“When the WHY is clear the HOW is easy.” - Unknown

Due to the frequent inquiries I receive about FBA, I've compiled this guide to assist you in comprehending how FBA operates and how you can leverage it to increase sales for your online selling business. Whether you're just starting out in online selling or striving to achieve your next million in sales, this guide is tailored to provide you with valuable insights and strategies.

Many FBA guides out there are written by individuals who have never even used the program. With over a decade of experience using FBA, I aim to provide you with insights and perspectives that I hope you'll find valuable and practical. Enjoy exploring the guide, and may it prove helpful in your endeavors.

What is FBA on Amazon?

FBA, which stands for Fulfillment by Amazon, is a service where you can send your products to Amazon's fulfillment centers ahead of customer orders. Once an item is purchased, the fulfillment center takes care of storing, packing, and shipping it to the customer. Furthermore, Amazon handles returns and exchanges for items enrolled in the FBA program.

Although FBA can be a excellent choice for sellers, it's important to note that it's not obligatory for selling products on Amazon. We'll discuss alternative options later in this post.

Amazon FBA is a valuable tool that provides numerous benefits to sellers, allowing them to save time and focus on tasks such as sourcing, marketing, and ultimately increasing sales of their products.

FBA in comparison to Prime

Although Prime and FBA are sometimes used interchangeably, they actually represent different concepts.

FBA serves as a method for order fulfillment, whereas Prime is a membership service available for purchase by consumers. Prime grants members access to free two-day shipping on numerous items, and sometimes even free one-day or same-day shipping.

The Reasons for Choosing (or Not Choosing) FBA

At its core, Amazon functions as an online marketplace where sellers can showcase and sell their products. Apart from listing and selling items, sellers need to determine how they'll fulfill their orders. Order fulfillment encompasses tasks such as shipping, customer service, and managing returns.

Here are the three primary methods for fulfilling orders on Amazon:

• FBA (Fulfillment by Amazon)

• FBM (Fulfillment by Merchant)

• SFP (Seller-Fulfilled Prime)

Each fulfillment method comes with its own set of advantages and disadvantages.

FBA on Amazon

With Amazon FBA, sellers adopt a hands-off approach by sending their inventory to an Amazon warehouse, allowing Amazon to manage the rest. Utilizing FBA, your products gain the Prime logo, indicating fast shipping, free returns, and prompt customer service, all handled by Amazon.

Two main downsides of FBA are that it can sometimes cost more for fulfillment compared to doing it yourself, and you'll have less control over your inventory.

Merchant Fulfillment

Fulfillment by Merchant (FBM) simply means you're in charge of fulfilling your own orders. You can either handle everything on your own or enlist the help of a third-party fulfillment center.

We sold this item ourselves through our business, and it cost us $8.95 to ship it to the customer.

If we had chosen Fulfillment by Amazon (FBA) for this item, we would have paid $5.68 in FBA fees, around $0.50 for shipping it to Amazon warehouses, and about $0.14 for storage. So, the total FBA fees would have been $6.32.

Selling this item through Fulfillment by Amazon (FBA) would have resulted in a savings of $2.63 compared to using Fulfillment by Merchant (FBM).

While most of the items we sell in my business are typically handled through Fulfillment by Amazon (FBA), we made an exception for this item. We opted to use Fulfillment by Merchant (FBM) because we were conducting a test of a new internal tracking system specifically designed for FBM inventory.

Based on my experience, if you're selling items weighing more than a pound, you'll typically save money by using Fulfillment by Amazon (FBA) compared to Fulfillment by Merchant (FBM). However, there can be exceptions to this rule, and it's always a good idea to verify using the FBA Revenue calculator.

In my experience, Fulfillment by Amazon (FBA) is typically worthwhile. When you handle your own order fulfillment, you'll be responsible for storage, shipping, returns, and customer service. This process incurs various costs, and your products won't have access to the Prime label or free fast Prime shipping options for customers.

