Fulfilled by Amazon – Who is Amazon FBA suitable for?
There is no way around Amazon in online retail. So it is no wonder that thousands of new seller profiles are created every year. However, starting an e-commerce business and building a profitable Amazon company is no walk in the park. A particular challenge is logistics. Those who sell goods usually have to not only manufacture them but also store, package, and ship them. This may work initially from one’s own garage, but as order numbers increase, this model quickly reaches its limits. Therefore, the “Fulfillment by Amazon” service, also known as “Fulfilled by Amazon” or simply “FBA,” is a welcome help, especially for business newcomers.
But even experienced Amazon sellers benefit from Amazon FBA. A large number of marketplace sellers employ a multichannel strategy, utilizing both Fulfilled by Amazon and their own logistical structures. This is because the online giant has optimized the shipping processes, providing an almost perfect solution for online retailers. If you also want to minimize the effort involved in shipping your items and are considering starting with Amazon FBA, we would like to offer you some helpful insights with our article.
What is Amazon FBA and how does it work?
Normally, as a seller, you are responsible for your goods and must handle all tasks related to storage and shipping yourself. With the FBA program, Amazon assists sellers by completely managing the storage of products as well as the order and shipping process. As a seller, you only need to send your goods to an Amazon logistics center and no longer have to worry about storage and shipping logistics. From now on, Amazon will pack and ship for you. You just need to ensure that your inventory is always stocked.
The service portfolio of the “Fulfilled by Amazon” program includes the following points:
In addition, your items receive Prime status as well as the “Fulfilled by Amazon” badge, which many customers pay attention to when selecting products because they appreciate fast shipping and excellent customer service.
Another advantage of Fulfilled by Amazon is the easy internationalization, as professional online retail has long been operating across Europe or even globally. Particularly in the European economic area, it is relatively easy to sell on various Amazon marketplaces simultaneously. With the Pan-EU program available to FBA sellers, Amazon takes care of the distribution of goods across Europe and fast shipping. The goods are close to the customer and can be delivered quickly. Here you can find more information about internationalization with Amazon.
What alternatives are there to Fulfilled by Amazon?
Amazon FBA undoubtedly offers many advantages. But what alternatives do Amazon sellers have?
Fulfillment by Merchant
The counterpart to Fulfilled by Amazon is FBM – “Fulfillment by Merchant,” which means “Shipping by Merchant” in English. The online retailer packages and ships the goods themselves, manages the inventory, and makes all decisions regarding returns management and customer service.
Fulfillment by Merchant is very suitable for bulky goods or items that are not sold for a long time and therefore need to be stored for a longer period, such as niche products or unique items. Otherwise, these items would incur high storage costs in the “Fulfilled by Amazon” service. Additionally, the seller can focus more on customer retention and marketing by maintaining direct contact with customers.
However, if a product is sold by multiple sellers, FBM sellers have some disadvantages compared to FBA sellers. Amazon has always been suspected of favoring FBA products in the battle for the Buy Box – often regardless of price. Additionally, the FBM seller cannot compete for the attention of Prime buyers with a Prime banner. This target group is the most affluent on Amazon and is likely to include well over 200 million Amazon buyers – as this milestone was reached by Amazon in 2021.
Prime by Seller
Since 2016, there has been the “Prime by Seller” program. This allows sellers who have their own warehouses and handle shipping themselves to receive the Prime label.
To participate in “Prime by Seller,” the seller must demonstrate excellent seller performance as an Amazon seller. The on-time shipment rate must be at least 99%, and the cancellation rate must be below one percent. With the Prime logo, the seller commits to offering shipping of goods within Germany within 24 hours and to Austria within 48 hours at no additional cost to Prime customers. Amazon provides the shipping labels to the seller.
Especially noteworthy: Amazon determines the shipping service provider, which can drive up the actual shipping costs. The warehouses must be located in Germany so that the service providers selected by Amazon can pick up and deliver the shipments from the warehouses. Amazon handles customer service and thus also makes the decision regarding the return of the items.
A nice package that the seller has to bear. At the same time, the costs for the shipping processes (packaging materials, manpower, storage costs, etc.) rest on their own shoulders.
Disadvantages and Weaknesses of Fulfilled by Amazon
As can be seen from the previous list, the advantages of Fulfillment by Amazon are clear: All individual segments of fulfillment are completely handled by Amazon. This allows marketplace sellers to fully focus on their business and outsource the most time-consuming processes to Amazon.
But nobody is perfect, not even Fulfilled by Amazon.
Costs and Fees for Fulfilled by Amazon
Of course, such a comprehensive service is not free. Storage, shipping, returns management, and customer service are excellent and come at a price. This is certainly not a disadvantage, but a necessity. What sellers should keep an eye on are the additional contractual terms. For example, items that have been in an Amazon warehouse for more than 365 days are subject to a long-term storage fee. However, sellers can easily avoid this by initiating automatic removal.
