The Fulfillment By Amazon (FBA) program allows third party sellers on Amazon to ship their inventory to Amazon, and Amazon performs the pick, pack, and ship when you receive an order on Amazon. They also handle returns, and all customer service functions. It’s about as hands-off as you can get, and with Amazon capturing a large part of online sales it’s a great opportunity for anyone who wants to grow their online sales into their main income.
Amazon recently announced changes to their pricing for FBA services, and I wanted to talk about them here because they definitely affect your business.
Amazon would like to receive FBA merchandise in condition to be ready to ship to a customer. However, it doesn’t always arrive that way and Amazon performs the necessary preparations when they receive the merchandise. For example, since the merchandise will be stored in a warehouse, which can be rather dirty, they require anything that’s particularly harmed by some dirt to be in polybags. Clothes would be a good example of this. Until now, Amazon has done this preparation free of charge, but that has now changed.
If your merchandise reaches the Amazon warehouse, and it isn’t prepared the way Amazon specifies, they’ll still do the preparation for you, but they’ll now charge you for it. As examples, at the time of this writing, putting a label on a product is $0.20, and putting a product in a polybag is $0.50.
These aren’t unreasonable prices for these services, but the fees will definitely add up. E.g., if you ship 10,000 items to Amazon per year that need to be polybagged and labeled, it will cost you $7,000 per year. Ouch! These fees may also make it no longer worth it to carry some products. If you’re making $1 per item, and your fees go up $0.70 per item, it’s probably not worth it to carry anymore (or at least, you’ll need to start doing the preparations yourself).
This is a new and rather large change, and it will take time for Amazon to get all of this right. E.g., when I was creating a shipment recently they indicated the products needed to be polybagged. However, the product comes from the manufacturer in a sealed box, clearly no polybag was actually needed. So be prepared to file help requests letting them know when they flag a product as needing preparation when in reality it doesn’t. No one shipment will cost you that much, but over time it will add up.
One more note before leaving this topic, you can also use the FBA program to fulfill orders on other channels, like eBay or Sears Marketplace. You’ll need to enter the orders on your Amazon account yourself, or pay a service to do this for you, but it’s still a good deal because of the shipping rates they get, compared to what a small retailer can get from UPS / FedEx / USPS.