So How Does FBA Work in 2023? A Guide to Selling on Amazon

Reading Time: 14 minutes

Amazon FBA (Fulfillment by Amazon) is an e-commerce service that has revolutionized how people do business. This solution allows you to store your products in an Amazon fulfillment center to sell and ship products, while Amazon’s fulfillment services package, ship, and provide quality customer service for individuals who buy your products.

With this Amazon seller fulfillment service, you can prioritize other aspects of your business, from marketing to product creation, rather than focusing on increasing distribution demands as you scale your business. Amazon FBA benefits sellers worldwide and can help young entrepreneurs grow their businesses in ways unimaginable.

But how does FBA work, and what should you expect before signing up for this service?

If you’re wondering whether to start selling with Amazon FBA, this article is for you. In this article, we’ll answer some of the following essential questions and cover these topics about selling with Amazon FBA:

• What is Fulfillment by Amazon?
• What does FBA mean?
• What does Amazon FBA stand for?
• What is an FBA seller?
• What does Amazon fulfillment mean?
• What is the Amazon FBA program?
• How does FBA work on Amazon?
• How Amazon seller works
• How Amazon fulfillment works

This comprehensive guide will break down everything there is to know about how Amazon selling works, the Amazon fulfillment process, and how to use Amazon fulfillment services to build a business that provides passive income. Let’s dive in!

What Does FBA Mean on Amazon? What is FBA anyway?

Newcomers to the e-commerce world often ask: what does Amazon FBA mean? What’s Amazon FBA in the first place? How does FBA work?

Amazon FBA is short for Fulfillment by Amazon. The service helps businesses and entrepreneurs streamline the distribution process by leveraging the advantages of selling on Amazon, such as fast shipping.

FBA lets businesses outsource the order fulfillment process to Amazon by sending products to Amazon fulfillment centers. The rest of the process is left to Amazon: when a customer purchases your product, Amazon selects, packs, and ships to order to its final destination.

Amazon also manages customer service and returns for your products to make the process less overwhelming. All you have to do is tell Amazon what to send and where to send it!

FBA in Amazon represents the perfect way for many sellers to quickly fulfill orders and avoid falling behind on distributing products. This service guarantees better customer satisfaction by making meeting your customer’s expectations easier.

What is an FBA Seller?

Hint: it could be you soon enough! Let’s get to the nitty-gritty details about being an Amazon FBA seller.

Amazon Seller: How it Works and What is FBA on Amazon?

So, what does being an FBA seller mean, and what does an FBA seller have to do to fulfill their side of the deal? As a seller, you’re responsible for the following:

• Choosing your products to sell on Amazon: while Amazon handles the hard work for you, it’s essential to conduct thorough research beforehand to see what sells well on Amazon and determine whether the platform suits your business.
• Keeping your inventory up-to-date: Monitor your FBA seller account frequently. Amazon will let you know when your business is experiencing low stock levels, but you should have your inventory restocked ahead of time to meet customer demand. Trust me though, this is often easier said than done.
• Creating your product listings and marketing your offerings: Amazon’s massive customer base is both an advantage and a pain point for many businesses. While listing your product as an FBA seller will help you rank higher in Amazon’s search results, the massive market of consumers means that you’ll need to keep your product listings, descriptions, and marketing effective to guarantee a strong customer base.

How Does FBA work on Amazon?

Now that we’ve answered the question of what it means to be an FBA seller, let’s explain Amazon’s role and how Fulfillment by Amazon works. Fulfillment by Amazon (FBA) is a vital resource for many budding entrepreneurs like you because they take the hassle out of fulfilling customer orders.

Below is a breakdown of what Amazon covers in its comprehensive program:

• Amazon receives your products at one of its warehouses and stores products before they sell to your customers.
• When FBA orders come in, Amazon deals with the transaction process, from payment to inventory updates. However, you are responsible for restocking inventory to avoid being out-of-stock.
• FBA fulfillment occurs once Amazon has packed and shipped your product to the customer.
• For a customer needing customer service or additional guidance, Amazon can manage the vast majority of customer interactions to save you time. For example, Amazon manages returns and refunds for your products.
• Amazon deposits your seller profits into your bank account every two weeks.

How Do I Sign Up for Amazon FBA?

Amazon fulfillment isn’t complicated, especially when you’re familiar with the concept before diving in head-first. But what is an Amazon FBA seller, and how can you get started?

To use Amazon FBA successfully, consider the following overview of the typical FBA step-by-step process.

