Selling on Amazon through FBA (Fulfilled by Amazon)

By: Hunter Hartman : Fulfilled by Amazon (FBA) is taking eCommerce sales by storm. I remember the first time I heard of it, I was at a community pool back in 2012 and talking to some friends. One mentioned that Amazon would allow you to subscribe to certain products and you didn’t have to pay sales tax, so the deal was incredible. Since this time, Amazon now forces customers to pay sales tax but the service and culture continues to take over. Next came free two-day shipping when subscribing to Amazon Prime. My wife and I were some of the first to market when we purchased Amazon Prime, now it’s everywhere. We couldn’t believe how great the product was and the service we were receiving. There was no possible way that Amazon was making money delivering products in two days and not charging shipping but we didn’t care, we just wanted our products as quickly as possible. I remember our neighbors would ask us what we were always buying online because it seemed like a truck was coming on a daily basis. This was just the beginning.
 
Fast forward a couple of years and now 65% of Amazon Sellers use FBA  to provide two day shipping to Amazon Prime users, boost sales velocity and improve their rankings.  So, what does it take to sell on Amazon FBA? There are three fees that are involved with FBA which include warehouse fees, fulfillment fees and inventory placement fees.
 
If you do not have an Amazon Professional Seller Account, you will pay 99 cents per label item listed on FBA. This professional account is a slam-dunk if you’re moving any volume on Amazon.


How do you calculate a break-even point for Amazon FBA? Most people get scared they’re going to lose money with Amazon FBA and many actually do. Costs are expensive and it is crucial to keep track of everything. The formula to break even in units = Fixed Costs / sales price per unit – Variable Costs.

• Fixed costs are independent of sales volume. (warehousing, software, property tax, amazon fees, employee cost, shipping, etc). In this case, we’ll calculate $50,000 a year for our example.
• Price per unit: How much does each unit cost? Let’s say $9.99 for example.
• Variable costs: Costs that depend on sales volume. This is the question I always get when communicating with customers. VOLUME,VOLUME, VOLUME…  We’ll set this at $10
• Break Even point= $50000 / $9.99 - $10= 4,995

The key here is that you must calculate total costs, because if you do not, your calculations won’t cover all of your cost and you’ll lose money. It’s always safe to be conservative when calculating this.
 
Amazon makes it easy to figure out the clear guidelines for preparing products for FBA. Each product must be individually package for eCommerce and labels individually based on the product sticking requirements and they must be ready to go.

• Any products sold as a single unit must be packaged together. This includes kits and multipacks.
• Products must be individually packaged and ready to ship. Packages can be clear plastic, opaque, or cardboard. Units that are not in secure packaging must be bagged or secured with non-adhesive bands or tape depending on the product.
• Each product must have a scan able barcode with a UPC, ISBN, EAN, or FNSKU depending on the stickering settings you set up in your account.
• Cartons including multiple units cannot have a scan able barcode.
• Package to protect. Amazon sometimes sends your products directly to the seller in your packaging. Plan accordingly.

Many of my clients in Southern California import products from China to sell online. One common question is if you can have your manufacturer in China ship directly to FBA? The answer is yes. You have a couple of options to do this. You can either ship it directly to Amazon FBA from the manufacturer or you can do freight forwarding. Either way you have to fully trust the people you are shipping product to handle it responsibly.

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Lastly, what do you need to get started selling on FBA? You need a professional seller account, a TAX ID and an application date between January and September, FBA doesn’t allow you to apply during their busy season, understandably so. Once you’re ready to sell, you can visit the FBA page and easily sign up for the service.
 
                

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Author

Hunter Hartman is an eCommerce consultant based in Ladera Ranch, CA. His focus is on small-to-large eCommerce companies that are shipping business-to-consumer. Most of his clients are based in Southern California but he has clients nationwide. Through his shipping expertise he has helped hundreds of companies save money shipping small parcels and helped to integrate a more automated solution. For more information and a free consultation, please contact Hunter Hartman. Hunter also has his a secondary website, HunterHartman.com