How Does Amazon FBA Work?
Photo by Christian Wiediger
Originally Posted On: https://andyamz.wordpress.com/2020/07/28/how-does-amazon-fba-work-andy-amazon-advocate/
Have you been wondering how to make money online through Amazon? Or heard of a friend or acquaintance who couldn’t stop raving about the benefits of e-commerce but you have no clue where to begin? Or you’re just curious to know about Amazon FBA and how it works in the broader context?
In today’s post we’ll be answering all your questions regarding Amazon FBA and the many benefits it has, some downsides to it, as well as going over the reimbursement process for it in case of any discrepancies or disputes. Although Amazon FBA allows sellers to provide their products easily through Amazon’s delivery service, there can be a lack of control issues that usually arises among sellers.
While there is no denying that the Amazon FBA program allows you to scale your small business to new heights, it also takes away many stressful points business owner face during their daily operations. That said, if you’re totally new to the charm and hustle of selling online, let’s begin by discussing what the Amazon FBA program is and how you can maximise the benefits.
What is Amazon FBA?
The Fulfilment by Amazon is a program by the E-commerce giant whereby online sellers can gain access and utilise Amazon’s warehouse and delivery infrastructure while selling their products on the platform. It is the perfect solution to inventory issues small business owner can face if their products are going off the shelves fast but they don’t have enough resources.
Similarly, a great example could be that you have a few products out of your range that are doing well on Amazon, and while you may want to put in purchase orders for more inventory, you lack the storage space to accommodate them all. On the flip side, you may not have the resources to package and delivery that many orders and need a reliable delivery structure in place.
That is where the Amazon FBA program steps in that allows you to generate passive income, while your products sell like wild fire through their automate processes. Of course in order to start selling through the FBA program you need to setup an Amazon Seller Central account. The next section discusses that in detail.
Setting up Amazon Seller Central Account
Before you go setting up a Seller’s account it is important to mention that access to Amazon’s eco-system doesn’t come free nor is it cheap. There is a monthly fee of $39.99 for the professional account and you will have to pay fulfilment costs along with warehousing charges in case your products aren’t high selling.
That is why it is better to begin the FBA program once your store takes off and your products become a hot commodity on Amazon. To begin the signing up process, go to this link and you’ll be redirected to a verification process where you’ll need to provide details including:
- Driver’s license
- Bank Account Statements
- Credit Info
- Address verification
- And more parameters
Although, in the beginning it may seem like a tedious and costly strategy, it will pay off in the long run once you have established your business on Amazon and zeroed in on your top selling items.
Now if you’re wondering how Amazon FBA works and the entire lifecycle, well we’ve explained it all down below.
Amazon FBA Process Breakdown
After you’ve set up your seller’s account and put up your products through a few clicks, here is how Amazon will handle all future orders:
- Firstly you’ll send over all your products to one of the specified Amazon warehouses.
- All your products will be stored safely in the warehouses. Don’t worry.
- Once a customer places an order, Amazon will deal with the entire transaction from payment to shipping.
- After the payment is good to go, the order will be packed and shipped by Amazon.
- All refunds or returns will be handled by Amazon, post sale. So you won’t have to deal with it.
- After every two week, your sales profit will be sent over to your bank account.
And that is about it.
As you can see it is such an automated and stress free process of selling goods through Amazon FBA. When you’re running a small to medium online business, there are so many aspects of running a business that you need to be on top of, and most of the times you’re the only one managing them.
However, Amazon takes over many aspects of a sale transaction from packaging to shipping , delivery, post sale returns and refunds as well. Sure, you can take on the packaging aspect and queue up to the post office, but isn’t it awesome if a company – that handles thousands of orders a day – can take over it?
There are many benefits of signing up for the Amazon FBA account, and in the next section we’re going over them in detail.
Benefits of Amazon FBA
It can be hard to multi-task and the stress can add up real fast, which is why if you’re already have products that sell well on Amazon it is a good strategy to go with the Fulfilment by Amazon to further your business.
Some advantages are:
- Trust: people all over the world trust Amazon and use it to buy so many items. They know their delivery rocks, they can get a refund and if you are not confident about gaining customer trust, Amazon helps you in that regard.
- Fast Service: we all know customers don’t like waiting around. When they place their orders they want it delivered fast and not have to wait around. Amazon’s ordering system is uniquely fast and top notch, and it matters when you’re thinking of expanding your business.
- Free Delivery: if your customers have Amazon Prime they automatically receive free delivery which surely is a huge advantage and competitive edge as compared to other sellers in the same category.
- Better Ranking: people who sell with the FBA program have their products appear higher in search results, which mean higher the chance of sealing a sale.
