How To Make Money With Amazon FBA (Fulfillment By Amazon)

How To Make Money With Amazon FBA (Fulfillment By Amazon) 


Disclaimer


This blog post is for informational purposes only. I tried to make the content in this post as accurate as possible, but I cannot guarantee that this post is completely reliable or free of errors.


What is Amazon FBA (Fulfillment By Amazon)


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Amazon FBA is a service offered by Amazon that allows you to sell products on Amazon with more convenience. Instead of Fulfilling all of your orders from Amazon yourself, you can have Amazon fulfill those orders for you. Amazon stores your products in their warehouses and takes care of packing, shipping and customer service (customer inquiries and returns). Amazon FBA allows you to store your products in multiple warehouses which means that you can sell your product through multiple channels. The only possible downside to using Amazon FBA is that you will not receive the full value of each sale that you make through Amazon FBA. Amazon will receive a commission from each sale in return for storing, packing, shipping and customer service.


Should you use Amazon FBA


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If you are currently a seller on Amazon and would like to broaden your reach to customers, then Amazon FBA would be an option for you to consider. Amazon’s Warehouses are very large and storing products in Amazon’s warehouse would be easier than fulfilling more orders yourself in a smaller space. Amazon’s FBA program allows you to store an unlimited number of products in their warehouse. You could also access much more customers without being inconvenienced by time and money. Even though you are only receiving a commission for each sale that you make through Amazon FBA, you could potentially earn much more revenue if you are able to reach many more customers. If you Join Amazon FBA as an Amazon Prime member, you can also become eligible for Amazon’s Free Two Day Shipping.


Packaging and Preparation Requirements 


Requirements: Before you send your products to one of Amazon’s Fulfillment Centers, you are required to meet Amazon’s Packaging Requirements. Depending on the product that you packaging, these requirements can vary. These are the different categories of products that Amazon has set requirements for.

Loose Products: These are products that contain parts that are not securely packaged. Electronics, for example, must have secure packaging for wires and separate parts. This can include adhesive or nonadhesive bands to keep separate parts (wires and adapters) in place after being put in packaging.

Products Sold as a Set: These are products that require assembly due to multiple parts. Products that have multiple parts and require assembly or don’t require assembly must be contained in the same packaging and sold as one product. Before shipping products that are sold as a set to one of Amazon’s Warehouse, Amazon requires you to label these packages with labeling such as ” This is a set. Do not separate.”

Products that come in a Boxed Unit: All packaged products shipped to Amazon’s Warehouses must be packaged in a box with 6 sides. You can’t package products in any other type of box. Each side must be securely wrapped. The box cannot contain any openings (ripped or perforated openings) that could cause potential damage to the product while being sent to a Warehouse. The boxes also must be secure enough to allow your product to withstand a 3 foot Drop.

Poly Bagged Units: Products that are wrapped in Poly Bags (Polyester Wrap) must meet certain requirements before being shipped to one of Amazon’s Warehouse. These requirements include:

  • A Warning sign that prevents toddlers and small children from suffocating
  • Transparent Polyester Wrap
  • Polyester Wrap that contains a scannable barcode or an XOO label scannable through the bag.

*The Font Size requirement for labels on polyester wrap vary with the amount of wrap that you are using. These are the requirements provided by Amazon:

Polyester Wrap (60 inches or more) must contain a label with 24 point font.

Polyester Wrap (40 to 59 inches) must contain a label with 18 point font.

Polyester Wrap (30 to 39 inches) must contain a label with a 14 point font.

Polyester Wrap (less than 29 inches) must contain a label with 10 point font.

Products that are packaged in a case: Products that are packed as a case (such as a case of multiple bags of oatmeal) must contain at same SKU. Each subunit that is packaged in a case as one entire unit must be the same as every other unit in the case. Using the oatmeal example, every bag of dry oatmeal must contain the same number of grams. Amazon has a 150 unit limit for a number of units that are packed together in one case.

Expiration Dates: Expiration Dates must be presented on each individual unit. The Font for each expiration date has to be 36 point Font must be presented in this format (MM-DD-YYYY).

Marketing Materials: Packages shipped to Amazon can only include labels that are not meant for marketing purposes. This includes pamphlets, price tags and labels with prices on them.

Safety: Knives or other tools that are used to package products before being shipped to Amazon’s Warehouses must be closed. This is to ensure protection among Amazon employees and customers.


Amazon FBA Sales Tax Nexus 


As an Amazon FBA seller, the products you sell you may require a sales tax. Depending on where you are storing your inventory, nexus may apply. Nexus is a tax law that requires you to collect a sales tax on the goods that you sell. Nexus is a state law that doesn’t apply in every U.S. state. Nexus will only apply in your state or other states if your inventory is stored there. As an Amazon FBA seller, if your inventory is stored in multiple fulfillment centers in multiple states, you may be required to collect a sales tax due to nexus.

States that have Nexus: Amazon currently has fulfillment centers in 19 different states. Out of the 19 different states, nexus applies to 17 of those states. The 2 states that nexus does not apply to include New Hampshire and Delaware. The 17 states that Nexus does apply to include:

1. California

2. Indiana

3. Kentucky

4. Nevada

5. Pennsylvania

6. South Carolina

7. Tennessee

8. Texas

9. Virginia

10. Washington

11. Arizona

12. Connecticut

13. Florida

14. New Jersey

15. Maryland

16. Wisconsin

17. Kansas


Amazon FBA Tax Collection Service 


Tax Collection Service: As an Amazon FBA Seller, you can either collect the sales tax yourself or you can have Amazon collect the sales tax for you. However, this tax collection service is only eligible to Amazon FBA sellers that have Professional Seller status and for Amazon FBA Sellers who own a web store.

