Fulfilment By Amazon
Fulfilment by Amazon (also known as FBA) is a service provided by Amazon which allows sellers to store and ship their products through Amazon’s warehouses. In this blog, we will be looking at how it works, the benefits of using FBA, and how it can help you to grow your business.
How Does FBA Work?
If you are using FBA, rather than sending your products to customers directly, you send your products to Amazon’s Fulfilment Centres. Amazon will then store, package, and deliver your product to customers for you.
Stock is sent to Amazon’s Fulfilment Centre
Amazon stores your stock in their warehouse.
Customer makes a purchase from your listing.
Amazon picks, packs and delivers your product.
Benefits of Using FBA
Winning the Buy Box
Over 83% of all Amazon sales occur through the buy box, which means it is crucial for you to win it. When Amazon’s algorithm picks which seller is eligible for the Buy Box, it will prioritize sellers who are using FBA over other sellers – meaning your product is much more likely to win it than your competitors.
Prime Eligibility
One of the primary benefits of selling through FBA is reaching the Amazon Prime customer base. While there still is the option of Seller Fulfilled Prime, utilising the Fulfilled by Amazon program is a great way for small companies to gain the Prime badge and offer free next day delivery to Prime customers.
Cost Effective
Amazon charges you for storage space in their fulfilment centres, as well as a seller account fee (either a basic account or a pro seller account). Amazon covers the cost of shipping products to customers, which is why you can offer free next-day delivery via Amazon Prime. Selling through FBA reduces the amount of space you would need in your own warehouse (therefore possibly decreasing costs), as well as the cost of employees picking and packing products.
Opportunity for EU Expansion
Amazon have a couple of different FBA services that allow you to sell your products across Europe. The Pan-European FBA allows you to send your products across multiple Amazon centres in different countries for a smaller fee. The European Fulfilment Network (EFN) allows you to send your products to one Amazon centre and have Amazon send the products across different countries, however it does cost more. Having these options allows you to increase your customer audience and increase your sales as a result. The US also has over 100 active fulfilment centres throughout the states, making Amazon US another alternative route for expansion.
Drawbacks of FBA
Preparation
Sending stock to fulfilment centres requires an amount of preparation and work, with tasks such as boxing stock and correctly labelling boxes. You should also be cautious on the amount of stock you send to Amazon, as they will charge additional fees for long term storage (full cost details are mentioned below*).
Occasional Additional Fees
Returns Processing Fees – Amazon covers the customer service and the tasks involved with a product return. Fees will be charged any time Amazon provides free return shipping for customers.
Unplanned Services Fees – when stock arrived at an Amazon Fulfilment Centre that wasn’t supposed to, or boxes are labelled incorrectly.
Removal Order Fees – Amazon charged per item if you want stock to return from fulfilment centres back to you.
Long Term Storage Fees – Poor stock control management can lead to long term storage fees if products are left in a fulfilment centre for longer than 330 days.
Possible Increase in Returns
Amazon Prime makes it easy for customers to return unwanted item (whether it’s not working/broken, the wrong size or the customer just regrets buying it). Because it is so easy and convenient for a customer to return a product, they are more likely to if not 100% satisfied. This may also cause extra costs if Amazon deems the returned product unsellable.
Costs of FBA
There are two costs involved when operating through FBA – normal fees and occasional fees.
Normal Fees
Selling fees relate to your entire account, and come in two options:
Individual Plan = £0.75 (excl. VAT) / item sold. This is suitable for those who are selling less than 35 items each month, and don’t plan to advertise.
Professional Plan = £25 (excl. VAT) / month. Suitable for people selling more than 35 items each month, and those who want access to advanced tools and reports.
More details on pricing can be found here.
Referral fees are a percentage taken off the total sales price, and this percentage depends on the type of category you are selling a specific product in (as well as the total sales price). See below for some examples:
| Category | Referral Fee | Per Item Minimum Referral Fee |
| Baby Products | 8.16 % for products up to £10.00 | £0.25 |
| 15.3% for products greater than £10.00 | £0.25 | |
| Beer, Wine & Spirits | 10.20% | £0.25 |
| Business, Industrial, and Scientific Supplies | 15.30% | £0.25 |
| Electronic Accessories | 15.3% for products up to £100.00 | £0.25 |
| 8.16% for products greater than £100.00 | £0.25 |
e.g., A baby product with a total sales price of £9.99 would have to pay a referral fee of £0.82 for every item sold.
To see the referral fee percentages for all category, visit Amazon’s information page.
Fulfilment Fee is a flat fee for every unit sold, based on the type of product as well as the dimensions.
For example, this 35cm x 25cm x 12cm parcel weighing under 400g would cost £2.51. Find the full dimensions and costings table here.
Storage Fees are charged per cubic foot per month (£/ft³/month). This cost varies based on the type of product being stored, and increases for the start of October to the end of December.
| Time of Year | Clothing, Shoes & Bags | Dangerous Goods | All Other Categories | ||
| Standard Size | Standard Size | Oversize | Standard Size | Oversize | |
| January – September | £0.43/ft³/month | £0.75/ft³/month | £0.65/ft³/month | £0.71/ft³/month | £0.46/ft³/month |
| October – December | £0.60/ft³/month | £1.05/ft³/month | £0.90/ft³/month | £1.00/ft³/month | £0.64/ft³/month |
Additional Fees
As mentioned in the drawbacks section, selling through FBA also may have additional fees for various reasons.
Returns Processing Fees – Amazon covers the customer service and the tasks involved with a product return. Fees will be charged any time Amazon provides free return shipping for customers.
Unplanned Services Fees – when stock arrives at an Amazon Fulfilment Centre that wasn’t supposed to, or boxes are labelled incorrectly.
Removal Order Fees – Amazon charged per item if you want stock to return from fulfilment centres back to you.
Long Term Storage Fees – Poor stock control management can lead to long term storage fees if products are left in a fulfilment centre for longer than 330 days.
There are other fees involved in selling on Amazon, but these do not directly relate to the fulfilment centres. These include high volume listing fees and refund administration fees.
Preparing for FBA
Set up Your Selling Account
If you don’t already have an Amazon Selling account, you will have to create one to sell on Amazon. If you are starting out and selling less than 35 items a month, we recommend the individual plan which costs £0.75 (excl. VAT) per item sold. If you are looking for more advanced tools (and sell more than 35 items a month), we suggest the professional plan for £25 (excl. VAT) per month.
Create Product Listings
Once your account is created and approved, you will need to create listings for any products you wish to sell on Amazon. This can be done through the seller central homepage.
Prepare Products for FBA
It is crucial for products to be packaged correctly before sending to the fulfilment centres, in order to avoid preparation fees. The requirements vary based on what you’re selling (bundle sets/boxed units/case-packed products etc). The full packaging requirements can be found here, and the box & shipping information can be found on seller central here.
Ship Your Products to Amazon
The next step involves creating a shipping plan for sending stock to Amazon. Need help/advice for sending stock to Amazon’s Fulfilment Centre? Contact Actimerce today to ensure a smooth and successful expansion into FBA.
Conclusion
We hope this blog has provided you with valuable information about Amazon FBA and how it can help you grow your business. For strategic advice from consultants with over 10 years of Amazon and E-commerce knowledge, get in touch with Actimerce today.