Amazon FBA Complete Breakdown for Sellers in 2024

Are you trying to join the online retail space? Amazon, the largest online marketplace should be your first port of call. If you have toyed with the idea of selling online, then you must have heard of Fulfillment by Amazon or Amazon FBA — Amazon’s popular fulfillment option. 

Joining the Amazon marketplace through Amazon FBA is easy, you only need to understand how it works. And that’s what we will help you do in this post. We will touch on all the basics of selling through Amazon FBA and then show you everything you need to know to succeed. First, what is Amazon FBA?

What is Amazon FBA?

Amazon offers two fulfillment options — Fulfillment by Amazon (Amazon FBA) and Fulfillment by Merchant (Amazon FBM).

Fulfillment by Merchant is a fulfillment service for sellers who want to sell on Amazon but will like to store and ship orders themselves. 

Fulfillment by Amazon, on the other hand, is a fulfillment service that allows sellers to outsource storage, order fulfillment, customer service, and returns processing to Amazon. Third-party sellers make up the largest share of Amazon’s retail sales, with about 73% of sellers using the FBA service.

Clearly, using the FBA service is one of the best decisions any seller can make. The service is open to anyone and easy to use if you understand how it works. 

How to Create an Amazon Seller Account

Creating a seller account is the first step to joining the marketplace. Thankfully, it is not a stressful or time-consuming process and you should be done in a few steps if you have the necessary requirements.

To create your seller account, you need:

• Business email address or Amazon customer account
• Internationally chargeable credit card
• Valid ID
• Tax information
• Phone number
• A bank account where proceeds from your sales can be sent.

Once you have all the requirements listed above, you can follow these steps to set up your account.

• Go to the AMZN website and click see pricing.
• Pick between an individual or professional selling plan
• Click on “create new account” and fill in the required fields
• Choose your business type and location
• Choose your preferred marketplace
• Provide billing information
• Provide your store and product information
• Verify your address

Check the post below for a more detailed guide on how to create a seller account.

Read Our Full Blog Post on: How To Create An amazon Account

How does Amazon FBA Work?

Want to sell on Amazon through FBA? The first step is to find a product, source it and ship it to any of Amazon’s warehouses. There are 175 Amazon fulfillment centers across the world, and the moment you join the marketplace, AMZN will assign you a fulfillment center. 

The next thing to do is to ship your products to the warehouse. Amazon will sort your inventory and store them safely to avoid any inventory damage. 

Once a customer places an order, Amazon will pick, pack, and ship your orders promptly. It does not end there, they will also provide 24/7 customer service and manage returns and refunds on your behalf. 

The first step to selling through FBA is to choose a business model. Afterward, you will have to create a selling account, find a product and create your product listings to start selling.

Read Our Full Blog Post on: How Does Amazon FBA Work?

Amazon Business Models

There are different business models or methods to sell on Amazon. Once you have a profitable product, you simply have to choose one of the five business models outlined below.

Private Label: The private label model is ideal for entrepreneurs looking to create their own brands. Instead of buying products from manufacturers, sellers create their own products based on their own specifications. These products are then branded with the seller’s name, not the manufacturer’s, and sold on Amazon.

Read Our full Blog Post on Private Label Products on Amazon

Retail Arbitrage: The retail arbitrage model is best suited for sellers who want to join the marketplace but do not have enough starting capital. If you opt for the arbitrage business model, you can purchase products from physical or online retail stores and resell them at a markup price.

Read Our Full Blog Post on A Beginners Guide on Retail Arbitrage

Dropshipping: The dropshipping business model does not require storing inventory by yourself. All you have to do is serve as an intermediary between buyers and suppliers. You place orders for customers from the supplier and arrange for the items to be delivered directly to the customer.

Read Our Full Blog Post: Amazon Dropshipping Complete Guide for 2024

Wholesale: Selling wholesale on Amazon means purchasing products in bulk directly from manufacturers and selling in smaller quantities to resellers.

Handmade: This business model is best suited for creatives or artisans who would like to put up their handcrafted goods for sale on Amazon. 

Read our Full blog post on Amazon Handmade Fees and Basics for Sellers

Now that you know the different business models you can choose from, how do you decide whether selling through FBA is worth it or not? It’s important to consider the pros and cons of using the service. 

