Are the Fees Associated with Fulfillment by Amazon Worth the Cost?

In running any business, certain fees and expenses must be accounted for. It goes without saying that you need to budget for this anticipated expenses. But concerns can arise if you’re not sure what the fees are. Thankfully, in running an Amazon FBA business, it’s easy to start tracking your fees from the outset.

Looking to start a business with much fewer startup costs than other prospective companies, it’s easier to have considered the potential to work as a third-party seller on Amazon. In recent years, these third-party sellers on Amazon using the fulfillment by Amazon model have successfully scaled their businesses and even been able to sell those companies with the help of an experienced business broker.

But launching an Amazon FBA business is not as simple as deciding to start your company, choosing one product, and setting up shop to immediately receive profits.

While there are shortcuts with many amazon FBA businesses that can help you avoid the traditional headaches, expense, and time invested to grow a company by other means, fulfillment by Amazon provides powerful opportunity to begin launching a business sooner rather than later and scaling it successfully.

Third party seller service revenues hit nearly $23 billion in 2016 alone and in fact, third party sellers account for more than 50% of the paid units sold on Amazon. To ensure the on time and accurate delivery that many Amazon customers expect, fulfillment by Amazon has become a very popular model. Fulfillment by Amazon works when you purchase items and send them to Amazon’s fulfillment centers for storage.

After Amazon takes your inventory, you can then monitor how much of it is available through their tracking system. A customer will then order your items through Amazon and Amazon selects and packs those sold items. Amazon is responsible for return management and customer service for those items, but FBA is not just for those items that are ordered on Amazon.com. Amazon keeps one single composite inventory in their fulfillment centers; meaning that you can sell across numerous sales channels.

There are many different benefits to using the fulfillment by Amazon model, which means that you must continue to research the process yourself to remain on the cutting edge with this increasingly popular business form. The top benefits of working with fulfillment by Amazon are customer service and return management, discounted shipping rates, the overall customer experience, being tied to the Amazon brand, and multi-channel Amazon fulfillment. There are costs associated with using the fulfillment by Amazon model.

Amazon breaks their fees down by the weight, time of year and size. You can expect storage and fulfillment fees to include things, such as product returns, shipping and handling of your order, picking and packing your order, customer service, and storage per cubic foot for each month. Costs will change for items sold on any channel other than Amazon.com. Different situations might also apply at particular pricing, such as clothing items carrying an additional fee, other fees like prep service, and storage and fulfillment fees rising every year from October to December.