Amazon FBA Guide for Third-Party Sellers

What is Amazon FBA?

FBA stands for Fulfillment by Amazon. This program allows third-party sellers to send items into Amazon fulfillment centers to be picked, packed, and shipped to buyers by Amazon.

The FBA program launched in September 2006, creating an opportunity for merchants to sell products on the world’s largest online marketplace while leveraging Amazon’s fulfillment centers and employees. Having an Amazon FBA business makes it possible for merchants to scale more quickly thanks to reliable service and predictable costs.

Amazon’s philosophy is deceptively simple: delight buyers with competitive prices and fast order fulfillment. Satisfied buyers continue to shop on Amazon, leading to more sales, which makes the marketplace more attractive to third-party sellers, who in turn pay commission to Amazon. That’s the Amazon flywheel in a nutshell. It has created a sustainable selling model that has allowed many individuals to gain financial freedom while exploring their entrepreneurial side.

Products enrolled in Amazon FBA are eligible for Amazon Prime shipping. Amazon continues to innovate and refine processes for streamlined and quick order delivery. To get an idea of how orders can be fulfilled in 48 hours or less (and in some cases, within an hour), check out this list of Amazon fulfillment centers in the US. With multiple warehouses, Amazon can quickly get orders of popular items to just about anywhere in the US.

Today approximately 50% of sales on the global Amazon marketplace can be attributed to third-party sellers. There are over 2 million third-party sellers active across all Amazon marketplaces.

Sellers see a 20-25% increase in sales on average after enrolling in FBA.

Who Sells on Amazon FBA?

Of the millions of third-party sellers on the Amazon marketplace, many are established brands that enjoy the volume of sales they get from Amazon. Others are resellers, who work with manufacturers or distributors to sell products on the marketplace. Some of these resellers work with manufacturers to private label certain products, which gives those sellers a competitive advantage on Amazon because they are the only seller of that particular ASIN (Amazon Standard Identification Number). Another type of seller is the retail or online arbitrage seller, who sets up an Amazon FBA store and sends all sorts of different products into fulfillment centers, based on the availability and profitability of the item.

What’s The Difference Between 1P and 3P Amazon Sellers?

While third-party sellers (3P) set up an FBA store on Amazon, first-party (1P) sellers, also called vendors, send their inventory in to be sold by Amazon. Pricing on 1P products is controlled by Amazon, and “ships from and sold by Amazon” appears on product listings.

1P sellers cannot make changes to their product listings, nor do they have the ability to request reviews from consumers who buy their products. Amazon sends these vendors purchase orders, the vendor sends in goods, and that’s it. A 3P seller has the option to fulfill orders through FBA, Fulfilled By Merchant (FBM), or a combination of the two. Third-party sellers control their pricing, and in cases where the seller is Brand Registered, their listing.

Amazon FBA is a game changer for third-party sellers, who benefit from outsourcing order fulfillment and customer service to Amazon. Utilizing FBA can help sellers maintain and improve their seller health metrics, since Amazon ensures a consistent customer experience.

Jay Lagarde
Founder & CEO
eComEngine