1. Sign up for an Amazon Seller Account. To use Amazon FBA, you must have an Amazon seller account. Sign up on Amazon’s website to create your seller account and log in to Amazon’s Seller Central.
2. Add product listings. After registering your business with Amazon, you can register your products and add listings to the Amazon catalog.
3. Specify. When adding your listings, specify that you are selling FBA inventory.
4. Prepare your products. Next, prepare your products to send to an Amazon fulfillment center. Ensure that your products are safe and ready for transportation. Always double-check that you meet Amazon’s shipping requirements and packaging guidelines.
5. Ship your products to Amazon. Once your products are packaged safely and securely, you can print shipping labels and send your products to an Amazon fulfillment center.
6. Make sales. After the fulfillment center receives your products, the items will become available for customer purchases.
7. Monitor your inventory. Once your products are in Amazon’s fulfillment warehouses, you can monitor your inventory in the Amazon Seller Central dashboard.

What are 10 Amazon FBA Benefits?

A Fulfilled by Amazon seller has much to gain by signing up to sell through Amazon FBA. However, knowing how to use Amazon fulfillment center services is only one step to a successful selling experience.

You might wonder about the primary benefits of this service before you’re ready to use the Fulfill by Amazon services. If you’re hesitant, consider the following fantastic benefits of using Amazon FBA to grow your business exponentially.

1. Access to Amazon’s Customer Base

Amazon’s customer base is one of the biggest in the world, and Amazon FBA allows businesses to tap into that customer base.

As the fifth-largest company worldwide in market capitalization in 2022, Amazon presents a massive opportunity to reach untapped markets. Your products are exposed to millions of potential buyers looking for the exact solution you provide.

Ultimately, Amazon FBA is one of the best ways to get your brand noticed.

2. Access to Amazon’s Reputation

Equally appealing for sellers considering making an Amazon FBA account is the access to Amazon’s reputation they can access with this service. Amazon is one of the leading brands worldwide for brand value, and its high customer service and order fulfillment standards allow businesses to take advantage of a high-class reputation.

When customers order products from Amazon, they know to expect a high level of customer service and a fast delivery time.

By selling without Amazon FBA, you may not be able to meet these expectations. FBA takes the distribution stress off your shoulders to let you focus on what matters most for your business.

3. Faster Service

Speaking of customer expectations, Amazon FBA makes it easy for businesses and entrepreneurs to fulfill orders quickly.

Amazon FBA’s vast network of fulfillment centers makes it easy to get their orders to customers quickly, especially for consumers with an Amazon Prime subscription.

Bottom line? The faster the service, the more likely customers will return to your business for future purchases.

4. Achieve a Higher Ranking on Amazon

When customers search on Amazon, products with Amazon FBA rank higher than those without. This factor means businesses with Amazon FBA will have their products appear higher in search results, leading to more sales and reviews.

Customers are more likely to trust products with a high ranking, which converts to more sales and revenue for your business.

Sellers that do not use Amazon’s FBA program have products listed by the total price of the product and the cost of shipping. However, products from Amazon’s FBA sellers are listed by price only, meaning these items will be among the first to appear in search results.

5. Reduce Your Overheads

With Amazon FBA, businesses don’t need to worry about storage, paying employees, or handling administration. This can significantly reduce overhead costs and eliminate time-consuming processes, letting you focus more on your products and increase your profits.

6. Boost Your Productivity

Amazon FBA makes it easy for businesses to focus on what they do best and outsource the rest. You want to constantly improve your products and evolve your business to meet shifting customer demands, and Amazon FBA makes it significantly easier to do just that.

With Amazon FBA, you can do what you love and reignite your passion for the products you sell. FBA doesn’t only make selling more accessible and more productive–it can give you the motivation you need to keep innovating your brand.

7. Run Your Business From Anywhere

Amazon FBA allows entrepreneurs to run their businesses from anywhere. No matter where you are, you can generate revenue and make sufficient passive income by selling with Fulfillment by Amazon. Rather than being tied to a physical location, you can keep your company flexible and appeal to a massive audience you wouldn’t otherwise reach.

8. Streamlined Logistic Services

Perhaps the most praised benefit of selling with the Amazon FBA program is that the company lets you streamline your logistic services, eliminating the stressful process of checking and shipping every single order solo. With Amazon’s streamlined logistic services, you can save significant money on storage and shipping, making it possible to scale your business.

This benefit is especially crucial for businesses starting to see a significant rise in their sales and needs to ship out products fast. With FBA, all you have to do is replace your stock, making it much more likely that you can produce large quantities of your products at once.

9. Simple Order Management and Tracking

Amazon FBA’s streamlined process means that you can easily manage your orders from start to finish, down to the tracking and order management process. This detail-oriented approach provides full visibility into all purchases.

Amazon FBA allows you to oversee your FBA orders with minimal effort to guarantee that the process is running smoothly and orders are being shipped and received on time.

10. Offloaded Customer Support

Not all entrepreneurs are suited to being customer service representatives for their businesses. If you’re operating without Amazon FBA, you’ll have to handle customers alone, which becomes incredibly challenging as your customer base grows.

