For Amazon sellers, it is important to know exactly what each fulfillment method entails For Amazon sellers, it is essential to know what each fulfillment method entails, including fees, logistical costs, and operational implications, to decide which fulfillment method is suitable for you. Therefore, we’re reviewing Amazon FBA, FBM, and SFP.
Fulfillment by Amazon (FBA)
Through FBA, the seller will send its inventory to Amazon’s warehouses, and Amazon manages the entire fulfillment process. Amazon charges a fee based on product size and weight, and sellers can also be charged for additional storage fees
Benefits of Amazon FBA
- Customers get 24/7 access to Amazon’s trusted customer service
- Your products are eligible for Amazon Prime free 2-day shipping, and all Amazon.com customers can get free shipping on eligible orders. When you list products for FBA, they are eligible for free shipping, too. Qualified FBA listings are displayed with the Prime logo, so customers know that Amazon handles packing, delivery, customer service, and returns.
- All fulfillment and shipping costs included (pick, pack, and ship)
- Access to one of the world’s most dynamic fulfillment networks
- When a buyer leaves negative feedback that is related to the delivery service provided by Amazon, as the seller you can request for removal of the feedback.
FBA Fees
Selling and being profitable on Amazon means being aware of all of the costs eating into your margin. So, keep in mind that FBA might not be ideal for low-value items, large dimension products, or other circumstances. Costs for selling using FBA include monthly fees, shipping, product costs, and third-party tools. Sellers will also have monthly, fulfillment, and storage fees when using FBA. FBA costs includes:
- Monthly fees: A Professional seller account is $39.99 per month. An Individual seller is free to sign up for but includes a $0.99 per item fee plus selling fees of 45 cents to $1.35 per unit. Because these fees add up, a Professional account is likely the better choice for anyone selling more than 40 items a month.
- Fulfillment fees: FBA costs for packing, shipping, handling, customer service, and handling returns start at $2.41 per unit and go up to $137.32 for special, oversized items.
- Storage fees and Long-term Storage fees: To store inventory in an Amazon fulfillment center, sellers pay a storage fee. Amazon FBA fees start at 48 cents per cubic foot and go up to $2.40 per cubic foot during the busier seasons, such as around the holidays. Fees also vary based on whether products are standard or oversized. For inventory held at an Amazon Fulfillment Center longer than 365 days, sellers incur long-term storage fees. These fees are the greater of $6.90 per cubic foot or 15 cents per unit.
- Shipping: While fulfillment fees do include the cost to ship your product to a customer, sellers still have to pay to ship their inventory to Amazon. We recommend using an Amazon partnered carrier to receive shipping discounts.
- Stock removal fee: FBA charges a removal fee of 50 cents to 60 cents per unit if you want to pull inventory from Amazon or dispose of unsold stock.
- Labeling fee: Amazon has specific FBA product barcode requirements. Failing to meet requirements could result in a labeling fee of 20 cents per unit.
- FBA prep service & FBA unplanned prep service: FBA has strict product packaging and prep guidelines. You can choose to pay a fee and have Amazon package and prepare your products. However, if you choose to package and prep your own inventory and you send improperly prepared products, you’ll incur an unplanned prep fee. Each fee varies by the type of product, fees range from $1.00 to $2.20 per unit.
- Returns processing: Basic returns processing is free for many categories, but not for categories with free customer returns. In these, FBA bills a return processing fee equal to your original fulfillment fee. If returned products need repackaging for resale, Amazon charges a repackaging fee.
- Referral fees: Referral fees are paid by all sellers, not just FBA sellers, and they are an important fee to include when calculating profit margin. For every item sold, sellers pay Amazon a percentage of the total price (which includes the item price, shipping cost, and any gift-wrapping charges) or a minimum amount, whichever is greater. This percentage is on average 15% of a product’s selling price. Referral fees are in addition to selling plan fees. Take a look at referral fees by category here.
To see if FBA could be a more profitable option for you, check out Amazon’s FBA calculator for US sellers here. All of the FBA fees can add up fast and are hard to keep track of on your own. At Envision Horizons, our proprietary software myHorizons does the hard work for us. Below we’ve included an example of how various fees and totals are displayed per product.
