When Amazon introduced FBA as a service for online sellers, it opened up a world of possibilities for sellers to expand their businesses. FBA stands for Fulfillment By Amazon, and the service is exactly as it sounds. Amazon fulfills orders for other online sellers by handling all of the physical logistics of the sale. So, how does Amazon FBA work?
How Does Amazon FBA Work?
The Amazon FBA process helps sellers automate a giant part of the business: stocking, fulfilling, and shipping inventory. Amazon FBA also directly handles customer returns. Here is an overview of how Amazon FBA works:
1. Sellers send their products into various Amazon FBA warehouses across the country.
2. Amazon stores these products until a sale is made.
3. Once a sale is made, Amazon pulls the item from the shelf and packs and ships it to the buyer.
a. If an item is returned, Amazon handles the return and inspects the unit when it comes back.
b. If the item is still in sellable condition, the item is added back to the live inventory and again stored in a warehouse until someone buys it.
4. If the item is damaged, the seller has the option to remove the item from Amazon or destroy it.
5. Amazon handles all interactions with the customers about shipping and fulfillment.
6. After the sale is cleared, Amazon pays out the seller the sale price minus the fulfillment fees, storage fees, and Amazon’s normal commissions.
The Amazon FBA system allows Amazon to use their shipping network to get the item to the buyers at lightning speed, generally under two days. (Most items that are fulfilled by Amazon will carry the Amazon Prime logo next to them on the website.) Prime buyers get free two-day shipping on anything they order, and it’s only made possible by Amazon’s ability to quickly pull a product from their warehouses immediately after an order takes place and get it on the way to the customer.
Why is the Amazon FBA process so important for Sellers?
For the buyer, it’s obviously awesome to get free two-day shipping on all products. For the sellers, it removes the burden of handling products, printing shipping labels, processing returns, and virtually all other logistical elements related to shipping. (Note- sellers still have to manage customer service for general product inquiries not related to the fulfillment side.)
Basically, Amazon FBA eliminates the huge time commitment and intricate process of storing and fulfilling inventory. The days of paying high prices for warehouse storage or filling your garage with products waiting to sell are gone.
Sure, if you are doing retail arbitrage, you’ll still have to prep the products at your house before you ship them into Amazon FBA warehouses to wait for a sale. But, even with retail arbitrage, you are eliminating the management and fulfillment of orders, one of the biggest challenges of selling anything online.
To take it a little further, if you are doing Online Arbitrage, Wholesale, or Private Label and utilizing prep companies to receive the inventory that you order, these companies also prepare and ship your products to Amazon FBA warehouses for you. With this system in place, you are completely removing the need to physically see or touch the products yourself.
This means you don’t have to spend any time receiving, prepping, creating shipments to Amazon FBA warehouses, or fulfilling and shipping any items once they sell.
With FBA, you can remove the physical restrictions of the business, creating much more free time to travel, spend time with your family, or party with your wild neighbor Bill.
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