Your business will start to falter if your customer base expands and you don’t deliver on all of your customer’s needs.

The Disadvantages of the FBA Service Amazon Offers

While Amazon FBA has vital benefits to help your business grow and thrive, there are disadvantages that some sellers encounter to be aware of before you go all-in and venture down the Amazon seller fulfillment path.

Consider the following disadvantages that could cause issues with Amazon FBA without proper preparation.

The Costs Add Up

One of the main disadvantages of Amazon FBA is the cost associated with using the service. Amazon charges fees for storing and fulfilling your products, which can add up quickly, especially if you aren’t seeing enough returns or your sales aren’t growing.

If your stock isn’t moving quickly, Amazon FBA could cost more than it saves long-term.

Amazon offers a revenue calculator to help FBA sellers accurately estimate the total cost of shipping their products through Amazon FBA.

Additionally, Amazon provides the following examples to help you better understand the cost breakdown of Amazon’s FBA program (note: pricing may vary depending on your region):

Product	Size Tier	Dimensions	Unit Weight	Shipping Weight Range	Fulfillment Fee
T-shirt	Large standard size (Apparel)	14” x 10” x 0.76”	12.32 oz	12+ to 16 oz	USD$5.32
Baby cot	Small oversize	24” x 7.5” x 6”	7.90 lb	7+ to 8 lb	USD$12.67 (USD$9.73 for first 1 lb, plus USD$0.42 for additional 1-lb intervals)
Monitor	Large oversize	54” x 35” x 3.5”	41 lb	47+ to 48 lb	USD$89.98 (USD$89.98 for first 90 lb)²

Your Packaging Isn’t Branded With Your Logo

Using Amazon fulfillment means that you won’t have the option to brand your product packaging with your logo–instead, you’ll be required to use Amazon’s signature packaging for your products.

Your logo and branding not being visible on the package could cause issues if you’re starting out and looking to build your image and foster customer loyalty.

A distinctive logo means a better chance at having a unique brand identity and makes it more likely that your customers will remember you. By sacrificing your logo for Amazon, your hard work will be associated with Amazon rather than your business.

Strict Product Preparation is Required

The process of preparing your products to send to an Amazon fulfillment center is another point of contention held by many FBA sellers. Sellers might find it challenging to meet the specific requirements that Amazon sets for FBA products, and if your products don’t meet those requirements, you’ll encounter costly delays and returns that can damage your business.

Always ensure you properly package and label your products to avoid rejection when your shipment arrives at the fulfillment center. Following the steps carefully can lower the chance that you’ll experience delays in getting your product on the market.

Challenges With Inventory Management

Managing and overseeing your inventory when you sell with Amazon FBA is a learning curve. If you aren’t careful, you might run into detrimental errors that slowly damage your company. It’s often challenging to track inventory and determine which products are available at any given time when you do not have direct access to your products.

Because you aren’t involved in the sales process as an FBA seller, you might not realize when you run out of stock–and when that happens, Amazon reduces your product ranking, making it difficult for customers to find you in the search results.

To prevent this, frequently monitor your inventory and analyze inventory reports to guarantee that your current inventory is accurately reflected in the Amazon system. Without accurate levels, you could wind up in an out-of-stock situation.

Increase in Returned Products

Using the Amazon FBA service comes with the risk of increasing the number of products returned. Because Amazon is in charge of the sales process and because of the company’s “easy returns” policy, businesses and entrepreneurs may encounter an unprecedented level of returns from their buyers.

Stranded Inventory

If you only use Amazon for your sales and send inventory in bulk, you risk stranding your inventory in an Amazon fulfillment center. If your products aren’t selling on Amazon and are sitting around the Amazon FBA warehouse, you’ll waste significant profits with FBA. Putting all of your faith in this program is a risk that sellers should prepare for before making Amazon FBA their sole business platform.

No Control Over the Quality of Shipping

Poor shipping quality is a significant risk when you sell your products with Amazon FBA. Though Amazon’s packaging is typically high-quality and protective, there are rare occasions when your product might incur damage on the way to its final destination. Since Amazon is entirely responsible for the shipping process, you can’t guarantee that your products are appropriately packaged for delivery.

Without control over the quality of your product shipping, customers might receive damaged boxes and items that allow for a return, refund, or replacement. No matter what the customer chooses, this will impact your revenue and, potentially, your reputation. Therefore, approach your decision carefully when deciding to work with Amazon FBA fulfillment centers.

If any of these are deal-breakers for you, Amazon Associates might be a better fit because as an Amazon affiliate, you don’t have to deal with physical products at all. Agora has some great free training on how that all works if you want to learn more.