Pros and Cons of Amazon FBA

FBA offers a lot of benefits, but it also comes with a number of drawbacks. However, the service is not free, so it’s important to be sure that the investment will be worth it. Here are a few benefits and drawbacks to keep in mind before settling for Fulfillment by Amazon.

Pros

• Less Time Spent on Business Processes: With FBA, AMZN handles all packing, shipping, and customer service for you. This eliminates the need for you to sort and manually process orders, handle fulfillment, and also handle customer inquiries. All of these tasks are taken care of by Amazon, freeing up your time to focus on other areas of your business. 

• Access to Amazon Prime Members: AMZN has a loyal network of paid subscribers apart from the regular shoppers who visit Amazon.com and only FBA sellers get to sell to Prime subscribers. In other words, using the service makes you prime-eligible and gives you access to a large customer base of shoppers who are accustomed to fast shipping and convenience. And you won’t have to worry about shipping orders yourself because AMZN will handle that for you. 

• Increased Visibility: When you enroll for the service, your listings are given priority in search results. This increases the visibility of your products, leading to more sales. Plus, shoppers are more inclined to trust products sold by FBA sellers because they know that AMZN handles the fulfillment and they can be sure of prompt delivery.

• Lower Shipping and Fulfillment Costs: AMZN charges a fulfillment fee that is often lower than regular fulfillment fees. This is because they have an existing network of logistics firms and can secure discounted shipping rates.

• Multi-channel Fulfillment: Even if you decide to sell on other marketplaces like eBay or Etsy, you can still leverage FBA for storing and shipping your orders.

Cons

• Stringent Requirements: Before you can have your products shipped to the fulfillment center, you must ensure they are properly prepared, labeled, and packaged according to AMZN’s standards. These guidelines are intricate and following them can be time-consuming. Non-compliance with these requirements can cause your items to be rejected or returned, resulting in wasted money and aggravation. Fortunately, AMZN offers a service in which they will prepare and label your items for you for an additional fee.

• FBA fees may be expensive: If you decide to use FBA, you will have to pay for Amazon’s services including storage, fulfillment, and others. These fees may sum up and be expensive, especially for sellers who are just starting out.

• Increased Return Rate: AMZN typically stores products from different sellers together, this is known as commingling. As a result, the products sent out may end up being of a lower quality than yours and this may lead to an increased return rate. AMZN’s flexible return policy also increases the chances of returns. You should note that too many returns may lead to account suspension.

Amazon FBA Fees

As we mentioned earlier, FBA is not a free service. There are a number of fees involved, however, some are fixed and others are miscellaneous. We have outlined the major FBA fees below.

Selling Plan Fees 

When you decide to sell on AMZN, you will have to create a seller account and choose a selling plan. There are two selling plan options — Individual plan and Professional plan. 

The individual plan costs $0.99 per sale and is ideal for you if you do not intend to sell more than 40 items per month. In contrast, the professional plan costs a fixed monthly fee of $39.99 and would be great for you if you intend to sell more than 40 items per month. 

Referral Fees

A referral fee is a commission-based fee that AMZN charges sellers for selling on the platform. It is a per-unit fee that is applied to each product sold and is based on the product’s category. 

This fee is the same regardless of the business model or fulfillment method. The rate of the referral fee ranges from 8% to 45% of the total sales price, but it is between 8% – 15% for most product categories.

Fulfillment Fees

You incur fulfillment fees on every order that AMZN packs and ships on your behalf. The costs depend on the size and weight of your item, as well as the applicable taxes in your location. These fees include picking, packing, shipping, and customer service, as well as product returns, and are charged per unit. 

Inventory Storage Fees

Since you’ll be storing your inventory in AMZN’s warehouse, you’ll have to pay inventory storage fees. Storage fees are split into two — monthly storage fees, deducted every month and calculated based on inventory volume, and long-term inventory storage fees if your inventory stays at a fulfillment center for more than 365 days. 

Check here to get a full idea of all seller fees and view the updated rates. 

Related: Complete breakdown of FBA fees

How to Calculate Amazon FBA Fees

There are a lot of fees involved in selling through FBA and it’s easy to miss out on a number of them when calculating business costs. To avoid this, it’s best to use an FBA calculator. 

