You want to sell your own products or brands on Amazon and benefit from the advantages of the world’s largest online marketplace? Then you should take a look at the “Fulfillment by Amazon” (FBA) program.
FBA and FBM (Fulfilled by the Merchant) are programs to participate in the Amazon Marketplace and its benefits. FBA is a service from Amazon that allows sellers to offer their products on the Amazon Marketplace and benefit from Amazon’s logistics and customer service services.
Moreover, there is also an alternative “Fulfilled by the Merchant” (FBM), but FBA offers many advantages, such as higher visibility of products and priority in delivery.
The FBA program has been available since 2005 and has since become a popular choice for sellers who want to successfully sell their products.
In this article, we will take a closer look at the FBA program and explain how it works and what advantages it offers. We will also compare the advantages and disadvantages of the program and present other marketplaces that can be considered as an alternative.
What is Amazon FBA?
Amazon FBA, or “Fulfillment by Amazon,” is a service from Amazon that allows sellers to offer their products on the Amazon marketplace while benefiting from Amazon’s logistics and customer service capabilities. With FBA, Amazon takes over the logistical tasks:
- Receipt of goods
- Warehousing
- Picking
- Packing
- Franking
- Shipping of the products to the end customer
- Processing of returns
This means that the reseller sends its items either itself or via a wholesaler to a central Amazon warehouse, from where Amazon handles storage, shipping, and customer service.
This allows the seller to focus on what matters most: providing high quality products and marketing their brand. FBA provides easy access to one of the largest and most visited marketplaces in the world, making it an attractive choice for many sellers to sell their products online.
Differences: FBA & FBM
There are two ways to offer products for sale on Amazon: Fulfillment by Merchant and Fulfillment by Amazon. FBM allows sellers to ship the goods they sell themselves. FBA, on the other hand, allows sellers to let Amazon handle the storage and shipping of their goods. For whom is which program suitable?
Fulfillment by Merchant for small merchants
Basically, FBM is suitable for small merchants who have their own warehouse capacity and shipping capabilities. FBA, on the other hand, is suitable for large or small merchants who scale quickly and do not have their own warehouse.
Amazon FBA: Disadvantages
However, there are also disadvantages of FBA over FBM. FBA comes with higher fees, especially for warehousing and shipping. These fees depend on product category, season and size. For example, it costs €26 to store 1 cubic meter from January to September and €36 from October to December. This means a 39% increase compared to January to September. It is important to note that these fees are in addition to the regular sales fees that are charged for each sale. Therefore, it is significant to carefully consider the costs before choosing FBA or FBM.
Amazon FBA Cost
Amazon FBA costs can vary from product to product. The fees break down as follows:
1. Basic fee
A monthly fee of 39€ is charged for the use of the Amazon FBA program. Numerous benefits already accompany the basic monthly fee. Among other things, it allows you to benefit from Amazon’s Prime service, which means faster delivery times for customers, resulting in higher customer satisfaction and higher sales figures. The option of multi-channel fulfillment and the use of Amazon’s logistics and warehouse infrastructure can also be of great benefit to many resellers.
2. Storage fee
There are fees for the storage of the products. For example, the storage of 1 cubic meter costs 26€ from January to September and 36€ from October to December. This represents a difference of 39% compared to January to September.
3. Shipping fee
There are also fees for shipping the products to the end customer. For example, shipping fees start at 1.79€ for a small envelope measuring 20 x 15 x 1 cm and weighing 80 grams. There is always a 50 cent penalty added if the seller does not participate in the “Central Europe” program.
4. Agency fee
This fee is equivalent to a sales charge. It is usually 15% of the item sales, but only 7% for electronics since the margin in this area is basically lower.
5. Return costs
Returns are subject to a 20% brokerage fee.
It is important to note that Amazon FBA costs for resellers can be significant and should be carefully analyzed before opting for the program. It is advisable to weigh the costs against the expected sales and profits to ensure that using Amazon FBA is really worth it. To help, there are tools and calculators that can help you calculate and compare costs.
It is also important to be aware of the current fee structures provided by Amazon and review them regularly as they may change occasionally.
