon does not seem to mind that I am a humble drop of income into their ocean of revenue.  I feel that the service is a win-win-win; Amazon wins by virtue of the fees they charge the seller, the retail customer wins by getting a great product at a great price with unbeatable customer service provided by Amazon, and I win by selling more items at a faster pace for an overall higher profit with a lessened workload.

Sounds good, right?  You want in!  Well, there are a few barriers to entry.

  1. You need to be a Pro Merchant through Amazon and pay the monthly service fee of $39.99, regardless of how many items you sell.
  2. You must be willing to pay the variable closing fee ($0.80 - $1.35 per item sold) and the referral fee (6-20% of the item's price, percentage charged varies by category).
  3. You must be willing to pay to have your item shipped to the customer, which means more fees! You can expect to pay a pick and pack fee of $1.00 per item, weight handling fee ($0.42 / lb), and FBA storage fees ($0.45 - $0.60 / cubic foot you occupy in the warehouse).
  4. Finally, you need to get your items to the warehouse!  As a FBA seller, you can use Amazon's terrific UPS rates to get your items to the Fulfillment Center (Amazon Warehouse) for around $0.25 / lb.

That's the harsh reality.  FBA will cost you money.  It's not a magical free-for-all.  You are paying for Amazon's infrastructure, service, and web traffic.  There is nothing else like it on the planet.  Click here for more information on Amazon Marketplace feesFulfillment by Amazon fees, and a FBA Revenue Calculator.

What's the good news?  Your sales volume will explode.  You will instantaneously experience a surge in sales that you will find hard to believe.  On top of your increased volume, you will pass along your fees to the customer.  Why?  You can an extract a premium for your goods by offering it as an Amazon Prime eligible item, which broadens your sales base to Prime customers who pay $79/yr for unlimited 2-day shipping and a host of other added features.  Non-Prime customers who spend a minimum of $35 to get Free Super Saver Shipping will also be eligible to put your items into their cart to qualify for the $35 threshold.

The fees feel top-heavy, but when you start to make sales and see your transaction reports, you will probably recognize that you are making more money on each item and doing less work in the process.  That means fewer trips to the Post Office or UPS Store, less time spent packaging orders, and less time responding to e-mails.  Once the items are in Amazon's warehouse, your job is done, freeing you to source more inventory, send more items to Amazon, and make more money!