People interested in selling on Amazon quite often ask me about Amazon FBA. That’s why I’ve prepared some of the most frequently asked questions and answers.
1. What is Amazon FBA?
FBA stands for Fulfillment by Amazon, which literally translates to Fulfillment by Amazon. It’s a warehousing and order fulfillment model where Amazon stores the goods, fulfills orders by shipping them to customers, and handles customer returns.
2. Can a Polish company sell on Amazon using FBA?
Yes, a Polish company can use FBA. However, it must have a VAT number in at least one of the countries that has its own Amazon version, namely the United Kingdom, France, Spain, Germany, or Italy.
Usually, due to costs, it’s best to store goods in Germany or the United Kingdom.
3. If Amazon has warehouses in Poland, can you send goods there?
Currently, there’s no option to choose for goods to be stored only in Poland.
There’s an option for storage in Germany and Eastern European countries: Poland and Czech Republic, but without specifying exactly where. The exact storage location among these three countries: Czech Republic, Germany, and Poland is chosen by Amazon.
So by choosing the storage option in XX countries, we don’t decide which one exactly will store our goods. Therefore, we can’t decide that goods should be stored only in Poland. They might end up in Poland, or perhaps in Czech Republic, or Germany.
4. What does storing goods in Eastern European countries involve?
According to what’s mentioned in point 2, goods can be stored in one of 3 countries: Czech Republic, Germany, or Poland. Therefore, to use this option, a Polish company must also register for VAT in Germany and Czech Republic.
5. Is Amazon warehousing expensive?
Storage fees in Amazon warehouses aren’t fixed, as there are additional charges for long-term storage of goods in FBA warehouses. Initially, the monthly storage fee is:
- 26 Euro per m³ from January to September
- 36 Euro per m³ from October to December.
This is the cost for de, es, fr and it.
For Amazon.co.uk the cost is very similar, but calculated in British Pounds per cubic foot (28.31 liters – 0.02831 m³):
- £0.65 from January to September
- £0.91 from October to December.
You can check if costs differ between Amazon de, es, fr and it, versus co.uk.
1000/28.31=35.32 – that’s how many cubic feet are in a cubic meter.
35.32*£0.65=£22.958 per cubic meter, which at a GBP/EUR exchange rate of 1.11 comes to:
22.958*1.11=25.55 EUR per cubic meter. This is practically the same cost, and differences may result from current exchange rates or calculation methods.
Twice a year Amazon conducts warehouse reviews, which take place in February and August. For products that have been in the warehouse longer than 6 months on the review date, the Amazon storage fee will be an additional 500 Euro/441.25 GBP per cubic meter. If goods have been in the warehouse longer than a year on the warehouse review date, the surcharge per cubic meter is 1000 Euro/882.50 GBP.
That’s quite a substantial amount. However, if goods aren’t in storage longer than 6 months on the day Amazon counts inventory in the warehouse, storage is very cheap and cost-effective.
* All costs mentioned in the text are current as of December 2018. If you want to know current costs, go directly to Amazon’s website.
6. Can you send goods back from Amazon FBA warehouses to your company?
Yes, absolutely. You can also create rules so that goods that have been in FBA warehouses for a certain amount of time will be automatically returned. So Amazon, without needing manual ordering of a return order: FBA Removal Order / Remissionsauftrag, will send us goods that could incur long-term storage fees. This prevents the fees from point 4.
7. Do I need to have a VAT number in every country that has its own Amazon version to sell goods stored in Germany there?
No, there’s no such requirement.
Amazon offers the possibility of storing goods in one country, e.g., Germany or England, and shipping them to customers from amazon.fr, amazon.es, amazon.it.
Shipping then takes place directly from the warehouse in Germany to a customer in Spain.
8. What is Pan-European FBA?
In point 6, I described how Amazon works when we store goods in only one country and shipping takes place from that country, and this type of FBA is European Fulfillment Network (EFN).
However, for sellers wanting to fully utilize the possibilities that FBA offers, Amazon has prepared a more advanced model called Pan-European FBA.
So goods that a seller sends, for example, to Germany are relocated to Amazon logistics centers in other countries, depending on where the customer is located.
This happens in two ways.
- Let’s assume that goods sent to an FBA warehouse in Germany were sold on amazon.es to a customer in Spain. After the sale, Amazon doesn’t ship directly from Germany via a company like DHL to Spain for goods sold on amazon.es, but uses its own transport to relocate goods to a logistics center in Spain and then from there the goods are shipped by local courier. What does this give? First of all, the delivery cost instead of, say, 7 Euro is only 4 Euro. Additionally, delivery time is often one day shorter, because instead of 3 days it’s 2 days. Lower costs result from the absence of cross-border transport fees that Amazon would have to pay to a courier company if shipping to the customer took place directly from Germany to Spain.
- Amazon, seeing that a given product sells only in one market, or in one market much better than in others, may transport some products to the warehouse appropriate for that market. So some quantity of product, e.g., 30% of 300 pieces, which was initially stored in Germany but sells very well in Italy, will be transported to Amazon’s warehouse in Italy using Amazon’s own transport. Thanks to this, after selling on amazon.it it will be delivered even faster to customers in Italy by local courier.
9. Is Amazon FBA profitable?
In most cases it’s definitely profitable due to low delivery costs and no need to have your own staff to handle orders. Profitability is especially visible if the seller doesn’t exceed the 6-month deadline and doesn’t qualify for long-term storage fees. However, often even long-term storage of goods can be more profitable than renting a warehouse and maintaining employees.
10. What are the most important benefits of selling in the FBA model?
- lower delivery costs to customers
- significantly greater customer interest in products shipped by Amazon – the customer sees that Amazon handles the shipping of given goods, which is synonymous with fast and problem-free delivery
- marking the offer with the Amazon Prime badge and participation in this program, which increases product attractiveness (similar to above)
- greater chances of winning the Buy Box – a product with fast shipping and usually lower price achieved through savings on delivery costs, as well as the fact that Amazon handles shipping, has much greater chances of winning the Buy Box
- no risk related to late shipments, lost packages in transport, etc.; Amazon takes responsibility for everything related to delivering goods to the customer; the seller avoids negative comments and related A-to-Z claims
- FBA, apart from one-time shipping of goods to Amazon, frees the seller from the need to daily pack and ship goods to customers
- FBA also frees from the obligation to handle customer returns, refunding money, etc.
11. Is Amazon FBA for everyone?
FBA isn’t the best solution in every case. When goods are sold in small quantities and the seller wants to have full control over the warehouse and doesn’t want to limit themselves to one marketplace, then FBA isn’t a beneficial model. While FBA allows shipping goods to any customers, not only those from Amazon but also those from eBay or even Allegro, if we’re selling to Poland, the costs of such shipping will be much higher than if goods were shipped directly from the seller’s warehouse in Poland. Unfortunately, FBA doesn’t handle returns from such customers when selling to customers outside Amazon, and you need to have your own return addresses.
If a seller wants to focus on Amazon customers, then FBA is an ideal model. However, if Amazon is just one of many marketplaces and the seller can’t dedicate goods only to Amazon, it’s better to stick with the FBM model. FBM stands for Fulfillment by Merchant, which is Fulfillment by Seller. This is nothing other than the most popular model of running an online business, where the seller fulfills orders from start to finish.
