What Is Amazon FBA

The previous lesson argued that Amazon already has the buyers. This one covers the mechanism that lets a one-person business serve those buyers without a warehouse, a packing team or a courier contract. It is called Fulfilment by Amazon, usually shortened to FBA.

The idea fits in a sentence. You buy stock, you send it to an Amazon warehouse, and from that point Amazon stores it, picks it, packs it, ships it to the buyer and handles the delivery side of customer service. You never touch the parcel that reaches the customer.

What Amazon takes over

Once your stock is checked into the network, these stop being your job:

• Storage. The units sit in Amazon's warehouses, not in your spare room, and Amazon can spread them across several sites.
• Picking and packing. When an order comes in, Amazon staff pull the unit, box it and label it.
• Shipping. Amazon's carrier contracts move the parcel, at rates a small seller could not negotiate alone.
• Delivery-side customer service and returns. Amazon answers the buyer about where the parcel is and processes the return when one comes back.
• The Prime delivery promise. Eligible FBA offers carry it, which is what puts them in front of members who filter for it.

That last point is the one that matters most in practice, and it is why this course assumes FBA. A large part of the audience never sees an offer without fast delivery.

What stays your job

FBA is not a business in a box. Everything before the warehouse door is still yours:

• Deciding what to buy. Amazon will store and ship anything you send. It will not tell you the item was a bad buy. Most of this course is about that decision.
• Buying it. Your money is tied up in stock from the moment you pay the retailer until the moment Amazon pays out.
• Prep. Items have to arrive in the condition Amazon's rules require: labelled, sometimes bagged, sometimes bundled. A prep centre can do this for you, and there is a later lesson on that.
• Getting the stock in. You create the shipment plan in Seller Central and pay to send the boxes to the addresses Amazon gives you.
• Pricing. Amazon does not price for you. What you charge decides whether you win the sale, which is what the Buy Box and repricing lessons cover.
• Account health. The rules on restricted products, condition and performance apply to you whoever ships the parcel.

FBA and FBM are not rivals

The alternative is Fulfilment by Merchant, or FBM: you keep the stock and post it yourself when an order comes in. It is not a worse choice, it is a different one.

FBM keeps your cash out of Amazon's warehouse and avoids storage fees, which suits items that are large, heavy, slow-selling or awkward to ship into the network. FBA suits small, light, quick-selling items, and it is the only route to the Prime badge on most listings. Plenty of sellers run both, choosing per product rather than once and for all.

What FBA costs

There are two charges that only exist because of FBA, on top of the referral fee Amazon takes on every sale whichever way you ship:

• A fulfilment fee per unit sold, set by the item's size and weight. A small, light item costs little to fulfil; a bulky one costs a lot, which is why weight and dimensions belong in the buying decision.
• A storage fee, charged by the volume your stock occupies and by how long it sits there. It is small for goods that sell quickly and grows for goods that do not.

There are further charges for stock held a long time, for asking Amazon to send units back to you and for handling returns in some categories. Every rate here varies by marketplace, by category, by size band and by season, and Amazon revises the schedule, so work from the current published figures rather than from any number quoted in a video or a blog post: the US schedule and the UK one. The lesson on analysing products shows where these fees enter the sum.

What can go wrong

Two problems account for most of the unpleasant surprises, and both have their own lesson later in the course.

The first is stock that does not sell. Slow stock keeps occupying space you are charged for, and the money you spent on it is not available for the next purchase. The second is stock Amazon cannot sell for you: a listing that gets restricted, a unit that arrives damaged, a product that turns out to need approval you do not have. Units in that state sit in the warehouse until you fix the cause or ask for them back. Neither problem is a reason to avoid FBA. Both are reasons to be careful about what you send in, which is the subject of nearly every lesson that follows.

The next module covers what to settle before your first purchase: the tools, the startup costs, the business structure and the seller account itself.