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Are you dreaming of making boatloads of money selling products on Amazon? You’re not alone. In the last decade alone, the platform has enabled countless sit-at-home moms and 9-to-5 employees to earn money from the comfort of their homes. 

But what about today? Can you actually make money from Amazon FBA in 2024? 

The answer is yes (and it’s pretty easy).

So, what is FBA, and how does selling on Amazon FBA work? 

This blog simplifies the process of FBA selling and explains how to earn your first dollar on Amazon. 

Continue reading to know more about: 

  • How Amazon FBA works
  • What is the best product to sell on Amazon
  • The pros and cons of Amazon FBA selling
  • FBA costs per month

What is Fulfillment by Amazon (FBA)?

Fulfillment by Amazon (FBA) is a service that lets third-party sellers outsource product packaging, storage, and delivery to Amazon for a fee. It removes the need to hire staff, rent expensive storage facilities, or pay for transportation, allowing sellers to market and sell their products easily.

How Does Amazon FBA Actually Work?

The process of how FBA works in US, UK, Canada, Australia, India (or any other global marketplace) is broken down into four stages:

  • Stage 1: Sign up for a seller central account.
  • Stage 2: Create product listings by clicking on the drop-down menu in the top left corner of your Amazon seller central dashboard. Click on Catalog, select Add Products, and select I’m choosing a product not sold on Amazon. Follow the steps and provide the necessary details. Once your product listing is complete, mark it to be sold via FBA.
  • Stage 3: Place an order for your first batch of inventory and transport it to a fulfillment center for packaging and safe storage (we’ll cover the ‘what to sell with Amazon FBA’ in the next section).
  • Stage 4: Start advertising your product on Amazon. Once orders start, Amazon will ship products to customers and handle customer support and product returns on your behalf.

Note: Like any business, Amazon FBA product sales may be subject to tax. We answer the question: how does Amazon FBA work with taxes in this handy guide!

What is the Best Product to Sell on Amazon?

There is no single ‘best’ product to sell on Amazon; what sells well today might be a fad and vanish from Amazon’s ranking pages tomorrow. There are, however, signs that point to a product worth selling via FBA, some of which include the following: 

  • Small and Light program: These low-weight and small dimensional products incur lesser fulfillment fees. As a result, sellers can maintain relatively bigger profit margins and compete aggressively.
  • Non-seasonal products: These products perform really well during a specific season, e.g., hoodies in winter and swimsuits in summer. Although they perform well during certain parts of the year, unreliable and unforeseen circumstances (e.g., closed shipping routes) make them risky, especially for new sellers who need more experience.
  • Products in open categories: Some products appear impressive on paper, but be careful! They could fall under a gated category, i.e., products that require certain licenses or certifications before you can sell them on Amazon. Make sure the product you choose can be listed in an open or non-gated category.
  • High-demand, low competition: High-demand and low-competition products generate substantial revenues and don’t require an Amazon FBA seller to spend hundreds (or even thousands) of dollars in ad budget. Such products usually feature 10,000 or above average monthly searches and below 500 average reviews for the top 10 sellers.

Top tip: Most, if not all, successful sellers rely on seller tools to uncover FBA products worth selling in seconds. A monthly subscription costs a few dollars and saves hundreds of hours of effort. Here’s a well-known product research tool with a 7-day free trial – check it out to see if it’s a worthwhile investment.

The Benefits of Amazon FBA

Millions of third-party sellers prefer FBA over self-fulfillment (even if it costs extra). The following are a few reasons why:

Ease of selling 

Forgoing FBA means you’ll have to be responsible for storing products at a warehouse, packaging them according to Amazon’s requirements, and transporting them when orders come in. This requires considerable time, physical and mental effort, and resources. It also includes responding to customer queries on time and handling product returns.

With FBA, you can gain peace of mind and dedicate more time to refining your on-and-off advertising campaigns and brand-building efforts.

Improved Visibility and Sales

Amazon favors sellers who fulfill products via FBA by offering them greater visibility and pushing them higher up its search engine ranking pages (SERP, for short). That’s because the more sellers join FBA, the bigger Amazon’s revenues. 