Cost of Amazon FBA Tax Collection Service: The cost of this service as an FBA seller depends on the amount you are collecting in fees from a sales tax. Amazon currently charges FBA sellers 2.9% of the total amount they collect from a sales tax.

Here is an example of how this works:

Example: 

Price of Product: $100

Sales Tax: $8

Total Sales: 12 Products ($96 dollars collected from sales tax)

Amazon’s Tax Collection Fee: $96 X 0.029 = $2.784

For every $12 you collect from a sales tax, Amazon would charge you 36 cents to collect this sales tax for you.

If you own a web store as an Amazon FBA seller, the tax collection fee will be included with payments that are processed at checkout.

Transferred Inventory: It is also important to keep in mind that your inventory may be transferred from one Fulfillment center to another. This is important for knowing when to collect a sales tax.

I hope you found this information helpful. Feel free to leave any questions or comments in the comment box below. Please let me know if there is something you would have liked to have seen in this post or in a separate post.


Verdict


If you are thinking about starting an E-commerce company, selling on Amazon through Amazon FBA would be an ideal way to increase the scale of your business. If you do not have a product or do not plan on making one, joining Amazon’s FBA program would not be the right choice. Other Business Models that allow you to create a website and monetize it through affiliate marketing or Ad networks such as Google Adsense are easier to implement.

 

 


Bibliography


1) “FBA Features and Fees.” Amazon.com Help:. Amazon. Web. 20 Feb. 2016.<http://www.amazon.com/gp/help/customer/display.html/?nodeId=201100920>

2) “Packaging and Prep Requirements.” Amazon.com Help:. Amazon. Web. 19 Feb. 2016 <http://www.amazon.com/gp/help/customer/display.html/?nodeId=200243250#sold>.

3) “Sales Tax FAQs.” The FBA Sales Tax Guide. Tax Jar. Web. 29 Feb. 2016. <http://www.fbasalestax.com/sales-tax-faqs/>.

4) “Tax Collection Services Terms.” Amazon.com Help: Tax Calculation  Services Terms. Amazon. Web. 02 Mar. 2016. <http://www.amazon.com/gp/help/customer/display.html?nodeId=200787200>.

 

 

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10 Responses

  1. Sherry and John says:

    We have a small business in sewing products. After 1 year marketing in various ways we sell more on Amazon with our product line than anywhere else.
    We are still a small struggling company however we are looking forward to the time we can go to FBA. We sell and ship our products from our office at this time. You have outlined the FBA process in a very concise and easy to understand way. Good to see it all in one short article.
    We are going to bookmark your article for further reference.
    How do you determine a good time to switch over to FBA to relieve the pressure on our office?

    • Dom says:

      Hi Sherry! I’m glad you enjoyed the article. One of the big advantages of using Amazon FBA is storage. You can store a large amount of inventory in Amazon’s warehouses with Amazon FBA. I would have to say that the best way to sell more from your product line would be too start storing your inventory in Amazon’s warehouses instead of your office. You could free up more space in your office and sell more.

  2. John says:

    Awesome post on how to make money with Amazon FBA!
    I have previously looked into this process as a way to make money online, but to be honest, I found the whole thing a little confusing and I gave up.
    Your article explains it to me much more clearly and I now understand how it actually works.
    I like how you have given some extra resources at the end at the end as well.
    Thanks 🙂

  3. Anthony Little says:

    Hey Dom, I found your article very interesting about selling Amazon product. I live in North Carolina, where the Nexus tax laws are required. I have visitors asking questions about Amazon selling and I’m glad to have landed on your website.

    It’s good to know that I’ve finally found an article that explain all about Amazon selling and the taxes that are required for each state. I will use your article as a reference to point my visitors back too, that has questions about Amazon. I will be bookmarking your website. Thanks for a great article.

  4. Jo Jo says:

    You know what, I’ve read a book about Amazon FBA and it had a bunch of fluff. I like that this post is nice and simple, and straight to the point. The book I read didn’t even include expiration date requirements. I will be starting an Amazon FBA business in the future, and bookmarked this article for reference. Thank you!

    • Dom says:

      Hi Joannah! I’m glad my post was able to help you find what you were looking for with Amazon FBA. I hope Amazon FBA works out as a good fit for your business.

  5. Michael says:

    Hey Dom,
    I’ve contemplated various ideas of how I could work from home and selling products I knew was always an option. I steered away from it though because I knew I wouldn’t be able to store enough to make a substantial income from it unless I rented out space, at least that is what I thought.

    I’m happy to know that there is a program like this with Amazon (a very well established business) to manage the worst part of the process. I don’t mind dishing out a portion of the profit to have them do all that, on top of being able to reach a far greater number of people out there. I’ll definitely be revisiting the idea again.

    Thanks for the information!

    • Dom says:

      Hi Michael! I think space is one of the biggest obstacles as a seller on Amazon. I can’t imagine being a seller and storing inventory inside of a small office or an apartment. Amazon’s FBA program gets rid of any potential clutter that sellers would have to deal with.

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