Pros and Cons of Amazon FBA for Sellers

Pros:

1. Effortless Fulfillment: Amazon FBA simplifies the fulfillment process, making it easy for sellers to focus on growing their businesses while Amazon handles the shipping, packaging, and customer service.
2. Leverage Amazon’s Reputation: By utilizing Amazon FBA, sellers benefit from Amazon’s stellar reputation for customer service and fast delivery, building trust with customers.
3. Access to a Massive Customer Base: With Amazon FBA, you tap into Amazon’s vast and global customer base, exposing your products to millions of potential buyers.
4. Fast Shipping and Prime Benefits: FBA offers fast shipping options, and products are eligible for Amazon Prime, making them more appealing to customers.
5. Improved Amazon Ranking: FBA products tend to rank higher in Amazon search results, increasing visibility and the likelihood of more sales and reviews.
6. Streamlined Logistics: Sellers enjoy the convenience of Amazon’s streamlined logistics, eliminating the complexities of order fulfillment.

Cons:

1. Fulfillment Fees and Costs: Sellers should be aware of FBA fees, which can add up, affecting profit margins. Utilizing the Amazon FBA shipping calculator is crucial to estimate costs accurately.
2. Loss of Branding Control: Using FBA means your products won’t have your branding on the packaging, potentially affecting brand recognition and customer loyalty.
3. Strict Product Preparation: FBA has specific product preparation requirements, and failing to meet them can lead to delays and returns.
4. Inventory Management Challenges: Managing inventory can be challenging, as sellers may not have direct access to their products. Running out of stock can harm your product ranking.
5. Increased Returns: Amazon’s easy returns policy can result in a higher number of product returns, impacting your revenue.
6. Limited Shipping Control: Sellers have no control over the quality of shipping, and occasional damage during transit may occur, affecting customer satisfaction.

While Amazon FBA offers numerous advantages, sellers must weigh these against the potential drawbacks to determine if it aligns with their business goals and needs.

Does Being an Amazon Seller Really Work?

So far, you’ve discovered the answers to some of the following vital questions:

• What is the Amazon FBA program?
• What is Amazon Fulfillment Services?
• What does it mean to be an Amazon FBA seller?
• What does FBA mean in Amazon?

However, while these questions are helpful to understand before you embark on your journey along the FBA process, you still need to know whether the program works overall. Given the benefits and disadvantages of this program, knowing what to expect and if the service will benefit you is integral to your overall satisfaction and success.

How Does FBA Work – Summary

If you’re wondering whether Amazon FBA is worth it, the answer is yes. While it will take time to get your business up and running, and while you might not see massive sales immediately,

Amazon FBA is a vital service for anyone wanting to stay competitive on the platform, or even for those not wanting to deal with shipping products themselves ever again.

By going beyond understanding what FBA is in Amazon and exploring the various assets this platform offers business owners, you can expand your business and succeed on Amazon. However, it takes true dedication to achieve the success you’re hoping for.

While not all Amazon sellers are successful, learning from your past mistakes and taking guidance from Amazon experts significantly boosts your chances of making a profit.

At least all you’ll need is a laptop and an internet connection!

How Does FBA Work – FAQs

How does Amazon FBA work?

Amazon FBA, or Fulfillment by Amazon, is a service that simplifies the e-commerce distribution process. When a customer places an order, Amazon handles product storage, packing, shipping, and customer service. It streamlines the logistics of e-commerce and offers efficient order fulfillment, making it a valuable option for sellers using multi-channel fulfillment and e-commerce Amazon FBA strategies.

Can you actually make money with FBA?

Yes, many sellers have found success and profitability with Amazon FBA. However, it’s essential to understand the FBA fees, fulfillment fees, and other costs associated with the service. Sellers must conduct thorough research, select the right products to sell on Amazon FBA, and optimize their listings to maximize their revenue. Leveraging Amazon FBA can be a good idea for your e-commerce business when done strategically.

Is Amazon FBA good for beginners?

Amazon FBA is an excellent option for beginners entering the e-commerce world. It simplifies the logistics of e-commerce and multi-channel fulfillment, allowing newcomers to focus on product selection and marketing. By leveraging Amazon FBA, beginners can sell their products on Amazon without dealing with the complexities of shipping and customer service. However, it’s crucial for beginners to understand how FBA works and continuously improve their e-commerce strategies.

How much does Amazon FBA take from you?

Amazon FBA involves various fees, including FBA fees, fulfillment fees, and referral fees. The exact amount Amazon takes from your revenue depends on factors such as the size and weight of your products, how long they’re stored in Amazon’s warehouses, and the category of the items you sell. Using the Seller Central revenue calculator is essential to estimate these costs accurately, which is an important aspect of understanding FBA pricing and FBA shipping cost for your e-commerce business.