Warehousing & Fulfillment

Fulfillment by Amazon: Is it Right For You?

Curious about Fulfillment by Amazon? From storing to packing to shipping and handling returns, learn how this extended service can help your business.
Fulfillment by Amazon: Is it Right For You?
Gayatri Bhaumik

By Gayatri Bhaumik

 

February 12, 2020

Amazon is very much a household name. Not only does the brand offer extensive online shopping services, it also has amazing services like Prime, Audible, and Fulfillment by Amazon. Started in 2006, FBA is an extended service that allows sellers to use logistics and fulfillment services at Amazon warehouses. All they have to do is get their products to the warehouses, and the company will handle everything else, from storing and packing to shipping and returns.

What Does the Service Involve?

Fulfillment by Amazon is an extended service offered by the eCommerce conglomerate. To put it simply, you store your items in their warehouses and when the order comes in, the fulfillment center will pick, pack, and ship the item to your customer. This service is not just available to the website’s sellers - any online retailer can use it! According to Statista, 73% of Amazon sellers in the US use FBA. Similarly, this service was launched in Australia in 2018 and quickly found a 33% adoption rate by the end of the year. This goes to show the success of this service.

Fulfillment by Amazon has many features that can help you grow your business. Perhaps most importantly, by using this, you’ll be eligible for Prime’s free two-day shipping and free shipping. The best part is there are no required minimum products. Just think of this as getting world-class fulfillment services at affordable rates from the eCommerce giant without any heavy investment. Anyone can take advantage of the service, which also offers reduced prices for small and lightweight items.

How Does It Work?

It’s actually very straightforward. Using the Amazon fulfillment service will immediately qualify your products for Prime, increasing your audience reach and sales potential. Here’s a quick summary of how the service works:

  • Opt into the service.
  • Send your products to one of the company’s warehouses.
  • The products will be stored in the warehouse until they are needed for order fulfillment.
  • When you receive an order, your product will be picked up from the warehouse, packed, and shipped to the customer.
  • Your order will be tracked in real-time; customer service is provided as necessary.
  • Your returns will also be handled by the service.

Amazon has some 100 warehouses around the US, though exactly which warehouse will work for you depends on the products you want to store. Perhaps the most useful part of the service is how easy everything is. The company handles all aspects of fulfillment, and will also calculate your sales, deduct service charges, and send your money directly to your bank account within two weeks. Plus, they’ll pay for any damages.

8 Advantages of Using FBA

  1. You will get high-quality logistics and shipping services.
  2. You will get discounted shipping rates.
  3. You won’t personally have to handle returns.
  4. You will have excellent outsourced customer service.
  5. You will get unlimited storage at affordable rates.
  6. You will be able to offer Prime services.
  7. You can access the company’s many warehouses and fulfillment centers.
  8. You can use this as part of a multi-channel fulfillment strategy.

7 Disadvantages of Using This Service

  1. Storage and fulfillment are charged separately.
  2. If you are storing items for more than six months, it gets expensive.
  3. Because returns are easy to facilitate, you may see more of these.
  4. Your products must be carefully prepared and labeled for storage and inventory.
  5. It can be difficult to keep track of your inventory.
  6. Calculating sales tax can be tough since the company has many fulfillment centers in different states.
  7. The pooling of your items with similar items from other sellers is an option but can raise issues as some sellers are fraudulent.
Fulfillment by Amazon

How Much Does FBA Cost?

You will have to pay to use this service, but Fulfillment by Amazon fees are reasonable and come with flexible payment options. Plus, you only pay for the services you use. Fees are charged per unit for picking, packing, shipping, handling, customer service, and product returns. You can also pay for monthly storage.

Fees Per Unit

There are different price categories for standard and oversized items, according to their weight. These are all charged at different unit prices.

  • Standard small size 10oz or less - $2.41/unit
  • Standard small size 10-16oz - $2.48/unit
  • Standard large size 1lb or less - $3.19/unit
  • Standard large size 2-3lbs - $5.26 (additional $0.38/lb after 3lbs)
  • Small oversize 71lb or less - $8.26 (plus $0.38/lb above 20lbs)
  • Medium oversize 151lbs or less - $9.79 (plus $0.39/lb above 90lbs)
  • Large oversize over 151 lbs - $75.78
  • Special oversize - $137.32
  • Additional $0.40/unit for clothing
  • Additional $0.11/unit for items with lithium batteries

Monthly Storage Fee Per Cubic Feet

For standard size storage, the monthly charge from January to September is $0.69/cubic foot, and from October to December it is $2.40/cubic foot. For oversized storage, the monthly charge from January to September is $0.48/cubic foot and from October to December it’s $1.20/cubic foot.

To calculate the exact cost that you have to pay for storage, you can use the Fulfillment by Amazon calculator. You can calculate all the storage and fulfillment costs that you have to pay to and also calculate the revenue you will be left with.

Amazon Fulfillment Services

How Do I Use Fulfillment by Amazon?

  1. Register with Amazon
  2. List your products using the FBA option
  3. Follow the guidelines for preparing and shipping your items to the fulfillment center
  4. The warehouse will receive your items and will scan and store them in your inventory
  5. Your listing will be labeled as Fulfilled by Amazon - eligible products will feature the Prime logo.
  6. When your orders comes through, everything will be handled by the company

Things to Keep in Mind if You Want to Use this Service

  • Follow the provided shipping and item preparation guidelines
  • If you send fraudulent or illegal items to the fulfillment center, you can be banned for life
  • Figure out which warehouse you need to ship your products to
  • Make sure you use FBA for products that sell quickly to avoid storage fees
  • Be sure to keep an eye on your inventory
  • Don’t forget to market your products to get good sales
  • Use kitting to further cut cost and increase sales
  • Start with a few products to see which items sell best
  • Work towards building your brand to be successful on the platform
  • Use SEO best practices to show up on more search results
  • Good product descriptions and photos can help
  • Interact with customers and answer questions
  • Encourage buyers to give reviews
  • You can also use branded marketing services and created sponsored listings
  • Choose a good repricing mechanism

Ship Around The World With Amazon

Fulfillment by Amazon is an excellent service, especially for small businesses. In a small business, you may find that you don’t have enough manpower to properly manage order fulfillment, so outsourcing this to a big company like Amazon can be a good choice.

If you feel that FBA is not right for you, don’t worry- we can still guide you to cheap fulfillment. Easyship partners with many affordable courier services and hybrid shipping solutions - sign up for a free account today!