All about Amazon FBA
What is Amazon?
For those of you not familiar with buying items online, or have been hiding in a cave for the past 10 years, Amazon is a HUGE business that you should be aware of. Amazon essentially is "The Everything Store". You can buy almost any product you want on Amazon and have it delivered straight to your door.
Amazon was started by Jeff Bezos who is now one of the richest men in the world. Jeff's idea was simple, he wanted to create an online store that sold everything, had great customer service, and delivered items very quickly. Jeff worked tirelessly and has now created the most amazing website in the world. Amazon breaks records every year for e-commerce and is only getting larger. They are also highly diverse and have many different avenues to earn income. For the purposes of this article we will focus on their Fulfillment by Amazon business model which most simply call FBA.
Example of a product page on Amazon
Lets use the following textbook as an example to see what a product looks like on Amazon and what I mean by other sellers:
If you were to go on Amazon looking for this particular textbook you have some options on how to purchase it. You could buy it directly from Amazon in new condition for $199.95 or check the third party sellers (see next picture).
The first picture is just to show you the link that you click on to see the other sellers. The second picture shows the other sellers prices and whether their product qualifies for Prime or not.
So what is FBA?
FBA simply means that Amazon is fulfilling a order for a third party seller. Anyone can become a third party seller on Amazon and ship items to them to sell. Just like how there were other sellers for the textbook in our example. There are other sellers for almost every product on Amazon. You could buy that textbook in new condition from Amazon or buy it from "Tbay Press" in used condition. It still is an order that goes through Amazon and still qualifies for their Free 2 Day Prime Shipping.
How can a seller qualify for Prime Shipping?
The reason you can still get this textbook from Tbay Press or any other prime seller is because the textbook is already being stored at an Amazon distribution center. The seller purchased the textbook and then sent it in to Amazon to store in their center. When a customer chooses to purchase Tbay Press's book instead of Amazon's, an employee at that center will pick the item, package it up, and ship it out to the buyer.
Why would Amazon let competitive offers on their site?
Good question with a simple answer. Amazon takes a commission for every item they sell. An Amazon seller understands that they will have to pay to ship the item to Amazon, pay to store the item in Amazon's warehouse, and that they will be charged a percentage commission when the item sells. This is still a great deal for the seller as they get to set their own price and can ensure they still make a profit. It's also great for Amazon because they effectively make money either way.
What are the benefits of FBA? Why not store the items yourself?
Amazon does have an option where you can list your products on their site and they will notify you when someone wants one of your products. Then it will be up to you to pack and ship the item to the customer.
The reason Amazon FBA is so much better, in my opinion, is because once I have shipped the item out to Amazon and set my price, I don't have to worry about anything else.
Using FBA means I do not have to:
- Watch for orders
- Ship directly to customers
- Worry about storage
- Or deal with customer service issues
Insead of worry about all of these things I can move on to finding more products to send to Amazon and build up my inventory that much faster. I find their commission to be an incredibly fair price to allow me to qualify for Prime shipping and let them take care of fulfilling the order!
I'm interested in FBA, what's the next step?
Stay tuned to my channel for my next posts about getting started as a reseller on Amazon.com and how to use the FBA system to generate profits!