How Does Amazon FBA Work? A Simple Explanation
If you’re reading this, you likely know what Amazon.com is.
If you somehow don’t know, Amazon is the world’s largest ecommerce store.
Roughly 40.4% of all eCommerce transactions in the US are made on Amazon.
That’s great and all, but why should you care?
One simple reason:
Amazon isn’t just an online store, it’s a marketplace.
And what does that mean, exactly?
It means that in addition to Amazon selling products on their site, they allow companies and individuals to sell products on their site as well.
In fact, products for sale by Amazon and third party sellers are almost indistinguishable.
That means every day regular people like you and me can list a product on Amazon and sell it.
But how does one go about selling on Amazon?
One very popular way to currently do that is through Amazon FBA, which stands for Amazon Fulfillment By Amazon.
Let’s break down Amazon FBA.
How does Amazon FBA work?
With Amazon FBA, you send products to Amazon Warehouses where they become Prime-eligible and are ultimately sent to customers by Amazon.
This means that Amazon handles the picking, packing and shipping of your products, as well as a few other business functions like returns.
It could be products you create yourself, products you wholesale, anything sellable on Amazon can be sent to their warehouses.
Interested in selling? Check out the best type of products to sell on Amazon FBA.
While this offers a lot of benefits and convenience to you, the biggest benefit is having your products qualify for Amazon Prime Members and Amazon’s Super Saver Shipping.
If you don’t know, a Prime Member is an Amazon Customer that pays a monthly or yearly subscription to Amazon for access to fast and free shipping of products fulfilled by Amazon.
Super Saver Shipping is similar to Prime, but customers don’t pay the membership fee and will qualify for free regular shipping when their purchase exceeds $25 for products fulfilled by Amazon.
Why does this matter to you?
As a start, there are currently 148.6 million US Amazon Prime members.
Another thing about Amazon Prime members is that they convert at a much higher rate than typical eCommerce shoppers.
Products fulfilled by Amazon can have a conversion rate as high as 60%, or sometimes higher.
Amazon customers simply convert better than your standard window shopper at a regular website.
They come to Amazon ready to buy, and that’s the appeal of having your products on Amazon FBA.
Is it still possible to sell on Amazon FBA?
Short answer, yes.
Every year people wonder if the opportunity on Amazon is still there, or has it suddenly become too competitive for anyone to start.
As the old saying goes, the best time to plant a tree is 20 years ago, the second best time is now.
We write about it extensively in our Is Amazon FBA Worth It in 2022 post.
While this is a quick overview of how Amazon FBA works, the nuts and bolts of the business can get complex and have a lot of moving parts.
Getting started with Amazon FBA is no small task, but it is possible for anyone to be successful in.
Take it a step at a time, learn as you go, and you too can be a thriving Amazon Seller.