Amazon FBA: One of the Secrets for Success in the Amazon Marketplace

by Anders Hjorth | Published on May 18, 2022

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A smiling bartender shaking a cocktail shaker while standing behind a bar.

Image source: Getty Images

When you use Amazon's FBA service, you plug into the leading e-commerce platform's excellent fulfillment services, allowing you to concentrate on great products, marketing, and sales.

In the end, I gave up on my garden. I like gardening, but I really don't have the skills and patience for keeping it nice and tidy. Luckily, my wife found a gardener for us. He likes it and does a marvelous job, and now the garden looks better than ever.

Amazon FBA is like that for those who don't have the skills and patience for picking, packing, and delivering products to their clients, but who are excellent at marketing and selling their products.

Overview: What is Fulfillment by Amazon (FBA)?

Fulfillment by Amazon (FBA) is an Amazon service offering where a merchant pays Amazon to hold inventory, take orders, ship, and handle returns on behalf of the merchant. If you're selling online as an Amazon seller, FBA can make your life easier. But it comes at a price, of course.

Amazon fulfillment is an excellent service because of the global storage and delivery capabilities Amazon has developed. It's the world's leading e-commerce platform offering its infrastructure and scale to merchants.

Illustration of buyer, merchant, and Amazon roles in the FBA model.

When fulfillment is provided by Amazon in the FBA model, the buyer purchases your products on Amazon, and they're delivered by Amazon. Image source: Author

How does Fulfillment by Amazon (FBA) work?

Amazon fulfillment services include picking, packing, delivering to clients, and handling customer inquiries and returns. As an Amazon FBA seller, you can concentrate on marketing and selling your products and providing excellent customer service on inquiries not related to returns.

Let's look at how you can become an Amazon FBA business below.

1. Sign up for FBA in your seller account

If you already have a seller account in Amazon, you simply need to activate the FBA service. If you're new to selling on Amazon, you need to first create your seller account.

Occasionally, you can find discounts and special offers when launching on FBA such as a $100 discount on your first inbound shipment in the Amazon FBA program called New Selection currently running.

An Amazon seller account registering for FBA.

In Amazon Seller Central, you can upgrade your account to FBA and start changing product listings to Amazon fulfillment. Image source: Author

2. Create FBA product listings (or change inventory to FBA)

With FBA activated, you can now upload your product listings. If they're already listed, switch them to FBA. This will generate labels with barcodes for each product under FBA.

3. Print labels and stick them on your goods

You need to print the labels and stick them on your individual packages before shipping the inventory to Amazon.

4. Create an inbound shipment

You can now package all your products at once, and send them via an inbound shipment to an Amazon fulfillment center. This process introduces an entirely new way of managing your inventory.

5. Upon stock entry, you are active as FBA

Once your goods are scanned upon arrival in the warehouse, they go live on the marketplace. When customers view your products on the platform, it will appear that Amazon ships for you.

A product listing using FBA

When a product uses FBA, the listing indicates that Amazon delivers the product. This can give an edge to the seller because users place high trust in Amazon's delivery. Image source: Author

Drawbacks and limitations of FBA

The most important limitations you will run into with FBA are related to the service's cost. Let's look at some FBA drawbacks.

Storage fees can run up

If you start your e-commerce business directly as a seller using FBA, you won't know the inventory turnover and may overstock Amazon fulfillment centers with your merchandise. This can cause your storage fees to run up and eat into your margins.

Pressure on your margins

FBA is an excellent service, but it diminishes your margin potential because of Amazon's service charges. This puts more pressure on margins across your entire business.

Loss of control over returns

When Amazon handles returns, you won't hold the product in your hands and make the call yourself. This means you get less insight into why a product was not satisfactory. It's also not possible for you to contest those returns in any way.

Is Fulfillment by Amazon (FBA) right for you?

Every seller would probably prefer FBA over having to manage the complex management of warehouses, deliveries, and returns. The service comes with a cost, however, and if you're not careful, your margin can easily disappear into marketing, servicing, and handling fees.

There are some cases where FBA is definitely right for you, which we explore below.

Scale your success

Your products are already successful on Amazon, and you're looking for a way to expand sales even further. Amazon FBA is a great way to take that success to a higher level.

Amazon FBA makes your operation run more efficiently by removing limitations caused by inventory management, delivery capabilities, and customer service. With FBA, those capabilities become variable and therefore endlessly scalable.

Your products become Prime eligible when sold via FBA, and users place more trust in product listings delivered by Amazon, thus increasing your conversion rate. This translates into more and faster sales.

Resolve warehouse limitations

One of the limitations you can run into as a merchant is limited warehouse capacity. With its vast number of fulfillment warehouses around the world, Amazon can provide practically endless storage capacity for your products.

You still need to keep an eye on your inventory and storage costs, however. With FBA, you merely displace the costs and make the system smoother.

Concentrate on marketing and sales

Trusting Amazon with your fulfillment, you know your clients will have a first-rate user experience. By letting Amazon be your gardener, you can concentrate on what you do best. If you're successful at e-commerce, that's probably product management, marketing, and sales. Amazon will do the rest for you.

Plugging into Amazon's scale and fulfillment excellence

With its focus on user satisfaction, Amazon is raising the bar for the e-commerce experience. You can plug into that high level of service by using services such as FBA. This makes you compete at the same quality level as many of your competitors who are likely already using the service.

It comes at a cost, but excellent service creates a great end user experience which will generate more customer loyalty and favor your brand too.

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