- Reduced Expenses: with the FBA programme you will see a decrease or complete removal of overhead costs like storage, payroll, and other admin related factors.
- Ease of Operation: running your business from anywhere in the world? That is like a dream come true! As a FBA seller all your order issues and customer queries will be handled by Amazon which gives you all the freedom to conduct business from wherever, whenever!
The Buy Box Advantage
Apart from the advantages we’ve mentioned above, the highlight among them all is the “Buy Box” advantage that makes sure that your products are in the cart of your customers. So what is this feature and how will it increase credibility for your products? Here is how!
The Buy Box option adds an “Add to Cart” button to your products listed in the search page. Most customers simply click on the button without looking into the details or reviews, because they trust Amazon or know it is a legit product. In order to be eligible for this feature you need to fulfill two criteria:
- Be a registered trader for more than 90 days.
- You need have some sales and reviews already under your products.
Knowing when you’ll qualify for the “Buy Box” advantage won’t be notified by Amazon, but you can realize when it has taken affect once you see an increase in the sales. Of course there are other factors that can help you gain it quickly, like competing in the same category with a better price or by standing out with the product’s high quality.
Nonetheless, the Buy Box advantage is one of the most important features you get through the FBA program, and that can allow you to work with the secret Amazon algorithm rather than against to make your products visible.
Disadvantages of Amazon FBA
While the amount of pros we’ve gathered up above may portray the FBA program as fool proof there are some disadvantages to it that may otherwise go unnoticed or add up in the long run. Here is a list of cons to look out for before you jump ahead with the Fulfillment process:
- Costly program: like all good things that come at a price, the FBA program isn’t cheap nor can anyone just come and start using it. Since, Amazon is a business you can expect that the selling giant will charge you for the warehouse and fulfilment fees, even if they’re turning in a sales profit. The best way to make sure you’re not bleeding money is to find products that are selling fast and not sitting around.
- No Branding: you won’t be able to add any branding or promotional packaging to your products as Amazon will be using their own branding. This can be a pretty big downside if you’re looking to create more brand awareness.
- More Returns: as Amazon has pretty relaxed refund policies you may end up seeing more refunds. Of course this won’t be true if you are confident that the goods you are selling are of top notch quality
- Strict Guidelines for products: once you get accepted for the FBA program, you’ll have to follow a strict set of guidelines on preparing and shipping your products to the Amazon warehouse. In case you fail to follow proper instructions, this can result in inventory rejection and cause further delays that will build up to more stress.
For many businesses, these disadvantages won’t seem huge once the benefits of joining the FBA program are compared. Amazon’s great delivery and warehouse system does make the program see amazing, and if you know you products are of amazing quality, and sell well you won’t have much to think about.
However, if you’re still trying to figure out how to maximize the benefits of the FBA program, it all starts with figuring out products that will sell well on the site. The next section discusses it in detail.
Finding the Right Products to Sell
To figure out what products will do well on the Amazon site you will have to look out for the highest selling products. This can be a very long and redundant task, and won’t give you optimal results fast, which is why we recommend using tools that can help you figure out what item gets the highest volume of purchase or search result.
Tools like AMZscout and Jungle Scout help you figure out find product categories that have the highest search result, look for keywords that’ll help you rank items better and find profitable products to sell. If you haven’t yet started selling as an Amazon FBA seller, because you’re not sure how to proceed with rankings and search result volumes, tools like the one’s mention above can help you form a better picture and marketing strategy.
To help break it down further, here is how products on Amazon are ranked on their search page:
- Sponsored results: sellers can buy ad spaces on the first page with the “ad” logo beside them. Those are usually sponsored results and appear in the top row.
- Organic results: the best selling items on Amazon appear first through organic high sales velocity. These products will also have terms like “Best Seller” or “Amazon Choice” attached that further affect customer choice as well.
Through proper keyword research and reviews for the products you are selling you will have a better shot at making sure your items don’t collect dust while sitting in the warehouse. And we hope, through the information we’ve relayed above you can form a better picture of what items to choose and how quickly they will sell.
To learn more about Amazon FBA, sign up for a FREE Workshop at http://www.FBApreview.com in South-East Asia, Hong Kong and Taiwan
Although the Amazon FBA program may not be for everyone, but if you’re already a seller on Amazon then you’re bound to reap many benefits from this program, and expand your business further. It is a worthwhile and lucrative venture, but you will have to put in hard work and research to truly maximise all that this program has to offer.
It takes away many pain points and stress factors that small to medium business owners face while selling and delivering their products, and provides passive income without the need for sellers to be in one city or country. The freedom you get from using FBA is unique and if you know your products are selling like hot cakes then it will be a profitable investment in the long run.