FBA – Fulfillment by Amazon
Term #65
Amazon stores, packs, and ships for you. Includes the Prime badge and higher ranking. Fees: referral + FBA + storage.
In practice
FBA is Amazon's version of a 3PL. Prime raises sales by 30-40%. The catch: fees usually run 27-30% of the sale.
Common misconception
'FBA is easy money.' Fees can reach 30-40%. On products under $15, it's usually not profitable.
How to fix it
FBA not profitable? (1) use the FBA fee calculator, (2) watch long-term storage fees, (3) set a reorder point.
Example
An Amazon seller: a $25 product with $12.50 in fees and $6 COGS left $6.50 (25%). After ads at $2, net profit was $4.50.
Priority
Sale price should be at least 3x COGS for FBA profitability.
Related terms
Keep learning. Metrics that touch the same area:
- Amazon MarketplaceMarketplacesThe world's largest commerce platform — 300M active customers. Offers Seller Central (selling directly to consumers) and Vendor Central (selling to Amazon). Fees: 8-15% referral plus FBA fees.
- FulfillmentOperationsThe entire process from receiving an order to delivery: pick, pack, label, ship.
- 3PL – Third Party LogisticsLogisticsAn external company for storage, picking, packing, and shipping. The store owner sends inventory to the 3PL, receives orders, and the 3PL handles fulfillment.
- Last Mile DeliveryLogisticsThe final leg of shipping — from the logistics center to the customer's door. 53% of shipping costs.
- Reverse LogisticsLogisticsManaging product returns: collection, inspection, sorting, restocking, or recycling. Costs 2-3x regular shipping.
- CarrierLogisticsA company that performs shipping: DHL, UPS, USPS, FedEx. Each has different pricing, speed, coverage, and reliability.
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