What is Amazon FBA?

Amazon FBA is an abbreviation for Amazon Fulfillment By Amazon. Behind this unassuming abbreviation lies a powerful machine under the Amazon banner, whose heart is a network of warehouses scattered around the world, from which shipments of Amazon products and seller products are fulfilled. However, FBA is not only about warehouses but also a sales model that enables the delivery of your products to millions of customers worldwide within 24 hours and a logistics technology of the highest level. It is a solution that has revolutionised e-commerce and is available to every Amazon seller.

Amazon FBA Warehouses

You have certainly seen one of the giant Amazon warehouses on the outskirts of one of the Polish or European cities. In Poland, the Amazon FBA warehouses are currently located in Wrocław (2 warehouses), Poznań, Kołbaskowo, and there is a warehouse currently being built in Gliwice, and most likely in Okmiany in Lower Silesia. The FBA warehouses are enormous (the warehouses in Wrocław have a total area of 95,000 m2), and under their roofs, products intended for Amazon customers and your customers are stored and packed. The products in the FBA warehouses are either owned by Amazon itself or are products from Amazon sellers entrusted for storage and handling by Amazon warehouses. The main determinant of FBA warehouse locations is primarily geography and logistics costs. The warehouses are located so that they can handle shipments to all Amazon customers at an optimal shipping cost with the possibility of delivery in 48 hours, 24 hours, or even same-day delivery. The warehouses also differ in terms of the products stored in them; there are so-called small items warehouses and large/goods pallet warehouses. Some warehouses also have special functions, such as a warehouse with the ability to print books on demand (Print on Demand Cell) or printing designs on clothing.

How do FBA warehouses operate?

The FBA warehouse performs the basic functions of logistics centres, namely receiving products, storage, order fulfilment, packing, and shipping products to customers. When a seller chooses to sell a product using the FBA option, they are obliged to prepare the products appropriately and send them to the warehouse according to the information provided in Amazon Seller Central - Shipping Plan.

Upon receiving the shipment, the Amazon warehouse assembles the product in a designated centre and/or additionally distributes it to other logistics centres scattered across Europe, depending on whether the product is sold under the FBA model or PAN FBA. The decision regarding the quantity and target locations of the product is made by Amazon, and transfers between warehouses occur via Amazon's internal transport. Once products are received at the appropriate warehouses, they are stored and wait for customer orders.

When customer orders for a product appear, the FBA warehouse picks, packs, and ships the order to our customer. A customer who decides to return a product does so by sending it back to the FBA warehouse. Additionally, as part of the FBA service, Amazon employees also handle customer service in the respective language, and contact with us, as sellers, is initiated only when an Amazon employee cannot answer a customer's question.

What are the costs of FBA?

The costs associated with handling through FBA warehouses involve a rather complex algorithm that differentiates the costs based on the size, specificity of the product, and the time it spends in the Amazon warehouse. To generalize, the FBA storage costs consist of three factors:

1) The dimensions of the product, that is, its volume that it occupies in the Amazon warehouse on a monthly basis

2) The shipping cost of the product dependent on its weight and dimensions, thus also on the packaging that will accommodate the product

3) Special additional requirements concerning the storage or packing of the product before shipping.

Details about FBA costs can be found in the dedicated article on this topic here.

FBA or not FBA - that is the question?

To this Shakespearean question, there is no unequivocal answer. In summary, selling in the FBA model has its great advantages such as:

The ability to reach Prime customers, which is equivalent to higher sales

No need to engage your own warehouse, staff, equipment, and capital to handle orders

Handling returns through Amazon warehouses - no need to have a return address in the respective country

Customer service handled by Amazon in the respective language

Negative reviews related to the quality of service or shipping are automatically removed by Amazon.

When considering selling through Amazon FBA, however, there are matters that must be taken into account, which may pose obstacles to selling in this particular model:

Selling through Amazon FBA is associated with the requirement to register and pay VAT in the country where our goods are stored. More about this in this article

Unit costs associated with using Amazon FBA can be higher than carrying out sales in the FBM model - it depends on the product

Careful inventory management is required. The cost of storing products for longer than six months in the Amazon FBA warehouse is accompanied by a considerable increase in storage fees.

If you still have doubts about whether FBA is for you or have any additional questions - contact us or let us know in the comments to this article or on our Facebook group, and we will respond to it, and maybe this information will be useful to someone else :) Be part of the Go2Market Community.

Good luck,

Go2Market Crew