Despite claims to the contrary, Fulfillment by Amazon (FBA) is as valuable as ever.
Over half of Amazon sellers use FBA. They love offloading shipping to Amazon while keeping customers happier than ever.
Still, many people try selling on FBA, lose money, and quit. But FBA isn’t the problem—it’s a lack of research before starting.
So in this article, you’ll learn what FBA is and why it’s worth your time. Then, you’ll learn how to get started (the right way).
Amazon FBA 2022 Overview
FBA lets businesses offload order fulfillment to Amazon. The core concept is simple:
- The seller ships products to Amazon
- Amazon processes the shipments and stores them in fulfillment centers
- When an order comes in, Amazon packs and ships it to the customer
- If the customer returns the product, Amazon processes that too
Most FBA listings are eligible for Prime—Amazon’s two-day shipping program. FBA products also get 24/7 customer support at no extra cost.
FBA also allows lets sellers to scale much faster than they could themselves. It doesn’t matter how big your operation is—no minimums or maximums apply.
Imagine a small-time Etsy store going viral and receiving thousands of orders.
With self-fulfillment, they’d have no hope of keeping up and would have to cancel orders. But with FBA, they’d have zero worries about fulfillment—only production.
Fees
As great as FBA is, it doesn’t come free. Here are the kinds of fees you can expect to pay:
- Inventory storage fees
- Fulfillment fees
- Inventory disposal/return fees
- Long-term storage fees (365+ days)
- Improper labeling fees
- Customer return fees
Don’t let these fees scare you. FBA sellers save 30% on shipping, not to mention all the time involved.
Pros of Amazon FBA
Sellers benefit from FBA in several ways, as explained below.
1. Outsourced Logistics
FBA’s biggest benefit is eliminating the concept of logistics from a merchant’s workflow. For using Amazon’s worldwide logistics network, sellers only need to pay a small fee.
It’s hard to underestimate the profound shift this represents.
Fulfillment is usually a merchant’s main concern. Outsourcing it is like a farmer not having to worry about feeding their animals.
2. Two-Day Shipping
Prime’s ultra-fast shipping is the backbone of Amazon’s business model. Most FBA items qualify for Amazon Prime, causing a 25% increase in sales versus non-Prime items.
3. Increased Buy Box Sales
Amazon’s “Buy Box” is the Add to Cart button displayed on the side of product listings. When a product has many sellers, Amazon will select the best sellers (low complaints, shipments on time, etc.) for the Buy Box.
Thanks to Amazon’s fulfillment, FBA sellers are more likely to win the box than non-FBA ones.
4. Reduced Overhead
Let’s say you’re a merchant with a large warehouse full of inventory. By itself, this costs:
- Rent/property taxes
- Security salaries
- Property maintenance
- Equipment costs (forklifts and packing equipment)
By moving your inventory to FBA, you can reduce or cut these costs entirely.
5. Flexibility
You can run an FBA business from anywhere in the world. As long as your inventory is in stock, it doesn’t matter where you are.
6. Outsourced Customer Service
Amazon handles all FBA complaints with its customer service—no seller response is needed.
This is the most underrated feature of FBA. 89% of consumers are more likely to buy from a company again when they receive good service.
With FBA, all customer service concerns go to Amazon—a top-notch support provider. That will free up hundreds of hours for you to focus on your product.
Cons of Amazon FBA
As beneficial as FBA can be, it’s not a perfect service. Here’s where it comes up short.
1. Bad Seller Support
Despite Amazon’s great customer service, some sellers aren’t treated well. FBA sellers often complain of slow support that can’t stray from rigid scripts.
During the 2020 shipping crisis, some sellers received their FBA labels late. Because Amazon cancels unused labels after 90 days, their labels expired automatically.
But Amazon refused to accept the delayed labels. This forced sellers to relabel their items and deal with crowded shelves in a frenzy.
While nightmare stories aren’t too common, sellers may have trouble with FBA support if issues arise.
2. More Returns
Amazon’s return policy is no-questions-asked for 30 days. Because people can return items at will, FBA sellers see higher return rates than usual.
The good news is Amazon handles all the return labor. The bad news is they charge sellers a processing fee.
3. Strict Shipping Procedures
FBA doesn’t fully remove the shipping hassle—you have to send your items to Amazon. This requires a careful labeling process following FBA standards.
If you mess up the labeling, Amazon will charge you a fee.
4. Limited Customer Relationships
Beyond simple labels, FBA sellers can’t build relationships with customers. Amazon keeps all customer information, so you can’t retarget them.
This is why many sellers use FBA as an extra channel and not their only platform.
5. Rented Platform
All FBA accounts ultimately belong to Amazon.
Whatever volume you manage, Amazon can restrict or cancel your FBA account at any time. Such an action would be devastating to anyone earning most of their income through FBA.
The only sure protection sellers have from bans is not using FBA as their only channel.
6. Fees Hurt Smaller Operations
FBA’s convenience literally comes at a price. While fast-moving sellers come out ahead, small operations may lose their margins.
If you’re not quickly moving products off shelves, it’s best to stick to traditional fulfillment. Otherwise, seasonal and long-term storage fees will begin to add up.
Despite Flaws, Amazon FBA Is Worth It
Amazon FBA’s not perfect. But those flaws aren’t too bad compared to leveraging one of the biggest logistics networks ever (and its customer service).
