image represents What is Amazon FBA and how does it work

What Is Amazon FBA And How Does it Work? 🏗️

Selling online on Amazon is an art that has been mastered by many sellers. If you’re one of them, you would have probably seen how all the work comes down to listing products and shipping them, and all the customer does is buy.

But there’s more to it than that, isn’t there? There are a lot of hidden complexities involved in running an Amazon FBA business. In this blog, we’ll be talking about what is Amazon FBA and how does it work? We will also touch upon the benefits of selling on Amazon FBA, the costs, and fees involved with it, as well as common challenges new sellers face when starting their businesses.

What Is Amazon FBA? 📦

Fulfillment by Amazon, or ‘FBA’, is a program offered by Amazon where sellers can make their products ‘Prime Eligible and have Amazon handle customer service, shipping, and fulfillment.

image represents What is Amazon FBA

How To Get Started 🚚

To get started with ‘FBA’, you’ll need to become a seller, find a product to sell, enroll in the program, create a product listing, and send your inventory to Amazon.

After completing these steps, you’ll begin earning money from each product sold through Amazon’s fees and commissions on each purchase.

Those interested in selling on ‘Amazon’ should consider ‘FBA’ as it’s the most popular e-commerce method used by over 90% of third-party sellers. Not only does it offer seller benefits like improved visibility and greater customer engagement, but it also allows them to focus more on creating great products and customer service.

How Amazon FBA Works? 💻

Amazon FBA (Fulfillment By Amazon) is a service provided by Amazon for business owners to help them sell their products online.

image represents How Amazon FBA Works

Businesses ship their products to fulfillment centers, which are specifically designed for FBA services. Once an order has been placed, Amazon will pick, pack, and ship the order from the closest fulfillment center to the customer.

With FBA, businesses don’t have to handle customer service or product fulfillment in-house, making it a great option for those looking to increase their e-commerce revenue.

Besides making products Prime Eligible, FBA also allows businesses to hand off customer service to Amazon, making it a popular choice for those looking to increase their e-commerce revenue.

Alan Chen, CPA at Freecashflow.io, helping eCommerce businesses with their tax and accounting

Book A Call Now


Another benefit of using Fba is that it saves businesses the costs of shipping and storage. Additionally, product costs are typically lower than if they were fulfilled by a third-party seller. However, the main drawback of using FBA is Devolved control over product quality and shipping times.

The service requires businesses to use amazon’s packing materials and shipping supplies – which can be costly – and also handles product returns and refunds on amazon’s behalf. This means businesses can’t control product quality or shipping times as much as with other fulfillment options.

Let’s discuss them one by one.

  • Set Up FBA 🎚

Amazon FBA is a storage and shipping service that helps businesses sell their products. To set up Amazon Fba, you must first ship your products to an Amazon fulfillment center.

Amazon then handles receiving, picking, packing, and shipping the products, as well as post-sales processes such as returns, refunds, and customer service. As a seller using Amazon Fba, you only need to focus on creating high-quality products and shipping them to the right customers.

Amazon Fba allows Amazon to take control of the entire supply chain, set prices, and choose suppliers while focusing on its core business strengths. So whether you are an eCommerce novice or a seasoned seller, Amazon FBA can help you reach new audiences and grow your business online.

  • Create Product Listings 📝

Amazon FBA is a service that enables businesses to store their products in Amazon fulfillment centers. When you create product listings on Amazon, you enable your business to send products to Amazon fulfillment centers.

Amazon will then pick, pack, and ship the order for you. This service can save businesses time and money while ensuring their product reaches customers safely and reliably. While selling products on Amazon can be lucrative, it’s also a time-consuming process.

Selling directly through Amazon eliminates the hassle of listing, listing management, packing, and shipping. In addition to this, FBA allows sellers to reach millions of customers with the help of customer service and returns. Overall, Amazon FBA is a valuable service that simplifies the logistics of selling products online.

  • Prepare Products 📟

Amazon FBA is a service that stores and ships products for businesses. Amazon handles receiving, picking, packing, and shipping the product for free. This service saves businesses time and money while improving their customer service and product delivery.

 Rather than needing to store and ship products themselves, sellers use Amazon FBA to focus on building their brand. Fees for this service are dependent on the selling plan, referral fees, fulfillment fees, and other miscellaneous costs. Overall, Amazon FBAservice helps businesses save time and money while providing superior customer service and product delivery.

  • Ship Products To Amazon 🚚

Amazon FBA works by storing products in Amazon fulfillment centers and then handling the picking, packing, and shipping of the products to customers.

By taking care of customer service and returns, Amazon FBA simplifies the process of sending products to its warehouses, packing them, and shipping them to customers.

The service provides businesses with a way to reduce their reliance on third-party retailers and take control of the entire supply chain. In 2017, Amazon shipped over two billion items through FBA accounting for more than two-thirds of the items shipped on Amazon that year.

Overall, Amazon FBA offers a reliable and efficient way for businesses to ship their products to customers without having to worry about the logistics of shipping.

Benefits Of Selling On Amazon FBA

Selling on Amazon using Fulfillment by Amazon (FBA) is a great option for businesses looking to increase product sales without having to manage the logistics of shipping and fulfillment themselves.

image represents Benefits of Selling on Amazon FBA

With FBA, businesses can store their products in a secure and easy-to-use fulfillment center, allowing customers to get their orders quickly. That means sellers can focus on running their business and creating product offerings, not on customer service and returns.