The first step is to calculate the profit potential of the product. To do this, you should determine the cost of sourcing the product (manufacturing, shipping fees, packing, and labeling), seller fees, and estimated costs. 

The FBA calculator takes these costs into account before coming up with an estimate of your net profit. This will help you maintain your profit margins and fix good product prices.

The FBA calculator typically covers selling plan fees, referral fees, and shipping fees.

See Our Guide on: All you need to know about the Amazon FBA fee calculator. 

How to Minimize FBA Fees

• Sell product bundles: Bundling products helps to cut storage and shipping costs. This is because you can sell a bunch of products at once and ship them together and only pay the shipping fee for one item because bundles are considered one item.

• Track inventory activity: A simple way to do this is by keeping an eye on your inventory performance dashboard in seller central. On this dashboard, you can monitor your inventory to avoid stranded inventory, stockouts, or excess inventory.

• Focus on cutting down storage costs: While you may not be able to cut down fulfillment or shipping costs significantly, storage costs can be managed. One way to do this is to avoid leaving inventory in a fulfillment center for more than a year. If you do, you will incur additional long-term inventory fees. Also, avoid selling large items that take up a lot of space. Remember that storage costs are calculated based on dimensions.

• Remove excess or unsellable inventory: When products are returned, AMZN runs a check to confirm if the product can be resold or not. Products that cannot be resold are tagged “unsellable”. Of course, keeping them at a fulfillment center means you will keep paying storage fees. So, the best thing to do is to ask AMZN to destroy or return them to you by filing a removal or disposal order. 

Is Amazon FBA Worth it?

The answer to this question is totally up to you. However, in our opinion, the pros of the service far outweigh the cons. If you would like to run a flexible side hustle, FBA provides a great opportunity for that. 

Since AMZN handles everything for you, all you have to do is find a product, create listings, and you’ll be making sales in no time.

The seller fees are the only other thing to consider before deciding to use FBA. The fees may seem like a lot, but when it comes down to it, an investment in this service is totally worth it. 

Read More on Our Full blog Post on Is Amazon FBA Worth it in 2024?

How to Start Selling on Amazon FBA

Ready to start selling on Amazon? Follow the steps listed below to get started.

• Choose a Business Model: The first step to joining the marketplace is to choose one of the business models we mentioned earlier. Be intentional about choosing a business model that suits your need and finances.

• Pick a profitable product to sell: If you want to make sales on AMZN, you have to carefully pick a product to sell. There are thousands of product options to choose from and you have to try as much as possible to avoid losing money. 

• Create your seller account: Here, you’ll have to choose between individual and professional selling plans. You’ll also have to pick a fulfillment option — ensure you opt for the “Fulfilled by Amazon” option.

• Source your products and create your listings: Once your seller account is up and you have a profitable product option in the bag, you can go ahead and source your products. Next, create and optimize your listings using catchy titles, bullet points, attractive images, and clear descriptions.

• Ship your products: Be sure to check your products before sending them to the fulfillment center and package them securely for optimal quality. Adhere to AMZN’s guidelines to ensure your products are shipped properly; failure to do so could lead to extra costs or lost customers. Keep a close eye on your shipping costs to make sure they don’t eat away at your profit margin.

Tips for Finding Profitable Products to Sell on Amazon

Finding profitable products to sell is not a walk in the park, however, there are simple tips that can help you discover the bestselling products in any category. We have outlined some tips below.

Use the Bestseller List

The Bestsellers list is an extensive list, curated by AMZN, that contains the top 100 products in any product category. These products are assigned a rank based on sales volume. Using the bestsellers rank, you can easily tell a product’s profit potential. 

Check Out Google Trends

Google searches can be a great tool for finding the best product among many options. Utilizing Google Trends data can help you determine what products are trending in your chosen market. Additionally, the comparison tab on Google can provide useful information about the products you are considering.

Use a Product Research Tool

Using a product research tool is one of the most reliable ways to find new product options for your business. Most product research tools provide essential data to help you make informed product choices. ZonBase offers four product research tools to help you uncover profitable products and also access hidden product information.

ZonResearch, ZonBase’s main product research tool can help you find products in minutes. The tool comes with presets and filters to help you narrow down your search. Here’s how to use the ZonResearch tool. 

• Open the ZonResearch tool from your ZonBase dashboard

• Choose your marketplace, select your preferred categories, and set the filters based on your specifications.