When FBA works, it’s fantastic for sellers. They can build highly profitable businesses requiring minimal oversight.
You can also use FBA at your own pace. There’s no obligation to use it, so you can experiment and see how it works for your products.
How to Start Amazon FBA (2022 Guide)
Sadly, “gurus” selling useless $20k masterclasses have ruined FBA’s reputation. Now, many people assume FBA to be over-saturated, only bringing losses to its victims.
But that couldn’t be further from the truth. Amazon is massive, and the growth gets passed on to its sellers.
So is selling on amazon worth it? Yes, and here’s how to start:
1. Study Everything
FBA involves many moving parts. A new seller’s worst mistake is to rush into it, mess everything up, and wind up disappointed and angry.
While there are tons of low-quality FBA courses, great ones exist. A coach or teacher experienced in FBA can also help you learn how to run your business.
And if those aren’t options, there is tons of free information out there. Whatever you choose, the point is to understand every aspect of FBA—sourcing, marketing, labeling, and everything else.
2. Pick the Right Product
There are two main options for selling products on Amazon:
- Manufacturing original products
- White-labeling existing products
If this is your first ecommerce business, white labeling will be the easiest option.
White labeling is the practice of selling third-party products under your branding. You’ve seen this before with “store brand” grocery items (like Whole Foods’ 365).
There are tons of white-label products to choose from. You can sell everything from cat collars to LED lights.
But it’s not an issue of finding products to sell. It’s finding ones that will make you money.
Picking the right product will define your FBA success. You have to find a niche you can realistically break into. Some niches will be hard, while others will be much easier.
Fortunately, tools like Jungle Scout make this much easier. They make it easy to find high-demand white-label products at a price you can afford.
Just try to find something with room for improvement. Having a better product than your competitors will give you a huge advantage.
Even if you can’t do that, find other ways to stand out (better photos, description, copy, etc.). Low-effort knockoff listings will never make you serious money.
3. Outsource Everything You Can
Trying to do everything yourself will burn you out. Luckily, the internet’s made it easier than ever to outsource tasks to others.
You can outsource:
- Copywriting
- Product photos
- Logo design
- Content strategy
- And tons more
Start with freelancer sites like Fiverr. For a few bucks, you can get an expert to do a tough job for you.
One of the most important entrepreneurial skills is outsourcing. You can’t do everything yourself, but you can find people to do it for you.
FBA vs. Other Methods of Selling on Amazon
FBA isn’t the only way of selling products on Amazon. When planning your Amazon strategy, you need to consider all options.
Amazon is flexible as it is massive. So if you’re not sure about FBA, compare it to these alternatives:
Fulfilled By Merchant (FBM)
FBM is sellers listing products on Amazon but handling storage, shipping, and support by themselves. It’s more work than FBA but gives sellers greater control over customer experience.
FBM might be best if you:
- Only sell low-volume products
- Have space to store products
- Sell especially heavy items
- Manage limited inventory
- Ship products fast without hassle
- Have temperature-sensitive products
- Have great customer service
But FBA might be the better choice if you:
- Sell items quickly
- Are cramped for storage space
- Aren’t great about customer service
- Struggle to ship items quickly
- Are spending too much money on shipping materials
Sellers generally move from FBM to FBA when they outgrow their current operation. If you’re just starting on Amazon, you can use FBM and move to FBA when ready.
Seller-Fulfilled Prime (SFP)
SFP is a program letting third-party sellers get “Prime” badges on their listings, boosting impressions and sales. Enrolling requires sellers to complete a lengthy trial period meeting these requirements:
- Over 99% of orders shipped on time
- Cancellation rate less than 0.5%
- Ship at least 98.5% of orders with Amazon Buy
You must also agree to the Amazon Returns policy and give all customer service to Amazon Prime.
At first glance, SFP’s harsh requirements make it seem worthless next to FBA. But SFP has two key advantages:
- More control over your packages (less Amazon logos, access to inventory, direct oversight)
- Less expensive than FBA (based on the cost-effectiveness of your operation)
If you can meet SFP’s standards, your products get the Prime badge without Amazon controlling your inventory.
Third-Party Logistics (3PL)
A 3PL provider stores, packs, and ships orders on behalf of an Amazon merchant. It’s like FBA but not fulfilled by Amazon—and with no Prime badge.
3PL has a few key advantages over FBA:
- Branded packaging: Remove Amazon branding from your packaging and replace it with your own.
- Inventory distribution: 3PLs store products closest to your main customers, giving you fast shipping without FBA fees.
- Discounted shipping rates: Major US carriers reduce shipping rates for 3PLs due to their volume, meaning lower costs for you.
- Seamless Amazon integration: 3PLs get notifications about new orders from Amazon and provide full tracking info.
Sadly, no 3PL offers Prime eligibility, and Amazon considers them FBM no matter how fast they are. Not having a Prime badge means missing out on increased sales.
Try FBA and See What Happens
If you’re a high-volume seller, Amazon FBA can be incredibly beneficial.
It eliminates logistics, boosts sales, and slashes shipping costs. And when customers need help with orders, Amazon handles them, not you.
You don’t have to commit even if you’re not sold on FBA. As long as you follow Amazon’s guidelines, you can fulfill orders however you like.
So start by moving a portion of your inventory to FBA. If it works out, send more. Sellers on Amazon have the freedom to choose.
Amazon FBA 2022 Infographic