As a seller on FBA, you’ll handle customer service and returns, freeing up resources to work on your business’s growth. Plus, customers trust FBA products due to the quick delivery and quality assurance they provide. Plus, it’s accessible and user-friendly, making it easy for businesses of all sizes to start selling on Amazon.

What Are The Costs & Fees Involved With Amazon FBA?

The fees associated with Amazon FBA are quite varied.

image represents What are the Costs & Fees Involved With Amazon FBA?

When you start an account, the brokerage fee usually ranges from $1-$2 per product sold through FBA. This fee covers shipping costs and other fees associated with your business relationship with Amazon.

Additional Fees

There are additional fees associated with Amazon FBA, such as selling plan ($49.99), referral fees (10-17%), stickering & labeling ($0.30/label), and fulfillment & storage fees. These fees vary depending on the size and weight of the inventory, which can affect the cost of shipping and storage.

Fee By Size And Weight Of The Inventory

The fee is determined by the size and weight of the inventory and can be lower for smaller and lighter items. For example, for products that weigh less than 10 lbs, the fee could be $2-$3 per item sold; for items that weigh between 10-20 lbs, it could be $4-$6 per item; and for products that weigh more than 20 lbs, it could be $7-$9 per item.

The total cost of using Amazon’s fulfillment service will vary depending on the product you sell and how many fulfillment items you use within a given period of time. However, shipping costs for fulfillment items should not exceed $4 per order.

What Are The Requirements For Selling On Amazon FBA?

Businesses need to sign up to become a seller on Amazon’s marketplace. They must find and enroll in an FBA program, which includes meeting eligibility requirements, creating product listings, and shipping inventory to Amazon’s fulfillment centers.

Pros And Cons

As an FBA seller, businesses should be aware of the pros and cons of doing business through Amazon.

In short, the benefits include access to a large customer base and cheaper storage fees than if you were selling on your own. The drawbacks include increased costs of shipping and handling, delayed shipping times, and limited product control.

Product Idea

Tips for becoming a successful FBA seller include finding a product idea that is profitable and selling it online. Also, businesses should use Amazon’s tools and resources to improve their business operations and customer experience.

Common Challenges When Starting An Amazon FBA Business

To start an Amazon FBA business, you need a product idea and the ability to research and analyze the product’s selling performance on Amazon.

 It is essential to understand how product listing fees work and how product shipping fees work. Businesses should develop their product research skills to identify products that are likely to be profitable on Amazon.

Post-sales processes like returns and refunds are a vital part of running an Amazon business. Businesses need to ensure that they can handle these processes well so as to ensure customer satisfaction.

It may take up to 1-2 years for the business to start generating a full-time income and businesses need to build their product listing, advertising, and shipping management skills during this time.

Finally, businesses need to understand the logistics of how products are delivered to customers so as to ensure customer satisfaction.

By following these steps, businesses can begin their journey as Amazon sellers with confidence.

Is Amazon FBA Still A Good Way To Make Money Online?

Amazon FBA (Fulfillment by Amazon) is the most popular method among third-party sellers on Amazon, with over 90% of them using it.

Inventory Storage

With Amazon FBA, sellers can store their inventory in Amazon warehouses and have Amazon pick, pack, and ship products directly to customers. This saves time and money compared to other fulfillment options, such as shipping products themselves or having a third-party seller handle fulfillment.

Third-Party Sellers

As part of the program, third-party sellers are provided with seller fees, advertising fees, and a 6% commission on each sale made through their account.

Some Additional Costs

In addition to these fees, there are additional costs associated with hosting an online store through amazon FBA, including fulfillment fees ($39.99 per month plus additional selling fees) and listing fees ($0.15 per item listing fee).

Overall, amazon FBA offers many benefits for ecommerce business owners. However, it does have fees associated with it as well as similar programs from other ecommerce platforms such as Shopify or BigCommerce.


Amazon FBA is a simple way to an e-commerce business that can work for everyone, regardless of your experience and expertise. Sell your own products on Amazon and use customer reviews and seller ratings to get the customer feedback you need to succeed.

You can start selling with little inventory and shipping fees, which will help you build a business over time. However, it is important to note that fulfillment costs as well as product design are key aspects of e-commerce business success.

Want Help With E-Commerce Taxes?

Alan Chen, CPA at Freecashflow.io, helping eCommerce businesses with their tax and accounting

Book A Call Now

Free E-book for E-Commerce Entrepreneurs

9 Most Crucial eCOM Tax Deducations The IRS Doesn’t Want You to Know

Explore More

How To File Taxes For Shopify Store?

How To File Taxes For Shopify Store?

How To File Taxes For Shopify Store? In this article, you will learn: Shopify Taxes Shopify Store Owners Need To Pay Shopify Income Tax: Forms,

Boost Your E-Commerce Business Now

drop us a line and keep in touch
Alan Chen

Schedule Your Call with Alan!

Hate working with accountants that don’t understand your online business?

By the end of this Strategy Session, you will have a clear understanding of the next steps you can take.

 This Call Is Completely FREE.

Have Urgent Questions You Need Answered?

Book a FREE consultation call with Alan and talk to a CPA who actually understands and cares for your business.

Alan Chen