Another advantage of choosing FBA is the increased likelihood of winning the coveted Buy Box, i.e., the area on the right-hand side of a product listing with the Add to Cart and Buy Now options. For sellers, retaining the buy box results in receiving all customer orders, so whoever gets to keep the buy box the longest gets to make the most sales – FBA helps achieve that goal. 

Faster Shipping Times with Discounted Rates

Amazon operates a highly sophisticated shipping network that sprawls across every major continent. It also works with some of the world’s largest shipping firms, resulting in super-fast delivery times. In terms of shipping, the benefits of FBA are two-fold:

  1. Discounted rates: Although you’re paying a fee to enroll in the FBA program, in most cases, FBA is the cheaper option once you compare it with other fulfillment methods or fulfilling orders yourself.
  2. Target more customers: FBA products are eligible for Amazon Prime – a service that allows buyers to purchase and have products delivered to their residences within a day. This makes your offer more attractive than FBM (Fulfillment by Merchant or self-fulfillment) without you having to pay extra fees. 

Leverage Amazon’s Name

Amazon is one of the world’s leading online marketplaces. Visitors know that if the product they purchase is faulty or not as advertised, they can claim a refund. As a result, millions of people trust Amazon and readily buy products from third-party sellers. 

Starting a web store from scratch, generating traffic, and building trust require learning how eCommerce works and putting knowledge into practice. So why not just leverage Amazon’s name and save yourself months (and maybe even years) worth of effort?

Multi-Channel Fulfillment

FBA opens the door to omnichannel or multi-channel fulfillment solutions, through which you can leverage Amazon’s shipping network to fulfill orders you receive from outside the platform, e.g., eBay.

The Disadvantage of Amazon FBA

The perfect product or service doesn’t exist, and FBA is no exception. Here are a few drawbacks of Fulfillment by Amazon.

Reduced Profits

FBA isn’t free; you must pay a percentage-based fee on every sale. Now, considering FBA’s benefits, it isn’t a big deal. However, if you’re new to the platform and your sales aren’t picking up, you’ll also incur monthly storage free for inventory in Amazon’s fulfillment centers. 

We recommend using a reliable Amazon FBA calculator to determine product profitability before you finalize an FBA product for sale.

Strict Packaging Requirements

Amazon maintains strict product packaging guidelines that all sellers must adhere to, e.g., proper labeling, packaging material, bubble wrapping, etc. Failing to send inventory to fulfillment centers according to these requirements may result in your shipment being returned or Amazon charging extra packaging fees.

Weighing Your Fulfillment Options on Amazon

You now have a basic understanding of how Amazon FBA works. But how does it fare vs. other fulfillment options?

Amazon FBA vs. FBM

FBM or Fulfillment by Merchant is when sellers take responsibility for the storage, packaging, and shipping aspects by themselves. The apparent upside is no fulfillment fees, but that can hardly be considered an advantage because if you’re not paying Amazon to handle these aspects of your business, you’re paying someone else. And in most cases, FBA is the cheaper alternative.

FBM has some situational advantages over FBA like:

  • Large dimensional products incur hefty shipping fees. In such cases, FBM is the cheaper option.
  • For established businesses with an existing shipping network (and a customer support infrastructure), FBM could lead to reduced shipping expenses. 

Amazon FBA vs. Third-Party Fulfillment

Third-party logistics (3PL) or third-party fulfillment is when sellers hire a shipping company to handle product packaging, storage, and fulfillment on their behalf. The 3PL option rose in popularity when Amazon started imposing inventory storage limitations, and sellers with high sales needed extra logistics support.

Although storage limitations still exist (the exact amount varies from one seller to another), FBA remains the superior fulfillment method. That said, many sellers use 3PL service providers for extra storage after hitting their Amazon inventory storage caps. 

This hybrid approach allows sellers to via FBA while maintaining large amounts of inventory, avoiding out-of-stock (OOS) situations, and maintaining steady sales all year round.

Amazon FBA vs. Dropshipping

Dropshipping isn’t a fulfillment model like FBM or Seller Fulfilled Prime (SFP) but is considered a viable alternative or eCommerce business model to Amazon FBA. 

Dropshipping on Amazon involves listing products for sale without purchasing inventory in bulk. Instead, when sellers receive an order, they forward the customer details to the supplier or manufacturer, who then handles shipping and customer service.