• Click the “Search” button 

• Once you click the search button, ZonResearch dives into Amazon’s product database to uncover an extensive list of profitable product suggestions.

Read Our Full In Depth Guide on Finding Profitable Products on Amazon

You can try out the ZonResearch tool alongside other ZonBase tools for FREE when you sign up for a free trial of the software.

How to Create Product Listings on Amazon

After creating your seller account and finding a profitable product to sell, the next step is to create your product listings. You can do this by following the steps outlined below.

• Log in to your seller central account
• Navigate to the inventory tab and click on “Add a product”
• You’ll have three options for listing your product — add an existing Amazon product by searching for the product name or ID, create a new product listing, or bulk upload if you want to upload multiple listings at once.
• If you want to create a new listing, click on “create a new listing” and select your product category.
• Provide your product details and listing information — description, keywords, images, offer, variations, and other important information. 

Related: 6 Amazon listing optimization guidelines

Optimizing Your Amazon Product Listings

After creating your product listing, you will also need to ensure your listings are well-optimized. This is very important if your goal is to make substantial sales on Amazon. Optimized listings are the only way to increase your chances of showing up in search results, gaining visibility, and making sales in the long run.

Optimizing your listings typically comprises a number of basic things like using attractive product images, relevant keywords, catchy product titles, and clear descriptions. 

Although listing optimization is a relatively easy task, you may not be able to fully optimize your listings manually and get the results you want. So, it is best to use software for keyword research and listing optimization. 

ZonBase offers a number of listing optimization tools and services, however, the AI Listify tool is the star of the pack. It is an AI-driven tool that allows you to create well-optimized listings from scratch in minutes without carrying out manual keyword research or creating any content.

All you have to do is to provide a seed keyword related to your product, and the tool will carry out deep keyword research, and check out your competitors’ listings to see what their top-performing keywords are. It then carefully creates a unique, new listing for your product using these keywords.

You can try out the AI Listify tool and other ZonBase tools for free for 7 days when you sign up for a free trial of the software.

Read our Full Blog Post On Optimizing Amazon Product Listings

Shipping and Order Fulfillment with Amazon FBA

Of course, the first step in fulfilling orders is to send your shipment to the fulfillment center. There are two methods of setting up an Amazon FBA shipment — the excruciatingly long old method, and the three-step new method. We’ll show you how to create your FBA shipments using both methods.

First Method

• Open the ‘Manage Inventory’ tab and find your listing

• Choose “Edit” from the drop-down menu on the right and then click “Send/Replenish Inventory.”

• Enter your “ship from address” and choose between ‘individual’ or ‘case-packed’ products. Opt for the “Individual products” option if your shipment consists of multiple products with different SKUs or conditions (new, used). Pick “Case-packed products” if your shipment involves a single item. Afterward, you can type in the number of cases and the count of items in each case for the particular SKU included in the delivery.

• Click on ‘Continue to shipping plan’.

• If you chose the case-packed option, indicate the number of products you’re shipping. Enter this based on how many products are in each case, and how many cases you are shipping.

• Indicate whether your items need to be prepped before shipping to the fulfillment center. You may have to use specific packaging materials like bubble wrap or bags and label them. But first, choose your product type. 

Products that do not appear in the dropdown menu will not require any additional packaging. However, if your products appear in the dropdown, AMZN will let you know the packaging and prepping requirements for your product.

AMZN charges a small fee to prep and package products for FBA sellers who do not have the necessary packaging materials. This cost can vary between $1.00 to $2.30 per unit. If you would like Amazon to prep and package your products, choose ‘Amazon’ under the “Who Preps” section.

• The next thing is to label your products appropriately. If your products require FNSKUs, you can label them yourselves or ask AMZN to help you. Printing the labels by yourself is quite easy, just enter the number of labels to print and click “Print labels for this page” if you decide to label the products yourself. Peel and paste the FNSKU barcodes onto each item using address label sheets.

If your FNSKU starts with “X00,” use the FNSKU assigned to you by AMZN but if it starts with “B00,” use the manufacturer barcodes on the product.

• AMZN assigns you a fulfillment center. The default inbound shipment setting is “Distributed Inventory Placement,” which implies that your shipment could be divided and sent to different fulfillment centers. This may not sit well with you, and if it doesn’t you can always change this setting.