The major advantage of Fulfillment by Amazon (FBA) is that you don't need to be physically present with your inventory as it sells. Whether you're at home or on vacation, Amazon takes care of shipping your items for you as they are sold.

Seller Fulfilled Prime (SFP)

The last type of fulfillment you might come across is Seller Fulfilled Prime. With this option, you manage all the fulfillment tasks but still have the privilege of using the Prime badge.

This program is primarily designed for larger sellers and is currently not accepting new enrollments. Therefore, it's advisable to focus on understanding and utilizing Fulfillment by Amazon (FBA) and merchant fulfillment options instead.

When and Why I Apply FBA

With years of experience in online selling, my business now generates millions in revenue each year.

The simple answer to when we use Fulfillment by Amazon (FBA) in my business is whenever it's feasible.

More than 98% of the products we sell on Amazon through my business are managed using Fulfillment by Amazon (FBA). The benefits of the program outweigh the costs significantly, enabling me to scale my business much faster compared to shipping all orders directly to customers.

Why I Began Using FBA More Often

When I began my online selling journey, I wasn't as reliant on Fulfillment by Amazon (FBA) as I am today.

Before transitioning to full-time online selling, a significant portion of my sales took place on eBay. During that period, I was also personally handling a larger share of my order fulfillment on Amazon.

Initially, managing order fulfillment was manageable when I was only selling a few items per day. However, once I transitioned to full-time selling, I quickly realized that fulfillment was consuming a significant portion of my time. At a certain juncture, the time I spent on fulfillment directly hindered my ability to dedicate more time to sourcing products for sale.

This got me thinking about what was more valuable: spending more time finding products or spending less time fulfilling orders. It became obvious that the extra profits from sourcing outweighed any additional costs from using FBA.

Why FBA Is Still a Wise Investment Even if I Now Have Team Members

Once you have a team working with you, it's natural to wonder if you could save money by having them handle order fulfillment instead of using Fulfillment by Amazon (FBA).

Things really picked up once I started treating online selling seriously as a business. However, as it grew, several obstacles prevented me from fully capitalizing on its strong sales and growth potential.

The initial challenge was time. To address this, I increased my usage of FBA and then hired people to assist me in processing products for shipment to FBA warehouses.

After resolving the time constraint, the next challenge was space.

We found ourselves constantly crowded, rushing to fulfill orders for customers and ship items to FBA warehouses. As shelf space ran out, we couldn't restock inventory despite high demand for our products.

We required additional space to accommodate our growing inventory, and moreover, we needed to allocate our time more efficiently. Our focus was on research, pricing, sourcing, hiring, listing, and various other tasks essential for the smooth operation of an ecommerce business.

By introducing streamlined processes to expedite shipments to FBA warehouses, we've boosted turnover and secured more sales.

How to Purchase Items Through FBA

Fulfillment by Amazon (FBA) can indeed enhance your sales and profits, but it's crucial to have products ready for sale. While using FBA is straightforward, the real challenge lies in finding the right products to sell.

One of the common misconceptions among new sellers is believing they must have their own products and brands to sell on Amazon.

Selling existing products and brands offers several significant benefits. Firstly, the upfront investment is lower compared to creating your own products. Additionally, you can leverage Amazon sales data to determine the item's sales frequency and potential profit margins.

Acquiring existing items to sell can be as straightforward as visiting a local store like Walmart and purchasing them. While it might seem unlikely that this method could lead to profitability, my business has generated millions in sales through this approach.

If you're interested in learning more about effective methods for sourcing products to sell on Amazon, take a look at our comprehensive guides on What to Sell on Amazon and How to Sell on Amazon linked below.

If you're keen on creating an online selling business similar to mine, one that can offer you a full-time income, consider signing up for this AMZ Shifu Free Training. It will guide you to start smart and profitably right from the start.

If you're interested in learning further about sourcing products to sell on Amazon, these guides are invaluable:

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