What is Amazon FBA selling?
FBA is short for ‘Fulfillment by Amazon.’ FBA selling is an online sales method where the vendor not only uses Amazon’s website to sell their goods but also uses its infrastructure for fulfilment.
FBA selling is particularly popular with entrepreneurs and startups who are operating on a low budget, as they may avoid many costs by being able to use Amazon’s platform and resources to sell their inventory instead of having to fund everything themselves.
Benefits for FBA sellers
FBA sellers are insulated from many costs that other businesses may have, as by operating solely on and having Amazon take care of fulfilment and after-sales, they gain the following benefits.
- Internet presence (although the vendor must add their products)
- Warehousing of vendor’s inventory at Amazon fulfilment centers
- Order processing
- Shipping (can offer 1 day shipping through Prime)
- Pre and after-sales customer support, returns, and refunds
In addition, marketing is straightforward because Amazon has a huge potential customer base to tap into (more than 300 million users, including 65 million paid Prime members globally alone); providing a reach far exceeding that of a small business website, for instance.
Ultimately, FBA sellers can expect to profit by reducing the costs associated with the infrastructure that Amazon provides. It often works out cheaper to pay Amazon’s fees, than individually for storage, shipping, online marketing, and more. In addition, they have the convenience of having a ready-made sales platform to tap into.
How does FBA work?
Let’s look at Amazon’s own video that explains the process:
Basically, you ship your goods to Amazon, put them on the platform, and then Amazon handles fulfilment, for a fee.
Drawbacks for FBA sellers
FBA sales sound easy, and it’s certainly accessible to even stay-at-home moms looking to make some extra money. However, it’s more complex than just posting some product information online and watching the dollars roll in.
FBA rules are strict
Vendors need to be wary of inventory requirements and FBA performance targets at all times.
FBA inventory requirements
If vendors fail to follow Amazon’s complex inventory requirements, goods sent to them won’t go on sale and may be refused, returned, or repackaged at your expense.
These requirements cover:
- Product titling
- FBA product barcodes
- Packaging and prep
- Shipping labels
- and more…
There are numerous demands for each, so get ready for a lot of reading! You can get started with our page on Amazon labeling requirements.
FBA performance targets
In short, vendors’ performance is monitored closely by Amazon, and if there are certain issues that affect customer satisfaction such as poor quality, you may be penalised.
It is in Amazon’s interest to provide products that their customers love so they keep coming back to the platform, in fact, it’s the very first of their ‘core principles:’ Customer obsession.
If your products keep getting returned due to poor quality, for example, this is a red flag to Amazon. They may eventually suspend your account, freezing your inventory and any money owed until you deal with the issues.
Ultimately, if you want to sell on Amazon’s platform, you must follow their rules which are in place for their and their customers’ benefits.
Read more about this on this page: FBA performance targets.
FBA selling isn’t ‘easy’
Administering an FBA business is not easy. Vendors can still expect to spend hours sourcing products, optimising listings, as well as assuring that the goods that they’re adding for sale will be compliant with Amazon and local regulations.
You still need to be very hands-on with the following:
- Source inventory (this is a minefield)
- Create product listings (quite intricate)
- Administering your FBA account
- Prepare your inventory following Amazon’s packing rules (Amazon will pack them again before shipping, but they still need to be packed securely by vendors first)
- Ship goods to their fulfilment centers
While this is less work than going it alone in many ways, it is still a time-consuming process and takes serious dedication to set up.
Sourcing goods from China or other Asian countries is hard for FBA sellers
Many FBA sellers struggle with finding the time to source suppliers in Asia and manage their supply chain, product quality, and logistics. Bear in mind that this is all on top of administering their FBA business, too.
Unless you are regularly in China (or wherever in Asia you source from), even sourcing reliable suppliers who aren’t going to get you in trouble from Amazon is tough. Let alone, being able to check your product quality before it reaches you.
You can read more about this here: How To Find Suppliers In China
Don’t miss these FBA resources
- Why Amazon FBA Prep Services Should Be Done in China (not USA)
- Standards for Selling on Amazon FBA Platform Are Getting Stricter