Amazon FBA Business – How it Works?

Amazon FBA

Amazon FBA has become one of the most popular means to earn online. There are over 2 million people selling on Amazon worldwide.

Almost anyone can list an item for sale on Amazon, whether it’s something you’ve purchased on wholesale, made by yourself, or merely a product you no longer want.

If you join the FBA program, you can systematize order fulfillment by taking advantage of Amazon’s advanced shipping and Amazon’s fulfillment services and earn more sales from Amazon’s desired Prime customers.

Half of all the sales on Amazon come from third-party sellers.

And out of the top 10,000 sellers, 66% of them use FBA.

What is  Amazon FBA?

FBA stands for Fulfillment by Amazon.

What that boils down to is: you sell it, Amazon ships it.

The way it works is:

  • You send your products to Amazon.
  • They store them in their warehouses.
  • When a customer orders one of your products, Amazon pick, pack, ship and track the order for you.
  • They also handle returns and refunds.

All this certainly comes at a price. Amazon charges both storage fulfillment fees.

However, those fees comprise Amazon’s stellar 24/7 customer service, the cost of shipping goods to customers, and access to one of the largest, most advanced fulfillment networks in the world.

Why Amazon FBA Matters: Stats to Know

Amazon has around 300 million active customers, with 90 million Prime subscribers in the U.S. only. Brands available exclusively to Prime buyers are those that utilize FBA. Prime customers spend more money with Amazon.

The average customer spends $700 per year on Amazon, while Prime customers spend roughly $1,300 per year.

This means that if you use Amazon FBA and are therefore more visible to Prime buyers, you can make more money.

How Amazon FBA Works

Amazon handles all the hard work for you within FBA, so the way it works is quite simple.

Send your products to Amazon.

Amazon has more than 100 warehouses across the U.S., some of which are over a million square feet. You tell them what products you’re sending, and they tell you which warehouses to ship your products to.

Amazon sorts and stores your products.

Once Amazon receives your products, they will sort and add them to their inventory. Your products are then stored safely in their warehouses. On the off chance that anything gets damaged in the warehouse, Amazon will reimburse you.

A customer buys your product.

Amazon takes care of the entire transaction for you. They receive payment and update your inventory routinely.

Amazon ships your product.

One of Amazon’s warehouse workers grabs your product from storage, packs it into a box, and ships it over to the customer.

Amazon handles customer service – well, a lot of it.

Once the customer receives your product, Amazon follows up to make sure they are satisfied with the shipment They also handle any returns or questions from the customer. As for any feedback you receive on your product listing, it’s up to you to reply and take action.

You get paid.

Every two weeks, Amazon sums up all your sales, subtracts your seller fees, and deposits your profits directly into your bank account.

Benefits of Using Fulfilment by Amazon (FBA)

The FBA program is one of the best ways to grow your business and get your products in front of more people.

Amazon has an army of loyal customers, which can mean enhanced sales for you.

Some of the biggest benefits of FBA are:

Effortless logistics and shipping

If you have ever managed your own fulfillment, you know it can be quite time-exhausting. Higher sales means more time spent on packing and shipping, or you need extra money to hire someone to handle it for you.

Discounted shipping rates

Amazon’s contracts with the major shipping carriers give them excessive discounts on shipping costs. Customers also profit because many orders on Amazon are eligible for free shipping.

Management of returns

Processing returns is a pain. From dealing with upset customers to inspecting returns and handling all of the administrative aspects, Amazon takes care of all of that for you.

Customer service management

Amazon has a repute for delivering excellent customer service. That results in satisfied customer and takes a huge load off your plate.

Potentially unlimited storage space.

Using FBA means you do not have to worry about how much or little storage space you need for your products. You do not have to pay for a warehouse or worry about the size of warehouse you need.

Quick delivery.

Amazon has hundreds of fulfillment centers all over the world. Regardless, where your customers are, they can reliably get their products delivered within couple of days.

Once an order is placed, Amazon automatically figures out which fulfillment center is nearest to the customer and ships their order from that center.

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