Amazon’s FBA program: Boon for Brands, Business & Startups

/ June 19, 2020 | 7 Mins Read

Amazon’s FBA program: Boon for Brands, Business & Startups

/ June 19, 2020 | 7 Mins Read

Amazon’s FBA program: Boon for Brands, Business & Startups

Fulfillment By Amazon is a service provided by Amazon that provides storage, packaging, and shipping assistance to sellers. Dive down to the following article to learn how sellers can take advantage of all of the resources and benefits when they sign up for Fulfillment By Amazon.

You must have seen a picture of Jeff Bezos in his early Amazon days sitting in a single room office with Amazon spray-painted on cardboard. He is the world's first trillionaire now. Thanks to his super-efficient e-commerce company Amazon, which has now become a household name for everyone across the globe.

amazon
Source: reddit

Amazon is a household name not only for the customers but also for the world of eCommerce, it is a tool that online sellers simply cannot afford to ignore

One of the major ways Amazon helps businesses become lucrative in the e-commerce space is through their Amazon fulfillment program. 

1. So what is the Amazon Fulfilment Program? 

Other than being a boon for all sellers, the Amazon fulfillment program allows sellers with warehouse storage space, packaging, and shipping facilities relieving all the burden from the shoulders of the sellers.

In other words, if an order is placed by the customer for your product. Amazon's employees physically prepare, pack, and deliver the product from their warehouse. 

Did you know?

  • Amazon marketplace sellers, product sales totalled $118.57 billion, up 25.2% from $94.67 billion in 2016. 

  • 66% of the top 10,000 sellers use FBA.

2. What are the benefits of using Amazon FBA?

Here are the reasons why businesses choose Fulfilment by Amazon program:

No investment in warehouse facilities

When you have your brand listed on the world's biggest e-commerce platform it becomes imperative for you to invest in big warehouses as well. With the Amazon FBA service, your space for storage of your items is taken care of by Amazon itself.

All you have to do is get your products shipped to Amazon's storage facility. And then when your product is ordered it is packed and shipped from that warehouse itself. 

The best of customer service

Part of the reason why Amazon is at the top is because of its superlative customer service. If you are a part of the FBA program then it basically means that all the customer support issues pertaining to your products will be handled by the Amazon customer support team.

From how and where to return the product, cancellation of the product to the management of late deliveries and refund related queries, trust Amazon to deal with it all.

Trustworthy Brand Authority

Brand-Authority

As you can see in the image above. This instills a strong trust in the customers when they see a product is fulfilled by Amazon. This is  also a mark of quality guarantee that most buyers will appreciate, making them less prone to patronize a seller in case something wrong happens with their deliveries.

Furthermore, having the Amazon name associated with your products will help consumers get assurance that they will get excellent customer service and quick delivery. 

Fewer Delivery charges for customers

As Amazon has a relationship with the major shipping companies, sellers associated with the FBA service will be charged lesser delivery charges. Sellers can also offer no cost delivery for orders over a certain price amount as products sold through FBA are also eligible for Amazon Prime and FREE Super Saver Shipping.

3. Which plan should you go for: individual or professional? 

Sellers who are new to the FBA program are often confused between which plan to choose. Here's what they need to know: 

Basically, sellers have two options to choose from: a professional or an individual plan.

  • Individual selling plan

The individual selling plan is suitable for sellers who do not require access to inventory tools and reports on a daily basis. They also have a lesser volume to sell due to the type of product and its market. Under this individual selling plan, the seller is not charged with a monthly subscription fee. The seller only has to pay the fees per-item fee in addition to the other applicable fees

Price: 

Individual sellers need to pay $0.99 for every item sold at the Amazon marketplace, in addition to the variable closing fees ranging anywhere between $0.45 to $1.35.

  • Professional selling plan 

The Professional selling plan gives sellers access to inventory tools to upload batch files and manage their orders through reports and feeds. This plan is suitable for medium- to large-size businesses.

