Amazon FBA stands for Amazon Fulfillment By Amazon. At the heart of this inconspicuous acronym is Amazon’s vast network of warehouses, spread across the globe, from which Amazon products and sellers’ products are shipped. FBA, however, is not just about warehouses, but also about a sales model that enables you to deliver your products to millions of customers around the world in 24 hours, and about logistics technology at the highest level. It’s a solution that has revolutionised e-commerce and is available to every Amazon seller.
Amazon FBA warehouses
You can definitely see one of Amazon’s huge warehouses in the suburbs of any Polish or European city. In Poland, Amazon FBA warehouses are currently located in Wrocław (2 warehouses), Poznań, Kołbaskowo, a warehouse in Gliwice and most probably in Okimany in Lower Silesia. FBA warehouses are huge (warehouses in Wrocław have a total area of 95 thousand m2) and under their roof products are stored and packed for Amazon customers and your customers. The products in FBA warehouses are either Amazon’s own products or products from Amazon sellers that have been entrusted to Amazon’s warehouses for storage and handling. The main determinant of the location of FBA warehouses is primarily geography and logistical costs. Warehouses are located to be able to handle shipments to all Amazon customers with 48, 24 and even same-day delivery options at optimal shipping costs. The warehouses are also differentiated according to the products stored in them and so there are warehouses for so-called groupage and large volume / pallet warehouses. Some warehouses also have special functions, such as a warehouse with the possibility of printing books to order (Print from demand Cell) or printing patterns on clothing.
How do FBA warehouses function?
An FBA warehouse performs the basic functions of logistics centres, i.e. receiving products, storage, picking, packing and dispatching products to customers. A seller, choosing to sell a given product in the FBA option, is obliged to prepare the products properly and ship it to the warehouse in accordance with the information provided in the Amazon Seller Central – Shipping Plan.
The Amazon warehouse receiving the shipment will store the product in that particular centre and/or additionally distribute it to other logistics centres spread across Europe depending on whether the product is sold in the FBA or PAN FBA model. The decision regarding the quantity and final destination of the product is taken by Amazon and the transfers between warehouses are carried out by Amazon’s internal transport. Once the products are accepted into the respective warehouses, the products are stored and await customer orders.
When customer orders for a product are received, the FBA warehouse picks, that is, completes the order, packs it and ships it to our customer. A customer who decides to return a product does so by also sending it to the FBA warehouse. Additionally, as part of the FBA service, Amazon employees also provide customer service in the relevant language and contact with us as sellers is only initiated when an Amazon employee is unable to answer a customer question.
What are the costs of FBA?
The costs associated with handling through FBA warehouses is a fairly complex algorithm that differentiates the amount of costs depending on the size, specifics of the product and how long it is stored in an Amazon warehouse. In general terms, FBA storage costs are made up of 3 factors:
1) The dimension of the product, i.e. the volume it occupies in Amazon’s warehouse calculated on a monthly basis
2) The cost of shipping the product depending on its weight and dimensions, thus the packaging it fits into
3) Special additional requirements for storing or packaging the product prior to shipping.
Details of FBA costs can be found in a dedicated article on the subject here.
FBA or not FBA – that is the question?
There is no clear answer to this a’la Shakespearean question. In summary, selling in the FBA model has its great advantages such as:
– The ability to reach Prime customers, which equals more sales
– No need for your own warehouse, people, equipment and capital to handle orders
– Returns handling by Amazon’s warehouse – no need to have a returns address in the country
– Amazon’s customer service in your language
– Negative feedback related to service or shipping quality is automatically removed by Amazon
When considering selling through Amazon FBA, however, there are issues that need to be taken into account that may be a barrier to selling through this particular model:
– Selling through Amazon FBA involves registering and paying VAT in the country where our goods are stored. Read more about this in this article.
– The unit costs associated with Amazon FBA may be higher than for FBM sales – this depends on the product.
– Careful inventory management is required. The cost of storing a product for longer than 6 months in an Amazon FBA warehouse is associated with a significant increase in storage fees.
Still in doubt if FBA is for you or have any additional questions – contact us or let us know in the comments to this article or on our FB group and we will respond and maybe this information will be useful to someone else:) Be part of the Go2Market Community.