Do you find yourself wondering what FBA is or what it stands for? If so, we’re here to unwrap what this popular e-commerce acronym stands for: Fulfillment by Amazon (FBA). It’s a powerful program that lets you tap into Amazon’s world-class logistics so your products can reach customers fast, reliably, and at scale.
Below, we’ll take a deeper look at what Amazon FBA is and how it works, how to get started, costs, pros and cons, and practical tips to boost conversions and increase sales. After that, you can decide whether this model matches your goals and margin structure.
What Is Amazon FBA?
At its core, Amazon FBA is a service that allows you to send inventory into Amazon’s fulfillment network. Amazon then stores, picks, packs, ships, and handles customer service and returns for eligible orders. You sell; Amazon fulfills. By contrast, Amazon FBM (Fulfilled by Merchant) means you’re responsible for warehousing, shipping, and support.
In other words, Fulfillment by Amazon (FBA) takes care of inventory storage, order fulfillment, returns processing, and Prime-level customer service for Amazon-listed products, so you can focus on product, marketing, and growth. Amazon describes and compares these fulfillment options and provides a Revenue Calculator to estimate costs before you enroll.
Facts about Amazon FBA
For e-commerce sellers looking to expand reach and streamline operations, FBA remains one of the most influential logistics levers in the market. Sellers choose it to unlock Prime eligibility, faster shipping, and Amazon-managed customer support.
Amazon accounts for approximately 40% of all U.S. e-commerce sales, underscoring its dominant position in online retail and the central role of its fulfillment network in supporting that scale.
That said, FBA isn’t one-size-fits-all. While it offers convenience and trust, it also comes with fees, packaging and labeling rules, and inventory health requirements.
The good news is that Amazon allows sellers to outsource storage, order fulfillment, and returns, and still be able to sell through Amazon!
How does Fulfillment by Amazon work?
Think of it as connecting your catalog to Amazon’s fulfillment network and following this operational flow:
- Set up your FBA account. Create a Seller account, then enable FBA in Seller Central. Use Amazon’s Revenue Calculator to model fees and profitability for each SKU before enrolling.
- List your products. Add products to the Amazon catalog and specify which SKUs are FBA inventory so Amazon knows to fulfill them.
- Prepare your inventory. Package and label according to Amazon’s guidelines (safety, compliance, barcodes) to avoid delays or non-compliance fees.
- Ship to Amazon. Create a shipping plan, label cartons, and send inventory to designated Fulfillment Centers. You can evaluate inbound placement options and their fees during shipment creation.
- Store, pick, pack, ship. Amazon receives and stores your goods, then picks, packs, and ships when orders arrive.
- Customer service & returns. Amazon handles order-related customer service and return processing for FBA orders.
- Track & optimize. Use Seller Central dashboards and reports to monitor inventory health, fees, and performance, and to plan replenishment.
Quick answers to common FBA questions
What is the meaning of Amazon FBA?
It is an acronym, and it stands for Fulfillment By Amazon.
How does Amazon FBA shipping work?
Amazon selects the carrier, ships from the nearest center stocking your SKU, and updates tracking automatically in the order detail page.
How does Amazon FBA work internationally?
You can expand to global markets using Amazon’s cross-border programs and regional FBA networks; eligibility and fees vary by region.
How does Amazon FBA process returns?
Amazon manages customer service and returns for FBA orders, inspecting items and returning eligible units to sellable inventory.
Amazon fulfilment: Pros & cons
By leveraging its logistics, policies, and consumer trust, Amazon has enabled thousands of e-commerce entrepreneurs to scale. But every advantage has a trade-off. Here’s a balanced view.
Benefits of using Fulfillment by Amazon (FBA)
- Prime eligibility & faster delivery. The Prime badge increases visibility and conversion by signaling fast, trusted shipping and easy returns.
- Inventory storage & nationwide reach. Amazon distributes and stores inventory across its network, positioning items closer to customers.
- Amazon handles shipping & returns. Amazon manages shipping and returns for all FBA orders.
- Multi-channel fulfillment (MCF). You can use FBA inventory to fulfill orders from other sales channels (your Shopify site, other marketplaces) via MCF, but with separate rates and SLAs.
Downsides of using Fulfillment by Amazon
- FBA fees can accumulate faster than expected. Fulfillment and storage fees vary by size, weight, category, and seasonality; margins on low-priced or bulky products can compress. Before using FBA for your fulfillment, always model with the Revenue Calculator and your specific dimensions.
- Inventory capacity & compliance. You’ll need to prep and label correctly, and watch capacity to avoid surcharges and non-compliance fees.
- Limited exterior branding. Amazon-branded parcels reduce shipment-level branding control (though your product packaging still matters).
- Potentially higher return rates. Amazon’s customer-friendly return policies can increase return volumes in some categories like fashion and consumer electronics, where sizing issues, style preferences, or quick product upgrades often lead to higher return rates.
- Commingling risks (if still applied). Until November, Amazon commingled inventory. This means that your units may be pooled with other sellers’ identical items, raising quality control considerations. The company stated that commingling will be retired from its FBA workflow before the year’s end. But until this is actually true, if you and another seller, for example, offer the same model of a phone charger with the same UPC, Amazon may ship the other seller’s unit to your customer if it’s closer in stock!
Bottom line:
Amazon FBA’s scale and customer trust can be powerful growth drivers. Yet lasting profitability depends on choosing the right products, managing fees wisely, and maintaining a healthy, well-balanced inventory.
How much does it cost to use Amazon FBA?
There isn’t a single “Amazon FBA percentage.” Your total cost combines your Selling Plan, referral fees, and FBA fees (fulfillment + storage + any surcharges). Amazon publishes the official fee schedule and calculator so you can estimate accurately before you commit.