Amazon dropshipping involves low startup costs and attracts new sellers each year. However, dropshippers don’t:

  • Own the brand or possess equity
  • Have creative control over the product
  • Earn significant profits and must dedicate extra time and effort to maintain sustainability.

Based on these reasons, dropshippers do not own an online business

Amazon FBA lets you earn money from your online business without spending endless hours in front of a screen.

How Much Does it Cost to Start Amazon FBA?

You should have $3,500 - $10,000 in hand to start an Amazon FBA business. The figure varies due to the product price and the cost of procurement. Other factors contributing to this number include the cost of a professional seller plan, advertising, trademark & registration, branding, product samples, and giveaways.

FBA Fulfillment Fees

At this point, you’re probably wondering: how does Amazon FBA fees work? Unfortunately, there’s no straight answer, as it depends on factors like your product’s size tier, dimensions, shipping weight, apparel or non-apparel status, and the time of year. 

Here’s a breakdown of Amazon fulfillment fees in 2022 and 2023:

Table taken directly from Amazon 

Want to know what percentage does Amazon take aside from the FBA Amazon fees? Visit Amazon’s pricing page for an in-depth answer. 

FBA Inventory Storage Fees

FBA sellers can store large inventories within Amazon fulfillment centers without looking for warehouse storage space elsewhere. However, this perk results in monthly storage fees calculated based on the product volume and tier size.

Amazon monthly storage fees are calculated by cubic foot.

Dangerous goods have higher storage costs because they require special care, handling, transportation, and storage facilities. Also, monthly storage fees get bumped up during the holiday season, which starts in October and ends in January next year.

If your products remain within a fulfillment center for too long, Amazon will start charging long-term storage fees. 

Long-term inventory fee details

A helpful tip to prevent long-term storage fees is to ramp up your advertising efforts or consider giving away products for free, increasing brand awareness.

Is Amazon FBA Suitable for All Businesses?

Amazon FBA is suitable for most businesses. If the product you’re selling falls into one of the roughly 36 product categories, you should consider listing and selling via FBA. That’s because millions of buyers visit Amazon daily, and with readily available advertising tools, you can substantially increase your business revenues.

If you don’t have an existing business and want to make a living off Amazon FBA, consider researching a viable product to sell using a reputable product and keyword research tool.

FAQs – Fulfillment by Amazon

Let’s wrap things up by addressing some commonly asked questions.

Is Amazon FBA Still Worth Starting in 2024?

Yes. Anyone looking to increase their monthly income and chances of gaining financial freedom should try their hand at Amazon FBA. With an abundance of online resources and how-to guides, help is readily available on how to set up an online Amazon business in 2024.

How Does Amazon FBA Shipping Work?

There are two aspects to FBA shipping. The first involves shipping products from the manufacturer’s hub to an Amazon fulfillment center (usually from Alibaba to Amazon FBA) – this is your responsibility. The second is where Amazon picks, packs, stores, and ships orders to customers on your behalf – that’s Amazon’s responsibility.

In both instances, you pay for shipping costs, but with FBA, shipping expenses are included within the fulfillment fees charges.

How Much Can a Beginner Make on Amazon FBA?

It depends on your Amazon FBA knowledge and the time and effort you put into creating your FBA store. But generally speaking, you can expect to make anywhere from $1,000 - $2,500 in sales selling FBA products. Most sellers' FBA earnings increase as they learn more about advertising and listing optimization

Can I Do Amazon FBA As a Side Hustle?

You can start Amazon FBA as a side hustle today. Start by implementing the tips in this blog and continue reading up on how FBA works to create a passive income stream. Then, as your earnings increase, you can take Amazon selling as your primary means of income and work towards creating a solid digital asset.

Final Words on How FBA Works

Every journey starts with a single step. However, with so much to learn about product research, product sourcing, listing optimization, Amazon PPC strategy, and other aspects of FBA, it’s easy to feel overwhelmed.

That’s why here at ZonGuru, we’ve created an extensive resource center for new Amazon sellers – think of it as a free Amazon FBA course filled with insights and guides taught by successful FBA business owners.

Feel free to browse through all the content and learn all there is to know about launching successful FBA products!

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