What is the FBA sales model on Amazon?

Kamil Kempisty
Updated: 26 April 2021

What is the FBA model?

FBA (short for Fulfillment by Amazon) is a sales model in which the entire logistics process, i.e. storage, packaging and shipping, is transferred to Amazon.

How does the sales process work in the FBA model?

Shipping of goods to Amazon warehouse

The first step is to send goods to Amazon warehouses. From now on, they will be stored by Amazon and can also be transported between Amazon’s warehouses.

Product sales

When the buyer decides to buy our product, Amazon takes care of everything. The goods are located in the warehouse, packed and then sent directly to the customer.

Complaints and returns handling

Amazon will also take care of any complaints arising from shipping problems and returns. Returned goods are sent to Amazon’s warehouse, where employees are responsible for collecting them and taking them back to the warehouse.

What are the advantages of the FBA model?

The FBA model undoubtedly has a lot of advantages, the most important of which you can include:

Reaching out to customers with a purchased Prime service

It is estimated that Amazon has more than 60 million Prime users who shop more and more often thanks to this service. Using the FBA model allows us to mark our products as Prime, which significantly increases the chances of the buyer choosing our products.

Reduced handling costs

By handing over responsibility for logistics to Amazon, there is no need to hire additional people to handle shipments, including returns and complaints. In addition, Amazon minimizes shipping costs due to the scale of its operations, which can not only increase margins on our products but also increase the interest of potential buyers.

Sales without own warehouse

Vendors, especially in the early stages of their operations, often have to deal with questions about where to store their goods. Even if you have your own warehouse, it may turn out to be too small with increasing sales. In the FBA model, the seller does not have to worry about having to rent additional space or high costs with too much space.

What are the disadvantages of the FBA model?

The FBA model also has a number of drawbacks, which you should be aware of before you start selling.

Obligation to register for VAT in the country of storage

When using the FBA model, please note that VAT settlements must be made not only in the country where you operate. VAT registration, regular returns and payment of VAT is mandatory in the countries from which Amazon sends our goods.

Need to monitor stock levels

The storage costs calculated by Amazon vary according to the storage time of the product. For goods that are in stock for more than 181 days, Amazon adds a so-called “long-term storage fee.”

A complex way of charging

The Amazon model charges the FBA fees by several factors, so it is not always easy to estimate them. When choosing this model, it is important to remember that fees are charged for monthly storage, order processing, collection and packaging and shipment handling.

What are the costs of the FBA model?

The costs in the FBA model are variable and depend on several factors:

  • Product size
  • Weight of the product
  • Storage time
  • Additional storage or shipping requirements (e.g. products that require refrigeration or need to be handled with care)
0 0 votes
Article Rating
Notify of
Inline Feedbacks
View all comments

See also

12 May 2021

VAT-OSS – rules and impact on VAT settlements for Amazon sales

The VAT-OSS procedure is due to come into force as early as 1 July 2020, hopefully facilitating mail order sales of goods between EU countries. Will it really make it possible to remove the obligation to register for VAT purposes in other EU countries?

26 February 2021

VAT – what you should know when selling online

VAT, VAT registration, and VAT settlements are quite a problem for online sellers operating within the European Union. Differences between the rate depending on the country, the VAT sales limit for mail-order sales or issues of storage and place of shipping – all these can seriously discourage online retailers from doing business on a larger scale.

2 February 2021

What VAT applies in the UK?

VAT has been in force in the UK since 1973, when the UK joined the European Union. The basic VAT rate in the UK is 20% and covers all products and services which are not covered by the 5% and 0% reduced rates.

29 January 2021

What VAT applies in Sweden?

In Sweden, VAT has been in force since 1960. There are four VAT rates in Sweden. The basic rate of Swedish Mervärdeskatt (moms) (VAT) is 25% and applies to most goods for which no reduced rates apply.

26 January 2021

What VAT applies in Germany?

VAT (value-added tax) in the local language is “Mehrwertsteuer,” and the acronym VAT is translated as “MWSt.” Find out what are the VAT rates in Germany and when the obligation to register VAT in Germany arises. What to pay attention to? Are there lower VAT rates in Germany than in Poland?

22 January 2021

What VAT applies in Spain?

IVA, short for “Impuesto sobre el Valor Añadido,” is the equivalent of VAT in Poland. VAT has been in force in Spain since 1986, when Spain joined the European Union. The basic VAT rate in Spain is 21% and covers all products and services that are not covered by the reduced rates of 10% and 4% and the zero rate.
Podstawowa stawka VAT w Hiszpanii wynosi 21% i obejmuje wszystkie produkty i usługi, których nie obejmuje stawki zmniejszone równe 10% i 4% oraz stawka zerowa.

Amazon, Amazon Service Provider Network, Amazon SPN, and Amazon SPN logo are trademarks of Amazon.com, Inc. or its affiliates.

facebook-icon twitter-icon linkedin-icon comments-icon facebook