Selling plans
- Individual plan: $0.99 per item sold, no monthly subscription. Best for <40 orders/month or early testing.
- Professional plan: $39.99/month, no per-item fee. Adds bulk listing, advertising, APIs, and advanced features for scaling sellers.
Referral fees (commission)
Amazon charges a referral fee on each sale, based on category – commonly 8–15% with some categories outside that range. Certain categories use tiered rates. Always confirm the current category table in Seller Central.
FBA fulfillment fees
These cover pick, pack, ship, customer service, and returns for FBA orders. Rates depend on size tier (standard vs. oversized/bulky) and shipping weight (actual or dimensional, Amazon bills the greater). Use the calculator to see per-unit costs for your exact package specs.
Monthly storage fees
You pay a monthly storage fee based on the daily average volume (cubic feet) your inventory occupies in fulfillment centers. Rates vary by season (off-peak Jan–Sep vs. peak Oct–Dec) and size tier (standard vs. oversized). Check Amazon’s current US storage rate table in Seller Central because Amazon periodically updates these numbers.
Aged inventory (long-term) surcharges
Amazon applies aged inventory surcharges to units stored 181+ days, with higher tiers for older stock. This policy is designed to push faster sell-through, but if your products tend to move slowly, those added fees can quickly eat into profits. It’s worth staying ahead of the curve by reviewing aging reports often and planning timely removals or promotions. In some cases, partnering with a 3PL fulfillment provider that doesn’t penalize long-term storage may offer a more flexible alternative.
Optional: inbound placement service fees
When you create inbound shipments, you may see inbound placement service options with per-unit fees. These cover Amazon’s cost to distribute inventory across its network and can differ by size or weight category. It’s best to evaluate placement vs. self-warehousing and distribution trade-offs for each SKU.
Because fees can change, always model “worst-case” dimensions and weights (and consider dimensional weight) to avoid surprises. Then pressure-test your margins with storage and aging scenarios.
Bottom line:
Does it cost money to ship to an Amazon warehouse? Yes. Depending on your method, you’ll incur inbound freight/parcel costs, and you may see inbound placement charges as described above.
Note: Amazon fee values can change; always confirm the latest numbers in Seller Central before pricing or launching new SKUs
How much does an Amazon FBA seller make?
Earnings vary widely. Product selection, landed cost, pricing power, PPC strategy, reviews, and inventory health drive outcomes. Some sellers generate a few hundred dollars a month; others scale to six or seven figures annually. Many new sellers aim to reach profitability within their first 12 months by selecting the right SKUs, controlling fees, and optimizing stock (not overstocked or constantly stocked out).
7 Tips to increase sales (and margins) with Amazon FBA
1. Nail your product-market fit and unit economics
After modeling FBA fees, referral, storage, and ad spend, confirm a healthy per-unit profit at realistic price points. Right-size packaging to improve size tier and dimensional weight. Small reductions often unlock better fee brackets.
2. Build listings that convert
Compelling titles and feature bullets aligned with “how customers search,” plus lifestyle images, comparison charts, and a clear value proposition, can boost conversion and reduce returns. Ethical review generation, solid packaging, and detailed instructions on product usage can nudge customers to buy again.
3. Price with intention
Anchor on delivered value, not only on competitor price. Consider tiered coupons or time-bound promos to spike conversion without permanently cutting list price. In some cases, you could also use automated or rules-based repricing where competition is dynamic.
4. Keep inventory healthy
Forecast demand around seasonality and promotions, always stay in stock, but avoid aging fees. Create removal orders or run promos before items hit 181, 271, and 366-day markers.
5. Run smart advertising (PPC)
Start with Sponsored Products to capture bottom-funnel demand. Then, expand into Sponsored Brands and Sponsored Display to boost visibility and build awareness across the shopper journey. Keep a close eye on your campaign data; test, refine, and reallocate budget toward the keywords and creatives that drive the highest return on ad spend.
6. Consider a hybrid fulfillment strategy
What is an Amazon FBA business that also uses other fulfillment providers? A flexible one. Some SKUs thrive on FBA; others (very heavy, very slow, highly customized) may fit a 3PL or a 4PL better. Many brands run hybrid: FBA for fast movers; 3PL for outliers.
7. Protect your brand & quality
If you are using FBA, avoid commingling. Use labeled inventory to keep the chain of custody tight. Also, monitor returns and listen to the voice of your customers to find and fix friction root causes.
Is Amazon FBA worth it?
For the right catalog and cost structure, yes. FBA lets you qualify for Prime and deliver a frictionless customer experience with embedded returns and support. But the best outcomes come from sellers who:
- Model fees precisely before launch, and re-model them after fee updates.
- Choose products with sufficient margins.
- Maintain inventory discipline to avoid aged surcharges.
- Invest in listing quality, reviews, and PPC.
- Stay flexible using a hybrid fulfillment model based on SKU economics.
Grow your Amazon sales with NovEx
Amazon FBA can be a game-changer for both new and established sellers: you tap into Amazon’s infrastructure, streamline day-to-day ops, reach a massive customer base, and benefit from fast shipping and Prime trust.
Success, however, comes from clear strategy and disciplined execution by choosing the right SKUs, designing conversion-ready listings, pricing for margin, staying in stock, and continuously optimizing your PPC and inventory health.
Remember: You can outsource fulfillment and still sell through Amazon!
Many brands use a trusted 3PL partner for some SKUs or non-Amazon channels. The right operating model is the one that protects margin, delights customers, and scales with demand.
If you’d like a collaborative partner to help you evaluate your fulfillment operations, pressure-test your fee model, and create a clear plan to turn more visitors into customers that keep coming back, we’re here to help you! Get in touch