For brands, selling on Amazon can be a hugely lucrative platform. Amazon has assisted thousands of companies around the world in capitalizing on eCommerce opportunities and expanding their markets.
Sellers can not only use the Amazon network to sell their products and raise their market share, but they can also take advantage of Amazon's many business services to boost their sales figures. However, as with any other channel, you must consider the fees associated with selling on Amazon to get a good picture of your total cost – and genuine Amazon revenue.
Far too many Amazon sellers have completed the game to win the buy box or push massive sales on a new private label product, lowering the price to the point that no margin remains until it is sold. Amazon alters fees for FBA, selling on Amazon in the first place, and much more. This guide will explain what Amazon fees are:
What is FBA?
Sellers who use FBA (Fulfillment by Amazon) submit inventory straight to an Amazon fulfillment center in their local marketplace. After a customer orders a product, Amazon can handle the entire pick, pack, and ship operation and provide customer support for that product. Many merchants choose FBA to satisfy Amazon orders. Sellers can use Amazon fulfillment centers to store products, and Amazon is in charge of the multi-channel fulfillment process's select, pack, and ship phase.
Though FBA can assist Amazon sellers in streamlining their eCommerce shipping processes, pricing for this service can be dynamic, variable, and costly. As we all know, FBA is a fantastic way to reduce the hassle of maintaining a fulfillment and delivery network. However, when enlisting Amazon's assistance, you must remember the cost factor. FBA fees are unexpectedly high, and the prices of selling on Amazon have risen in recent years.
However, many sellers are unaware of the specific types of fees paid by FBA, also perplexed as to how to file a claim with Amazon for missing or defective goods. As a result, additional expenses are unavoidable. As a vendor, we should take a comprehensive look at the running costs. Only by fully understanding Amazon FBA fees would we be able to manage inventory and reduce costs efficiently.
Today, we will provide you with a comprehensive guide to the FBA service:
Pros and Cons of FBA, Fees and Vital Tips for Beginners
Benefits of FBA
Increase Traffic To Your Store And Increase Conversion Rates
Customers prefer to buy Amazon-fulfilled products. Meanwhile, Amazon prioritizes FBA products with higher consumer rankings. If the goods are the same, but the shipping methods vary, FBA would rank higher than FBM.
Customers who are Prime members will get free one- or two-day delivery on eligible products. FBA warehousing and distribution centers are usually near airports. As a result, FBA can ship goods to consumers quickly and efficiently.
You Have A Huge Advantage Over Your Rivals
When you sell your goods via Amazon FBA, they are automatically eligible for Amazon Prime, Free Two-Day Shipping, and other benefits. Consequently, your goods will bear the Amazon Prime logo, allowing you to reach a broader audience.
Leveling Your Business Empire Is Easy
Since Amazon fulfills your orders, you don't have to stress about the logistics of your company. You can now concentrate on getting the company to the next level. When more orders come in, you can quickly fulfill them by keeping your inventory in Amazon's fulfillment centers.
Improved Rating In Search Results
FBA products are prioritized over non-FBA products in Amazon's search algorithm. It leads to higher rankings in Amazon's search engine results for FBA-fulfilled goods and, as a result, more sales. You can see this for yourself by searching for any product on Amazon. The bulk of the items on the first page are most likely Prime listings.
Customer Service And Returns
When it relates to, online shopping consumers prefer to purchase items that can be quickly returned. Furthermore, if a product has a customer service feature, it is more likely to be sold than products without customer service.
Poor feedback is excluded unconditionally to help the store retain a positive rating measure.
It is not a product review but rather thoughts on delivery and support for an Amazon-fulfilled order. As a result, you don't have to be concerned about lousy shipment results affecting your store scores.
For Standard-Size Goods With Unit Prices Greater Than $300, All FBA Fees Are Waived.
That is, if your product is a small item of high value, Amazon will not charge you an extra shipping fee.
Online Customer Service Is Available 24 Hours A Day, Seven Days A Week
Amazon provides customer support to shoppers 24 hours a day, seven days a week so that any problems or concerns regarding the product are address as soon as possible. Furthermore, it will assist sellers in lowering the likelihood of getting negative feedback.
Disadvantages of FBA
The Overall Costs Are Huge
When compared to all other related costs for self-fulfillment, FBA fees are very high since you must pay several expenses, such as the Amazon storage fee.
Lack Of Adaptability
a. Sellers are not permitted to contact customer support at any time. For example, if your account is odd, you won't get customer support right away to help you fix the issue. The only thing you can do is email your phone number and wait for a callback, which puts sellers in a very passive situation.
b. Buyers have the option of requesting refunds and returns. If consumers are dissatisfied with the product or find it to be of poor quality, they can request a refund or return at any time.
Labels Have An Effect On Shipments
If you choose Amazon FBA, you will notice that the items are branded with the Amazon logo. However, if the labels are incorrect or destroyed, the sales processes will suffer, and the goods concerned will not be processed in the warehouse.