To learn more about all of the tools included in myHorizons visit our technology page and contact bryan@envisionhorizons if you’re interested in learning more about the launch of myHorizons as a stand-alone software!
FBA Requirements and Policies
- Some products require prior approval before you can sell them on Amazon. There are some products that either cannot be sold using FBA, or must meet certain requirements before they can be sold using FBA. Check out FBA Product Restrictions here.
- Amazon has certain inventory requirements, including requirements for labeling, packaging, and shipping that must be met in order to use Amazon fulfillment centers. Check out the FBA inventory requirements here.
- With FBA, Amazon provides fulfillment and customer service for all orders, including processing customer returns. Check out the FBA customer returns policy here.
- If an item the seller sends through FBA is lost or damaged at a facility or by a carrier operated by Amazon or on behalf of Amazon, they will replace that item or reimburse you for it. Read more about the FBA inventory reimbursement policy. Also, check out the FBA fees reimbursement policy.
Fulfilled by Merchant (FBM)
The Seller fulfills from their warehouse and is not obligated to match FBA delivery times. As a result, FBM Sellers don’t enjoy the benefits of being a Prime Seller. If a FBM seller wanted to sell products with the Prime badge from their own warehouse/fulfillment center, they would need to apply to be a SFP seller.
Benefits of Amazon FBM
- Seller maintains more control over the business and more control over inventory
- More control over branding through packaging. When sellers fulfill their own Amazon orders they can also include additional customer inserts in the package, like a coupon code for a purchase from another sales channel.
- Fewer fees gives the opportunity for greater margins
- No unexpected costs or unavoidable loss due to Amazon policies
- Easier to maintain both online and offline retail activity with one inventory
Amazon Seller Fulfilled Prime (SFP)
Through SFP, inventory is kept in the Seller’s warehouse and delivery is managed through an Amazon preferred carrier. The seller’s warehouse must match FBA service levels to qualify. The seller also must meet other requirements to qualify. Amazon grants SFP to seller after a successful trial period.
Benefits of Amazon SFP
- Gives sellers the Prime Badge. There is a 30% boost in sales associated with the Prime Badge, and Prime members spend almost double what non-members spend on Amazon each year.
- SFP allows for inventory visibility, which gives sellers the opportunity to gain insights into their demand distribution and new market opportunities.
- More control over branding through packaging. When sellers fulfill their own Amazon orders they can also include additional customer inserts in the package, like a coupon code for a purchase from another sales channel.
- Streamlined Multichannel Fulfillment is another benefit. Sellers can manage fulfillment for all of their sales channels through a single network.
- Often saves money on fulfillment costs
Seller Fulfilled Prime Requirements
Your account must meet Amazon’s requirements for Amazon sellers in the United States before applying for SFP. In addition, enrollment in the program is only open at specific times a year. The criteria are as follows:
- Offer Premium Shipping Options
- Have 99% on-time fulfillment rate and 97% on-time delivery rate
- Have an order cancellation rate of less than 0.5%
- Use Amazon Buy Shipping Services for at least 98.5% of orders
- Deliver orders with supported SFP carriers
- Agree to the Amazon Returns Policy
- Allow Amazon to handle all customer service inquiries
New SFP Requirements as of February 2021
- Meet Delivery Speed targets for One-Day and Two-Day delivery promises
- Operate and ship out Prime products six days a week, (including Sat or Sun)
- Deliver standard-sized Prime products six days a week
- Standard-size products on a Prime shipping template must offer nationwide delivery coverage
SFP Trial Period
Amazon grants SFP to seller after a successful trial period. Amazon sellers must go through a trial period of anywhere from 5 and 90 days depending on when the seller satisfies the performance requirements on a minimum of 200 Prime trial orders.
Learn More About myHorizons
Our technology, myHorizons, is a real-time marketing analytics and AI-powered advertising optimization platform. Built by our developers, myHorizons enables our team and our clients to analyze profitability, optimize advertising, monitor consumer behavior, discover new opportunities, and make business decisions with confidence. Learn more about the many features and tools included in myHorizons on our technology page.
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