Got questions about FBA? Read on for answers to some common FBA questions.
FBA vs FBM
FBA stands for Fulfillment By Amazon, which means the seller ships their goods to an Amazon warehouse and Amazon takes care of storage and shipment to customers. FBM stands for Fulfillment By Merchant, which means the seller manages storage and shipment to customers. For many sellers, FBA means a boost to both sales and fulfillment capabilities. On the other hand, FBM offers greater flexibility.
Here are the main differences between FBA and FBM to help you choose which is right for you:
Shipping through FBA
- Freight shipping is faster due to Amazon’s large network of warehouses and supply chain operators
- Customers get the benefit of free shipping or 2-day Prime membership shipping
- Sellers have an increased chance of winning the Buy Box, which is when your business is the automatically selected seller when a customer clicks ‘buy now’ or ‘add to cart’
- Returns, replacements, and customer service are handled by Amazon
The catch to all of these benefits? Compliance with all the Amazon shipping guidelines, which are stringent.
- Delivery time may be longer
- Shipping costs can be optimized according to your budget
- You can ship Hazmat or other categories prohibited by Amazon
- Sellers have the flexibility to optimize their schedules around slow-moving or seasonal products and plan their freight inventory accordingly.
What are the different fees and costs related to FBA?
If you’re shipping FBA, take into account the associated fees. These include:
- FBA fulfillment fee
- Monthly inventory packaging charges
- Storage fee
- Referral fee
- Selling plan charges
- Advertising fee
- Return or repackaging fee
With efficient freight packaging, you can manage and optimize some additional costs incurred with FBA shipping.
Use this Amazon FBA Shipping Calculator to get an estimate of the costs you will incur.
Amazon FBA quality control
It’s always important to check that your goods are up to quality standards, but Amazon’s specific requirements make quality assurance even more crucial. Here are some steps you can take:
- Always get samples from your supplier (if you’re sourcing from Alibaba.com, most of the suppliers are trade-assurance enabled).
- If you’re shipping private-label items that other sellers might also be selling, consider getting a unique barcode label by FBA. This ensures your inventory doesn’t mingle with other products.
Guidelines for non-US FBA importers
If you’re a foreign importer, here’s what you need to know:
- The United States is one of the few countries that allow foreign importers, so you don’t need to have an entity in the US, be a US citizen, or have a US-registered company
- For Amazon FBA shipping, register with US customs as a foreign importer and provide documented proof that your company exists legally
ASIN & FBA inventory storage limits
ASIN (Amazon Standard Identification Number) is a 7-digit code assigned to every product shipped through Amazon. Every ASIN denotes a unique product in the FBA supply chain.
Since Amazon ships millions of products, the company has certain policies in place to optimize its inventory space. Amazon subjects the sellers to FBA inventory storage limits for overstocked items.
What are overstocked items?
Inventory kept in FBA warehouses beyond the average sales run rate of 12 weeks is considered overstocked.
For example, let’s say you sell 50 units on average every week. Over 12 weeks, your average sales run rate will be 600 units. Now, all the extra units stored in FBA above 600 are overstocked items.
Amazon determines your limit based on your past sales run rate along with space considerations in the fulfillment centers, and they only consider ASINs that have been in the fulfillment center for 90 days or more for this calculation.
What should you do if you exceed the storage limit?
- Try to sell excess inventory, free up warehouse space, and avoid additional charges
- If not, create a removal order and get the inventory returned to you or your forwarder’s warehouse
Who is responsible for Amazon FBA customs clearance?
Importers and exporters who use FBA are responsible for arranging customs clearance.
That means they are the ones who will book the customs brokerage and work with the broker to provide all the necessary information to file a customs entry.
FBA sellers who book their shipment on Freightos.com can book customs brokerage right on our platform, just like non-FBA importers and exporters.
Is Amazon FBA profitable?
Many FBA sellers find the medium quite profitable, with 65% of sellers reaching profit margins higher than 10%. Since sellers have easy access to customers, including Prime customers, and since Amazon takes care of the fulfillment logistics, FBA sellers often save time and gain profitability.
As with any business, profitability requires a solid investment of time and effort.