Fulfillment by Amazon – Do the benefits outweigh the fees?

Fulfilled by Amazon is one of the most popular services offered by Amazon, and it is being used by businesses of all sizes. We’ve seen this service grow in popularity over the past few years, and due to the current circumstances, many businesses have adopted this FBA model. There are many factors that you need to consider before signing up to use this program.

The fact is that Fulfilled By Amazon does come at a certain cost, and you will need to assess whether the associated fees are viable not for only your business as a whole, but your individual products.

We’ve thought about helping users out when it comes to making this decision, so we’ve put together a blog post with the key benefits as well as the fees for using FBA.

 

What are the benefits of using FBA?

There are many significant benefits of using FBA, one of them being access to Amazon’s growing client base and of course access to their most loyal and active customers, the Prime customers.

In fact, around 71% of FBA users reported a 20% increase in unit sale price since joining Fulfillment by Amazon. While this in itself is a huge incentive for using FBA, there are a number of other benefits that include:

Enhanced customer satisfaction

What does this mean? – the costs associated with FBA also include Amazon’s acclaimed customer service offering.

This means that any questions related to fulfillment and delivery will be handled by Amazon’s customer support team, providing you with confidence that any queries will be handled professionally on a 24/7 basis.

Fewer business operations

By using FBA, you essentially hand over the entire fulfillment process to Amazon, saving you valuable time to spend on other key business operations.

Faster Shipping

If you are fulfilling orders on your own, offering next-day delivery isn’t always viable, but with Amazon FBA, you can provide it easily and without and added stress or hassle. Because your FBA inventory is already stored at an Amazon fulfillment center, they can process and ship your products quickly and efficiently

We had a look at the pros, now let’s have a look at the cons -the Amazon FBA Fees

FBA fees typically vary based on two factors: the type of product you want to sell and the sales channel you are using to sell it.

Bear in mind that unlike most fulfillment services, you can actually use FBA to fulfill your orders from other selling channels, whether that be another marketplace or your own eCommerce website.

When it comes to the type of product that you are selling, there are three different types: non-media products of standard size, media products of standard size or oversized products.

These fees will depend on which channel you are selling through- Amazon.co.uk, any other EU marketplace, or on an external selling channel.

While the exact fee will depend on these two factors, it will always consist of both a fulfillment fee, as well as a storage fee.

The tables below will help you get a rough idea about the charges  – the outbound shipping weight is your unit’s weight + Amazon’s packaging weight.

Amazon FBA Fulfillment fee for Non-media products

 

Fulfillment by Amazon - fees

 

Amazon FBA fulfillment fee for Media products

 

Fulfillment by Amazon - media products

Amazon FBA fulfillment fee for oversized products

Amazon FBA fulfillment fee for oversized products

You can find the full list of rates here.

Please note that all these fees exclusive of VAT and other taxes. Standard Amazon selling fees will also be applicable and consist of both a Referral Fee and a Variable closing Fee.

When selling on Amazon, you will be required to pay a commission for each item sold, which will be a percentage of the final value. This percentage will be dependent on the product category and for most, there will be a minimum fee of £0.40.

Check out the Category fees in the table below:

In summary, UK FBA sellers have the following costs to look out for:

  • FBA Fulfillment Fee
  • FBA Storage Fee
  • Amazon Seller Fee (Applicable only to sellers listing on Amazon)
  • Amazon Referral Fee (Applicable only to sellers listing on Amazon)
  • Variable Closing Fee (Applicable only to sellers listing on Amazon, for media products)

You might think that there are a lot of fees involved, but do bear in mind that these fees no only cover storage of your inventory in the fulfillment centers, but also the picking and packing of your orders, handling and shipping, customer service, and product returns.

 

Summary

Amazon FBA is a favorable option amongst businesses of all sizes, for the simple fact that it can help to maximize business growth and it can become easily scalable.

Remember that not all of your inventory will be suitable for FBA, mainly because of two reasons:
First, part of your inventory might consist of slow-moving products and will just take up space in the fulfillment center (and subsequently incur a long-term storage fee), and secondly that the profit margin, once the fees are considered, just don’t warrant it.

For this reason, we would suggest that you at least start by using your best-selling products and those that have a high enough profit margin.