Requirements for Amazon FBA
Before you can join the FBA program, there are some requirements that should be met in order to sell successfully on the platform.
1. Sufficient knowledge of Amazon
One of the most important requirements is that the reseller already has experience with selling on Amazon and is familiar with the platform. For this reason, it can be beneficial to have previously participated in the FBM program to get a first impression and understanding of how the platform works and what requirements need to be met.
2. Existing storage capacities
Another important prerequisite is that you as a seller have the sufficient storage capacity to store the products that are to be sold. Since Amazon takes over the logistical tasks such as receiving goods, warehousing, picking, packing, franking, and shipping the products to the end customer as well as handling returns, it is important that you as a reseller have the sufficient storage capacity to be able to send the products to Amazon and ensure that the products are always available.
Furthermore, it is important that you as a seller have a good shipping infrastructure to deliver the products to Amazon quickly and efficiently.
3. Time management
Likewise, aspiring Amazon FBA sellers should be well organized and have good time management skills to ensure that stock levels can be kept track of and merchandise can be reordered in time to avoid sell-outs. Only those with good knowledge of product categories and demand can ensure that they are selling the right products. Demand should also be analyzed at regular intervals.
4. Knowledge of Amazon policies
Finally, as a seller, it is important that you have a good knowledge of Amazon policies and regulations. This will ensure that the requirements are met and that the platform can be used properly. Amazon has strict policies and regulations that must be met in order to sell successfully on the platform. Accordingly, it is important to be well informed about them in advance and to comply with them.
5. Register for Amazon FBA Business
Before you can start selling on Amazon, it is important to register a reselling business. This is necessary in order to legally sell on the platform and fulfill tax obligations. There are specific requirements and regulations that must be met depending on which country you are in. It is advisable to familiarize yourself with the local regulations and requirements and make sure that all the necessary steps are taken properly to avoid legal consequences.
6. Amazon FBA Taxes
In order to sell successfully on Amazon, it is important to consider some tax aspects. These include, for example, sales tax and income tax. Familiarizing yourself with the tax requirements and meeting them correctly is important to avoid legal consequences. Those who deal intensively with the topic of taxes will be able to build a successful reselling business.
As part of selling on the Amazon Marketplace, Amazon offers benefits to its sales if they participate in the Central Europe Program.
The Amazon Central Europe Program allows sellers to store their products in Poland and the Czech Republic, thus saving on logistics costs. Another advantage of the Central Europe program is the ability to benefit from lower shipping fees. By using Amazon’s shipping fees to ship from German inventory (storage in Germany, Poland and the Czech Republic), savings of at least €0.26 per unit can be achieved.
It is important to familiarize yourself with the specific requirements and costs of the Central Europe program in order to make the most of the benefits. However, these benefits create additional sales tax obligations and reporting requirements such as Intrastat. In order to meet these obligations, Amazon offers VAT services that can be utilized at special rates. Alternatively, of course, the services of an existing tax consultant can be used so that the business transactions can be correctly entered into the invoicing program.
Find Amazon FBA Products
Want to sell on Amazon but don’t have a suitable reselling product yet? In the following, we will go into how you can find profitable products to sell on Amazon.
One of the most important aspects when choosing products for Amazon FBA is the margin and profit. One way to find suitable products is to use tools that analyze Amazon sales data and show the products with the highest margins and sales figures.
Find Amazon FBA products through self research
Finding suitable reselling products can be a big challenge. But occasionally, appropriate FBA products can be found even in everyday life. For this, it can be helpful to go through your personal household and gather inspiration.
An example of such a product could be a portable air purifier. These products have become increasingly popular in recent years and offer a good margin. Another example represents a multifunctional kitchen tool that can be used in various kitchen tasks and has a high demand. It is important that you take your time to figure out the different options and find the best products for the FBA business.
Find Amazon FBA products using tools
Using tools is another option to find suitable products for Amazon FBA. An example of such a tool is Jungle Scout. It allows you to analyze Amazon sales data to find the products with the highest margins and sales figures. Moreover, it allows you to search different keywords and analyze the competition situation. Another helpful tool is Helium 10, which offers a variety of features. These include monitoring keywords and analyzing sales data.
