Amazon FBA, or Fulfillment by Amazon, is a service in which sellers send inventory to Amazon for storage, order handling, delivery and selected customer-service functions. The seller still owns the inventory and remains responsible for sourcing, listing accuracy, product compliance and the economics of each SKU.
How does the FBA workflow operate?
- Create an eligible listing and prepare inventory to Amazon’s requirements.
- Send labeled units to the assigned fulfillment locations.
- Amazon receives and stores the units.
- Amazon picks, packs and ships customer orders.
- Returns, reimbursements, fees and inventory adjustments are reconciled.
What costs should a seller track?
- Referral and fulfillment fees
- Monthly and aged-inventory storage
- Inbound freight, duties and preparation
- Returns, removals and disposal
- Advertising and discount costs
- Inventory loss, damage and reimbursement differences
Illustrative unit-economics check
Assume an illustrative selling price of $40, product and inbound landed cost of $14, marketplace referral fee of $6, FBA fulfillment fee of $5 and allocated storage and returns cost of $2. Contribution before advertising and overhead is $40 − $14 − $6 − $5 − $2 = $13 per unit. The figures are illustrative; actual Amazon fees vary by marketplace, category, dimensions, weight and inventory age.
FBA vs. seller-fulfilled orders
With FBA, Amazon performs fulfillment from its network. In a seller-fulfilled model, the seller or its logistics provider stores and ships the order. The better route depends on service requirements, inventory velocity, product size, margin and the seller’s operational capability.
