Interested in selling on Amazon? If you want an online business selling tangible goods, you can’t go bigger than having an Amazon business. My favorite method is selling on Amazon FBA for many reasons. This article will show you how does Amazon FBA work, what is the Amazon FBA process, how do you get paid from FBA, and much more. If you have ever thought about selling on Amazon FBA, this is a must-read!
This post may contain affiliate links. Please read my disclosure for more info.
How Does Amazon FBA Work?
Amazon FBA is only one of the ways that you can sell on Amazon.
We’ll talk about the two main ways to sell products on Amazon, and all the details about Amazon FBA in particular.
Questions that will be answered in this article on how Amazon works:
- What is FBA?
- What is the Amazon FBA process?
- How does Amazon FBA shipping work?
- Is there a monthly fee for FBA?
- How do you get paid from FBA?
- Can you lose money with FBA?
Let’s get started with what is FBA…
If you know you want to fast-track your Amazon FBA success, you need Amazon Boot Camp. It’s the best course out there for Amazon FBA sellers, hands-down.
Watch the 5 key things every business needs to be successful:
- How to Make Money with Amazon: All the Best Ways from Selling to Self-Publishing
- How to Sell on Amazon for Beginners: Your All-In-One Guide to Success
What is FBA?
What is Amazon FBA?
There are two main ways to sell products on Amazon: fulfilled by merchant (FBM) or fulfilled by Amazon (FBA).
With Amazon FBM, the seller is responsible for shipping directly to the customer. This means that you manage all the inventory, have space to store all your products, and ship each order to each customer.
If 10 customers each order a single low-cost product, you are responsible for getting together 10 orders and shipping each to the customers.
The trade-off is that you will pay more fees for Amazon FBA.
With selling on Amazon FBA, Amazon warehouses store your inventory and are responsible for shipping your products to customers.
What is the Amazon FBA Process?
This is how Amazon FBA works in a nutshell:
- Sign up for an Amazon Seller account
- Source inventory to sell on Amazon
- Figure out pricing for your products
- Create listings on Amazon for your products
- Prepare a shipment to send in to an Amazon distribution center
- Either take your boxes to a shipping company like UPS or have them pick up your shipment
- Amazon stores your inventory for you
- When a customer makes a purchase of one of your items, sit back and relax while Amazon FBA ships it for you
- You pay a fee for the FBA services of storage, inventory management, and product distribution
- Get paid every two weeks by Amazon
Now let’s go into more details about how Amazon FBA works…
How Does Amazon FBA Shipping Work?
When you use Amazon FBA instead of Amazon FBM, Amazon will handle all the shipping to customers for you. You in turn pay fees for each item sold for these extra services that make your life easier.
You don’t get to choose which Amazon distribution center you ship your products to – you will be told where to send it when you create a shipment.
A question I get asked a lot is can you combine different items in the same shipment to Amazon.
The answer is yes, usually.
You don’t need to mail in an entire box filled with the same book, or the same toy, for example. You can usually include multiple items from different categories in the same shipment.
Related reading: How to Sell Used Items on Amazon for a Good Profit: Your Guide
How Does Amazon FBA Work: Split Shipments
The exception to this is that sometimes Amazon wants to split up your shipment. This means that certain SKUs might need to get sent to different Amazon warehouses.
By default, the FBA service is Distributed Inventory Placement, which means potentially you have to split one shipment to multiple Amazon distribution centers.
Don’t let this worry you too much. It will all be spelled out for you when you go to prepare your shipment.
I never had to split up a shipment when I had my Amazon business selling books, but it can happen so I want to let you know about it.
Another option is you can switch the setting from default Distributed Inventory Placement to Inventory Placement Service. This way you just have to send your shipments to one Amazon warehouse.
If they need to move around some SKUs, Amazon will be responsible for shipping from one warehouse to others.
For more information, read How to ship products to Amazon FBA.
Is There a Monthly Fee For FBA?
It depends on the type of selling plan you have on Amazon FBA.
If you have an Individual Selling Plan, there is no monthly fee for FBA. Amazon will take fees for each item sold.
If you have a Professional Selling Plan, there is a monthly fee for FBA of $39.99 USD. You will also pay Amazon fees on each item sold.
The difference is that there is an additional $0.99 fee per item sold with the Individual Selling Plan.
If you sell over 40 units per month, it makes sense to get the Professional Selling Plan, as it’s $39.99 no matter how many units you sell.
If you are a beginner Amazon FBA seller, you might want to start with the Individual Selling Plan for the first month or two as you are getting familiar with how Amazon FBA works.
How Do You Get Paid From FBA?
Amazon is one of the few places that doesn’t use PayPal to transfer payouts.
Amazon pays directly to your bank account through an Automated Clearing House (ACH) or electronic funds transfer. This basically means an electronic transfer of money from one bank account to another, from the big Amazon bank account, to yours.
You get paid from FBA every two weeks. You will get paid whatever is in your account as long as it is a positive balance.
In your Amazon Sellers hub online, go to your Payments Dashboard. It will show you what you will get paid at your next payout.
You will get paid from FBA the amount you made on your sales, minus the Amazon FBA fees, minus a certain amount of funds that are reserved. Amazon sometimes reserves an amount of funds in case there are returns or refunds you have to give customers.
It can take up to 5 business days for your money to show up in your bank account after Amazon initiates payment.
Related post: How to Make Money on Amazon FBA – Make $100,000/year.
Can You Lose Money With FBA?
Yes you can lose money with Amazon FBA.
Any legitimate business comes with an element of risk, and selling on Amazon FBA is no exception.
You are never guaranteed to turn a profit with any business.
You can greatly increase your chances of having a successful Amazon business a few ways:
- Do your research when deciding what to sell on Amazon FBA – don’t pick based on a whim, a gut feeling, or what your favorite thing is. You need to figure out the numbers to see if want you want to sell can be profitable. For more on this read What to Sell on Amazon FBA.
- Take this FREE Amazon FBA starter course. Learn what it means to be an Amazon seller, where to buy inventory, and everything you need to get started on the right foot.
- If you’re truly serious about succeeding on Amazon FBA, this is the best Amazon FBA course out there. It’s taught by 6-figure Amazon sellers who work less than 20 hours a week.
To your massive success!