What is Fulfillment by Amazon (FBA)?

What is Fulfillment by Amazon (FBA)? Logistics solution for your business selling online!

Nowadays there are many e-commerce businesses with a great products. To make their businesses successful, they are spending a lot of times on things like sourcing a product, fulfilling the orders, providing customer service, handling the returns, generating sales and trying to grow.

But what if I tell you, that there is a service which helps e-commerce business owners to maintain these operations easier and find new customers at the same time? Fulfillment by Amazon or FBA is an efficient solution which can help businesses reach an incredible amount of customers and simplify their daily operations by the same time.

What is FBA?

Mainly, Fulfilment by Amazon is a great logistics solution for Amazon sellers. It works the following way:

• As a seller, you send all your inventory to Fulfilment Centers (FCs) of Amazon.

• Amazon FCs receive your inventory, and you can always track it through the Seller Central Admin.

• Your products become visible on the Amazon website, and customers are placing orders.

• Each order is picked, packed and shipped to the buyer, so sellers don't even need to approve each order. It happens automatically when Amazon receives the payment from the customer.

• Amazon is providing customer service. e.g. if the product was damaged during the shipping, Amazon will take care of that customer.

• As well as, Amazon handles each return customers are making.

At the same time, there are many other advantages FBA provides for the seller, such as:

Pan-European FBA

With the Pan-European FBA you send your inventory to fulfillment centers in the country you choose, and Amazon distributes them to storages across Europe. The distribution is based on the demand of your products in the region. Pan-European FBA is the best solution for localization of you business in the European countries.

When it comes to the legal aspects of selling abroad, the only thing you need to have is to be registered for VAT in the country you use FBA warehouses. So in the case you use EFN, it is necessary to have VAT just in one country. However, For the Pan-European, you need to be VAT registered in all the European marketplaces. In total there are 7 countries Amazon can store your products - Germany, United Kingdom, Spain, Italy, France, Czech and Poland.

There are tons of sellers who succeeded with the Pan-European program. Another benefit of it, is that it reduces the FBA fees and helps to optimize your Amazon business.

FBA fees

Sellers should pay a small fee in order to use FBA advantages. FBA fee is per product and is based on the dimensions and weight, as well as the category of your product.

There is a great tool to calculate the fee for a similar product to yours called Amazon Revenue Calculator. And it works the following way:

You find a similar product to yours on Amazon and copy ASIN number of it, which you can always find in the URL of the product, like here:

Then you go to the Amazon Revenue Calculator, choose the right country in the upper right corner, and paste the ASIN number. On the right column of the calculator you will be able to enter the sales price and buy cost. And you will be able to see all the calculations:

So, as you can see in the right column I have entered 6 £ sales price and 2 £ buy cost. Selling on Amazon fee is a commission (usually 15%, percentage based on the category) Amazon takes it for selling on their platform, which is 0.90 £ in this case.

And Fulfilment by Amazon fee is - 1.97 £ for this specific product, based on the dimensions, weight, and category.

Additionally to that, FBA offers extra services for a special fee, which is preparing and packing your inventory, labeling your products and even gift-wrapping.

In a conclusion, Amazon is an innovative sales channel which is always developing their business to make it a better world for the buyers and sellers.

Let us know in the comment section if you would like to use FBA for your business or share your experience with us!

Earning the Prime Badge

Amazon always supported FBA sellers more. One of the ways this support is beneficial for sellers is that with FBA - you will have a Prime Badge, which means that Prime customer will be able to have 2 days free shipping.

As well as, your product will be eligible for the Prime day. Prime members globally purchased more than 100 million products during last year's Prime Day event. Small and medium-sized businesses made out, as well, with sales exceeding $1 billion this Prime Day, while total sales exceeded $4.19 billion internationally, according to Amazon.

Increased reach to Prime customers can mean increased sales.

Earn the Fulfilled by Amazon badge

Amazon grants the Fulfilled by Amazon badge to FBA products. Amazon customers across Europe favor products with this badge due to the promise of superior delivery, customer service and returns. This can give you a big selling advantage over sellers who don’t use FBA.

It is also easier to sell across the Europe with the FBA

Imagine you want to expand with your e-commerce business to new countries. You will probably need to think about hiring agents or setting up distribution channels for your products.

But once your products are fulfilled by Amazon, buyers from many EU countries will be able to make a purchase.

And there are 2 ways of how to make this expansion happen, EFN and Pan-European FBA:

EFN - European Fulfilment Network

EFN means that your products are stored in only one country but it will be visible on all the Amazon EU marketplaces. Which means that if you store inventory in Germany, but the purchase is made in the Spanish marketplace, your customer will need to wait a bit longer than usual because the product will be shipped from Germany to Spain.

In the EFN case, your cross-border shipments will have an increased FBA fee, because the shipping and handling process is more expensive for Amazon.