In this professional selling plan, sellers are required to pay a monthly non-refundable subscription fee. This has to be paid regardless of whether the seller lists or sells anything that month. Here one does not pay a per-item fee when an item is sold. With this fixed monthly fee other charges as applicable as well. 

Price:

Professional sellers have to pay variable closing fees and referral fee percentages ranging between 6% to 25%. They also have to pay $39.99 per month, but they do not have to pay every time a product is sold.

Let's understand the different fees in detail below: 

4. What are the latest of Amazon's selling fees? 

To get started with Amazon's fulfillment program you will first have to know it's fees. With this you will be able to understand how you can generate revenue in the most profitable manner.

  • Monthly subscription charges

These charges apply for a professional seller. A professional seller could be anyone planning to sell more than 40 items per month. The fixed monthly fees are $39.99 per month.

If you plan on selling fewer than 40 items per month you can opt for  the individual selling plan where there is no upfront fee but you pay $0.99 with every product sold.

  • The per-item fee

Only Non-professional or individual sellers have to pay this fee. It is $0.99 per product sold.

  • Referral fees

Amazon referral fee is dependent on the product category.

Generally, the referral fee is a certain percentage of the price of the product. The referral fee is a certain percentage of the price of the product. But some items of certain categories have a per-item minimum referral fee.

Amazon will charge the seller whichever of these two is higher for each item:

Referral Fee as a percentage of sale price: This ranges between 6% to 20% (45% for Amazon devices), but is generally 15%.

Minimum Referral Fee of either $0 or $1: Jewelry and watches are the only two categories with a rate of $2.

Here is a chart by Amazon to help sellers determine referral fees for their specific product and category:

chart-by-Amazon

  • Variable closing fees

These rates only strictly apply to books, music, videos, DVDs, video games, consoles and software (BMVD products), and they will change in accordance to the product category, shipping destination and the kind of shipping service used.

  • Fulfillment fees

These fees are dependent on the dimensions and weight of the product. This charge varies from $2.41 and $10 for most products, the prices are going to increase in 2020.

5. What are the most frequently asked questions when it comes to fees and the FBA?

Since Amazon charges a host of different fees, sellers do have the following questions:

  • How much in fees am I going to pay Amazon?
  • What is left after all the expenses? In other words - what profit should I expect?
  • What selling price should I set to hit profitability?
  • What supply item price should I find to be profitable?
  • How much money can I spend on the marketing campaign?
  • How profitable is my product choice? In other words, what margin should I expect

So, finally, how do you get the answer to all of these questions?

IO Scout fba calculator is a free tool by ioscout.io that allows sellers to estimate the fees they will have to pay during the FBA program and can determine the revenue they will procure. In this particular section, we will talk about how to start with the FBA program and also how much you need to pay for the same. 

A free tool by ioscout.io will help you check your FBA fees in an easy manner. Follow these simple steps to get started: 

Step 1: Go to www.ioscout.io/fba 

Step 2: Insert the ASIN or ISBN number of your product

IO-scout-fba

Step 3: check details of the product, edit if necessary.

product-details-check

product-details-check

Step 4: choose filters like category, subcategory etc. , 

You will then be able to see your net profit and net margin in percentage. 

profit-calculator

If you still have more questions you can check out Amazon's official 

6. What are the different variables that are taken into account in IO Fee Calculator? 

There are several different variables that are taken into account in the IO FBA Fee Calculator such as:

  • Order handling
  • Pick & Pack
  • Weight handling
  • 30-day storage
  • Inbound shipping
  • Outbound shipping

Conclusion

By being a part of FBA program, businesses of all sizes and types can, not only get assistance in their online selling by the world leader of e-commerce but also create a better brand reputation for themselves, build a loyal customer base, and boost their online sales drastically. 

Shubham is an aspiring clinical psychologist, who also happens to be a blogger for corporates and startups.

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