In addition, there are many other tools such as Viral Launch or AMZScout. We will introduce you to other helpful tools in the following:
- Keepa: A tool that allows tracking and analyzing the price history of products on Amazon. There is also information about sales figures and ratings.
- CamelCamelCamel: A tool that works similarly to Keepa, but also allows you to create price notifications and track the price history of products on other platforms like eBay.
- Profit Bandit: An app that allows you to compare the selling price of products in retail stores with the selling price on Amazon to calculate potential profits.
- Unicorn Smasher: A tool that allows you to analyze sales data from Amazon to find the products with the highest margins and sales, as well as get a realistic estimate of sales per month, profit, and more.
- Viral Launch: A tool that makes it possible to research product ideas, identify keywords, perform competitive analysis, and obtain product data. There are also functions for optimizing product listings and monitoring ratings and sales.
- AMZScout: A tool that makes it possible to research product ideas, perform competitive analysis, obtain product data, and get sales estimates. There are also functions for monitoring ratings and rankings.
- Helium 10: A tool to research product ideas, identify keywords, perform competitive analysis, obtain product data, optimize product listings, monitor reviews and sales, and support a variety of other functions.
- Jungle Scout: a tool to research product ideas, perform competitive analysis, obtain product data, optimize product listings, monitor reviews and sales, and support a variety of other functions.
Create Amazon Seller Account
Creating an Amazon Seller account is the first step to being able to sell successfully on Amazon.
To create your Amazon Seller account, you must first go to the Amazon Seller Central page and then click on “Register”. You will then be asked to enter your contact and bank details and confirm your identity. It is important that the information is correct and complete, as it will be used to process orders and payments later on. Of course, it is also possible to update your account information later if there are any changes. Furthermore, there is a verification process that you need to go through before you can use your Amazon Seller account. After entering your contact and bank information, you will be asked to confirm your identity.
This can be done via credit card or bank account. Occasionally, the invoice for a trade registration or a trade certificate may need to be presented.
Alternatively, Amazon may verify your identity in another way, such as a phone call or email. Make sure that you follow all of Amazon’s instructions carefully. This way, your account can be successfully verified.
The verification process may take a few days. Once this is done, nothing stands in the way of selling on Amazon.
It is advisable to start this process well in advance of the planned sales launch to ensure that everything goes smoothly.
The best Amazon FBA alternatives
There are many reselling platforms that can be considered as an alternative to Amazon FBA. Other reselling platforms are interesting mainly because they serve diversification. They allow you to offer your reselling products on different channels and thus reach a variety of buyer groups. Furthermore, not every reselling platform is suitable for every product. Alternative reselling platforms can be very interesting for Amazon sellers as they offer the possibility to diversify their sales channels and thus protect their business account from potential risks such as arbitrary account suspensions or changes in Amazon’s policies. Before you start selling products on Amazon, it is advisable to consider other selling platforms and record them in your reselling business plan.
Shopify
Shopify is an e-commerce platform that allows you to create your own online store and sell your products directly to customers. A great advantage of Shopify is that you can use your own branding and domain. This allows you to better represent your product or brand. Shopify offers a user-friendly interface that allows even beginners to set up an online store quickly and easily. It offers a variety of app integrations that allow you to accept payments, offers shipping options, and simplify order management.
eBay
Ebay has a large user base and makes it possible to reach a worldwide audience. The platform is relatively easy to use and getting started is quick and easy. However, there are also disadvantages. These include, for example, the large competition and the lower level of trust compared to Amazon. Nevertheless, eBay can be a worthwhile alternative for Amazon sellers to diversify and expand their reach.
Conclusion: Amazon FBA is worthwhile
In summary, Amazon FBA is a great opportunity for resellers to start or expand their online business or start reselling as a side job. With Amazon FBA it is possible to reach a wide customer base.
Resellers should invest sufficient time upfront in researching and understanding Amazon FBA to be successful. This includes considering tax aspects, especially if participation in the Central Europe program is planned.
Tools like Helium 10 and Jungle Scout can help find suitable Amazon FBA products and optimize the business.