Another stumbling block is the strict regulations regarding how packages and pallets must be packaged for delivery to the warehouse and what guidelines must be met in general. Therefore, a very close look at the Terms of Order is important.
Here you can find detailed information on the topic of Amazon FBA costs: These fees for selling and shipping through Amazon can be expected.
Storage of Goods Abroad
After the goods have been sent to Amazon, Amazon decides in which logistics center the goods will be stored. This means that items may also be stored in warehouses in Poland and the Czech Republic.
This circumstance may require you as a seller to pay sales tax in these countries. Taxdoo has extensively dealt with the sales tax considerations of FBA warehouses in the Czech Republic and Poland.
There is also the possibility to exclude your own goods from the CEE / PAN-EU program (Central Eastern Europe / Pan-European). However, this incurs a penalty fee per package.
Branding and Marketing
Another drawback for some marketplace sellers is the branding of the packages shipped via Fulfilled by Amazon. An online retailer who wants to retain customers by offering special service or implementing certain marketing measures has no way to achieve this through the branding of the shipping cartons. The packages are marked with the Amazon logo, and shipping by Amazon suggests to the customer that they are also buying from Amazon. Most customers do not even realize that an independent seller is behind it.
FBA Mistakes – and Their Solutions
Another disadvantage that can be very costly is so-called FBA mistakes. The ordering and shipping processes in an Amazon fulfillment center are very complex, and errors occur that the online seller often does not even notice. For example, products can be lost or damaged. These mistakes cost money, a lot of money. Marketplace sellers can lose up to 3% of their annual gross revenue due to FBA mistakes.
But for these problems that Amazon sellers have with the “Fulfilled by Amazon” program, there is fortunately a simple solution. SELLERLOGIC Lost & Found Full-Service from the German market leader is your partner for professional FBA error analysis and reimbursement.
Why is Lost & Found Full-Service a real milestone on your journey from seller to bestseller?
- You do not have to analyze FBA reports, painstakingly gather information and copy it into Seller Central, or engage in stressful communication with Amazon. Lost & Found handles every step on the path to a successful FBA reimbursement on your behalf.
- The AI-powered system ensures smooth processes and maximum reimbursements. The SELLERLOGIC software monitors your FBA transactions 24/7 and automatically detects errors that other providers overlook. It promptly enforces your claims, allowing you to receive the maximum reimbursement amount for FBA mistakes with SELLERLOGIC.
- Lost & Found Full-Service detects FBA mistakes up to 18 months retroactively, thus covering the entire period seamlessly. Every month that you do not register, you lose valuable reimbursement claims and thus real money.
- The SELLERLOGIC experts turn Amazon’s mistakes into cash that you are entitled to. We take care of every detail so that you can get your money back.
Using Lost & Found is not associated with any base fees. We only charge a commission of 25% of the Amazon reimbursement if you actually receive it. If nothing is reimbursed, you incur no costs.
Conclusion: Fulfilled by Amazon for Everyone?
There are millions of potential Prime buyers alone on Amazon.de – an affluent target group that shops on the marketplace multiple times a month. This target group specifically looks for Prime offers – a service included in the FBA program. At the same time, FBA products are more likely to win the Buy Box.
The advantages of Amazon FBA are obvious. Essentially, the Amazon Fulfillment program is suitable for the vast majority of marketplace sellers, with few exceptions. However, since storage costs are calculated based on cubic meters and storage time, using FBA for bulky products that sell infrequently is usually rather unattractive.
Those who aim for real growth on Amazon cannot avoid automating their processes such as shipping, inventory management, repricing, or FBA error resolution. If you are already a seller on Amazon, using FBA or planning to do so, we are happy to advise you on the topic of error analysis and repricing. Do not hesitate to contact us at +49 211 900 64 0 or [email protected] .
Frequently Asked Questions
In the FBA program, Amazon takes care of storing the products as well as the ordering and shipping processes for the seller. As a seller, you only need to send your goods to an Amazon logistics center and then no longer worry about storage and shipping logistics. From now on, Amazon will package and ship for you. You just need to ensure that the inventory is always stocked.
The FBA seller sends their goods from their own warehouse or directly from the manufacturer to an Amazon logistics center. From there, Amazon takes over and handles the picking and packing of the items upon order receipt, shipping, returns management, and customer service.
Fulfillment by Merchant (FBM) is the counterpart to Fulfilled by Amazon. In this model, the seller stores their goods themselves and also takes care of the entire ordering and shipping process. Amazon merely provides the platform on which the products are sold. However, sellers can also achieve Prime status for their offers if they qualify by meeting certain performance and quality criteria.
There is no one-size-fits-all answer to this. FBM is often used for bulky products or those that sell infrequently. However, large sellers with their own efficient logistics can certainly sell all types of “classic” Amazon FBA products via FBM as well. Therefore, “FBM versus Fulfilled by Amazon” is always a decision that needs to be made on an individual basis.
Image credits in the order of the images: © Hor – stock.adobe.com / © Sundry Photography – stock.adobe.com / © Chris Titze Imaging – stock.adobe.com
