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!

  2 comments for “Fulfillment by Amazon (FBA) Overview

  1. Steve
    February 16, 2014 at 1:29 am

    Hello there, I found your blog through a post of yours on Reddit. I have a couple questions about FBA. I have a few hundred dollars worth of books I’m looking to flip. I could do it pretty easily by just selling them at the buyback prices, but placing them on Amazon with FBA would double the profit. Is it worth the fees up front? I’m not sure if I want to turn this into a thing I’m doing every month. Though, as a student without a job I do have plenty of free time. Can you cancel and start back up FBA? How much do you think I would need to be making every month to make the fees worth it? Thanks for your time, this fantastic blog, and your Reddit posts.

    • Endpaper
      February 16, 2014 at 1:16 pm

      Thanks for reading and commenting! I’ll lay out a few options for you and your inventory.

      You are already aware of Amazon’s buyback program, but do you know about Bookscouter.com? You should definitely check into Bookscouter if you want to offload your books easily. Look up your book via ISBN, see what the vendors will pay you for the book, send your books to the buyer, and get paid! It’s pretty awesome and takes out all of the back-end work of fulfilling inventory yourself. Plus, the vendors tend to pay better than the Amazon buyback program, and you get paid in cash, not Amazon gift cards.

      If you’ve got the book selling bug, open up your own Merchant account on Amazon and start small. Forget about FBA for now. It’s great, but it’s more of an advanced topic in reselling. Getting into FBA is pretty easy, but getting out is more difficult. What do you do with the inventory that won’t sell? It’s taking up space in a warehouse and costing you a little bit of money each month until it sells. To make FBA worth your time and effort, you need to be moving at least 40 items per month to cover the $39.99 Pro Merchant fee. You could turn this into a lucrative part-time job if you can figure out how to source inventory with some consistency. Once you get started, it’s hard to stop! If you feel like you want to turn your free time into work, and you will work to find inventory, list it, ship it, and deal with customers, start by setting up a Merchant account and fulfilling the items yourself. You will need some basic shipping supplies and a little patience to learn the business, but your items will sell. If it feels like a good fit to you and you see a way to grow your business with FBA, give it a try. I was skeptical of it at first but became a true believer and advocate of its power once I understood how to work the FBA system to my advantage.

      Start small, see what happens. Dip a toe in before you put your head underwater. Let me know if you have any more questions!

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