What Do the Amazon FBA Fees Include?
Storage fees, order processing fees, picking and packing fees, weight handling fees, and other charged services are all part of the FBA fees.
1. FBA fees are calculated as follows: (fulfillment fees) + (monthly storage fees) + (inventory placement service fees)
2. Fulfillment fees are calculated as the amount of (order handling fees) + (picking and packaging fees) + (shipping fees) (weigh handling fees)
3. Order handling fees are calculated on a per-unit basis.
4. Picking and packing fees and weigh handling fees are assessed based on the size and weight of the items.
5. Other costs primarily include marking, transportation costs, product removal and destruction, special wrapping, and so on.
If you sell a product on Amazon using Fulfillment by Amazon, you can primarily deal with two prices:
Amazon Fulfillment Fees: These are the fees you pay Amazon to get your order fulfilled. It includes all of the procedures involved in fulfilling an order, such as choosing, packaging, shipping, and offering customer service, as well as a return if necessary. It is also worth noting that these payments are measured on a per-unit basis.
Monthly Inventory Storage Fees: If you wish to store your goods in Amazon's warehouses, also known as fulfillment centers, you will pay these fees. It is measured per cubic foot and is determined by the amount of space occupied by the goods.
Another factor to consider is the size and weight of the items. As previously stated, Amazon FBA pricing is determined by the weight and dimensions of your product. Amazon has divided the product size into two groups for the sake of simplification:
Standard Size: A product must weigh less than 20 pounds when fully packed to be classified as a standard size. Furthermore, its dimensions must not exceed 18" x 14" x 8".
Oversize – Any product that reaches these dimensions and weight is deemed oversized. For example, if a product weighs more than 20 pounds and measures more than 18 inches on its longest side, it is considered oversize.
Learn more: Amazon Referral And FBA Fees: 2021 Guide
Which Types of Amazon Sellers Should Choose FBA?
- FBA is ideal for small companies and retailers who do not fulfill orders.
- Amazon is the primary online retail site, and using FBA will help you increase sales through Prime and Amazon's global marketing advertising.
- In addition to Amazon, you run the company on other sites such as eBay and Etsy. As a result, you can fully use FBA to build multiple logistics networks. Amazon's FBA company has grown by allowing sellers to use FBA on third-party platforms.
Related article: 6 Key Factors for Choosing the Best Amazon FBA Prep Services
Which Types of Amazon Sellers Should Choose FBM ?
- Sellers have complete control over the delivery process, from packaging to shipment.
- Sales are sluggish, or the products are bulky or heavy. In this case, you must pay a large number of storage fees to FBA per year since FBA is charged based on the weight and dimensions of the object.
- Your store's profits are poor (such as selling less than 40 items a month).
- Product profits are less than 250 percent so that FBA fees can consume a significant portion of your profits. It is preferable to use FBM.
FBA Tips for Beginners
Most sellers are believed to be willing to join Amazon FBA to have Amazon shop, pack, and ship their goods to customers. Furthermore, the benefits of FBA are more appealing to sellers who want to increase their market size and improve domestic and foreign competitiveness. But what else should we be concerned about?
You cannot assume that Amazon can do anything for you. You must keep an eye on your inventory and replenish it when required.
Amazon Categories That Need Approval
Products in approval-required categories can only be classified with Amazon's permission. These categories are only available to sellers who have a Professional Selling Plan subscription. If you sell in the categories that need approval, it can slow down the rate at which you list products and even affect overall sales.
In some instances, you might be eligible to participate in the Amazon Free Shipping scheme. However, most of the time, you would pay for delivery. It could result in a monthly cost rise of hundreds to thousands of dollars (depending on the volume of orders and the type of logistics service you use).
Returns and Damaged Products
Finally, keep in mind that certain items can be damaged in transit or returned by customers. So, how do you treat consumer returns? What steps must be taken to ensure customer loyalty without jeopardizing the ratings? Amazon can give you advice, but it will not manage your store's operations.
FBA uses infrared scanning to deliver supplies to warehouses, and the weight is exact. As a result, sellers must exercise extreme caution when it comes to carton sealing before shipment, and the cartons must not surpass the standard weight limit of 50 lb.
When it comes to your business, there are many things you need to focus on. But if you sell goods online through Amazon or another channel, fulfillment by Amazon (FBA) can increase revenue and market share significantly with minimal effort. The FBA prices are competitive in most cases, and often they become less expensive than using a third party logistics partner. If the idea of learning everything about this process is daunting for you, take solace in knowing that Simpl Fulfillment has experts ready to help you every step of the way. We stand behind our customer’s success 100% because we know that when they succeed so do we! Learn more about our FBA process here.
Next article: Best Ways to Reduce Amazon Seller Fees and Increase Profitability