Just go to “Settings” in your seller dashboard, click on  “Fulfillment by Amazon”, then select “Inbound Settings,” and then edit. Choose the ‘inventory placement service” option if you want your inventory to be sent to the same location.

• This is the last step, after which you will be able to send your shipment to a fulfillment center. Here, you will have to decide on a shipping service and packing method. Just provide the weight and dimensions of your packaging boxes and AMZN will provide you with the cost. 

• Accept the charges and print your labels. You should be able to see two barcodes on each sticker. One is for UPS and the other is for AMZN. Click ‘Complete shipment’. 

That’s all there is to it! Now you can label your boxes and either take them to the closest UPS location or have UPS collect them from your shipping address. 

Second Method

The second method of creating an FBA shipment is called “send to Amazon” and is a faster way to create FBA shipments. Here’s how it works:

• Start by following all the initial steps for the first method above, but this time, click on “send to Amazon”.

• Start by choosing the inventory you want to send to AMZN. All products with an FBA SKU will be displayed for you to choose from.

• Again, you will have to specify the number of units you want to send. Then, click on “ready to send”, and “continue”.

• Review your shipping details and accept the shipping charges.

• Lastly, print your labels, check the barcodes, and ensure both are showing. Then take them to the closest UPS location or have UPS collect them from your shipping address. 

How to Track Your FBA Shipment

1. Receive inbound shipment notifications

Enabling this feature will make it easy for you to view the status of your FBA shipment. Follow the steps outlined below to enable the notification feature:

• Log in to your Seller Central account.
• Go to Settings then click on “Notification Preferences”.
• Navigate to the ‘order notifications’ tab and click ‘Edit’. 
• Select ‘Inbound Shipment Notifications’.
• Click on ‘Save’.

2. Check your shipment summary

Go to the ‘Manage FBA Shipments’ menu, scroll through, find your shipment, and click on ‘track shipment’. You will be able to view the tabs listed below:

• Shipment Events
• Track Shipments
• Shipment Contents
• Problems
• Reconcile
• Pallets 

The Shipment Events tab will provide you with updates on your shipment’s progress, from when it was created to when it was closed. 

3 Tips for Growing Your Amazon FBA Business

Use Amazon analytics tools

Amazon analytics tools make it easy for you to access crucial business data, track your business expenses, and monitor revenue and sales.

Expand your product catalog

Expanding your product catalog is an essential part of growing an Amazon business. It allows you to offer a greater variety of products to your customers, while also increasing the potential for new sales. 

To expand your catalog, research and identify products that are related to the items you currently sell and that have a high demand. With the right approach, expanding your product catalog can help you to grow your business.

Run PPC Campaigns

If you want to make sales on AMZN, you have to focus on gaining visibility so you can generate conversions and make more sales. PPC (Pay-Per-Click) campaigns are an effective way to quickly grow an AMZN business. They allow you to target specific audiences, optimize your ads for cost and performance, and track the performance of your campaigns. 

When running PPC campaigns, it is important to be strategic with your targeting, create compelling ads, and monitor your campaigns regularly to ensure you are achieving your desired results. 

The best way to launch profitable PPC campaigns is to use software for PPC launch and optimization. 

ZonBase offers the best PPC optimization tool — ZonPPC. Using this tool, you can create and launch high-converting promotional campaigns. ZonPPC also provides insights into the performance of competitors’ campaigns, helping sellers to stay ahead of the competition. With its advanced features, the tool makes it easy for sellers to maximize their ROI and maximize their profits.

With ZonPPC, you can adjust budgets, change bids, and monitor your campaigns effortlessly. And the best part? You can use ZonPPC for free when you sign up for a free trial of the software.

Read our Post on Utilizing PPC for Your Amazon Store Amazon PPC Guide for Beginners.

Final Words: Should You Use Amazon FBA?

Using Amazon FBA is a smart move especially if you are a busy person who wants a better way to manage your business tasks. 

If you want to run a flexible business without having to juggle business tasks with everyday tasks, then yes you should use FBA. But if you prefer to handle everything yourself, Amazon FBM would be a better option.

Regardless of the fulfillment option or business model you decide to use, be sure to choose the right products and optimize your listings using Amazon software.