What is Amazon FBA? Fulfillment Process and Costs

I. What Is Amazon FBA?

Amazon FBA (Fulfillment by Amazon) is a fulfillment service provided by Amazon, helping sellers deliver products to customers quickly and efficiently. When you enroll in FBA, you send your products to Amazon’s warehouse, and they handle the entire process - from storage, packing, and shipping to customer service.

1. Benefits of Using FBA

• Fast shipping: Thanks to Amazon’s global fulfillment network.
• Optimized customer service: Amazon handles returns and customer support on your behalf.
• Increased sales potential: FBA products get the “Prime” badge, attracting more buyers.
• Time-saving: Focus on marketing and scaling your business instead of logistics.

2. How Amazon FBA Works

II. Amazon FBA Fees & Costs

1. FBA Fees

1.1. Fulfillment Costs:

This is the cost charged per unit for Amazon to handle the entire fulfillment process, including packing, shipping, and returns processing. The exact fee depends on the product category, size, and weight of each item.

1.2. Storage Costs:

Monthly Inventory Storage Fees:

This is a standard fee applied to all inventory stored in Amazon fulfillment centers. The exact amount depends on the product’s size and the time of year.  

• Billing cycle: Monthly  
• Formula: Storage fee per product = average daily units x volume per unit x applicable fee rate

*Smaller sized products often incur higher fees due to the need for shelves, drawers and multi-purpose containers for storage.

Aged Inventory Costs:  

This is an additional fee applied to inventory stored for more than 181 days. It’s a surcharge designed to encourage sellers to manage their inventory efficiently and avoid excessive stockpiling in Amazon’s warehouses.

1.3. FBA Inbound Placement Service Costs:

This is a fee Amazon charges when your inventory is sent to multiple fulfillment centers within Amazon’s warehouse network. This process helps optimize delivery speed to customers across different regions but also incurs additional costs.  

• Fee calculation: Based on product size tier, shipping weight, and the inbound shipping location.  
• New seller incentive: If you create and send your first shipment to an Amazon fulfillment center within 90 days of listing your product, you’ll receive a $400 credit to offset part of this fee.

1.4. Return Processing Costs:

This fee applies to products in categories with high return rates (except for apparel and footwear). It covers the cost of inspecting, repackaging, or otherwise handling returned items, while also promoting sustainable waste reduction.

• Fee calculation: Based on shipping weight, return rate, and return rate thresholds.  
• Return rate data: Available on the FBA Returns page.  

1.5. Removal, Disposal, and Liquidation Orders Fees:

If sellers want to withdraw inventory from Amazon’s warehouse or deal with excess stock, Amazon charges a fee per unit for these services.

• Inventory removal: Amazon retrieves and ships inventory back to the seller’s designated location.  
• Disposal service: If sellers don’t want the products back, Amazon can destroy them (typically for unsellable or damaged items).  
• Liquidation option: Sellers can also use the FBA Liquidations program to sell excess inventory to Amazon’s wholesale partners.

2. How to Estimate FBA Fees & Costs

2.1. Check Estimated Fees & Revenue:

Go to Seller Central > Inventory > Manage All Inventory.  

Find the product you want to check, then look at the Estimated fee per unit sold column to see the total estimated fees and FBA costs.  

Click on the estimate to view a detailed breakdown of each fee type.

2.2. Compare Costs Between FBA & Self-fulfillment:

Use the Revenue Calculator to estimate fees, costs, and revenue for both fulfillment options: FBA and self-fulfillment.  

Enter product details (dimensions, weight, price, shipping fees, etc.) to get accurate cost calculations.

2.3. FBA Fee Preview Report:  

Go to Seller Central > Reports > Fulfillment > Fee Preview.  

Download the report to view estimated FBA fees for all your current products, including upcoming fee changes.

III. Inventory Management

Managing inventory helps sellers maintain optimal stock levels, avoiding both overstock and stockouts. Overstocking leads to high storage fees or product damage, while understocking risks running out of products, hurting brand reputation.

1. Types of Inventory Situations

• Excess Inventory: Stock exceeding 90 days of supply based on demand forecasts.  
• Stranded or Dead Stock: Products that can't be sold due to listing errors.  
• Aged Unsold Inventory: ASINs with no sales in 6 months and stored for over 180 days.  
• Overstocked Reserve: Inventory exceeding Amazon’s allowed storage limit.  
• “In Working” Shipments: Shipments created but not yet sent.  
• Aged Inventory: Stored for over 365 days, subject to high long-term storage fees.

2. How to Manage FBA Inventory

2.1. FBA Dashboard:

FBA Dashboard displays 3 metrics: Sales, Units Sold, and Orders. Sellers can track business performance and compare year-over-year to better manage restocking.

• Plan Inventory tab: shows Inventory Performance Index (IPI score), including Sell-Through Rate, Excess Inventory, Stranded Inventory, and In-Stock Rate.  
• Shipments tab: provides data on total shipment count over 120 days, including In Working, In Transit, Delivered to Fulfillment Center, and Completed shipments.  
• Estimated Aged Inventory Surcharge tab: shows the number of units stored for 0-6 months, 6-9 months, 9-12 months, or over 12 months.

2.2. FBA Inventory Page:  

FBA Inventory provides inventory data and management action recommendations, helping sellers resolve issues like stockouts, excess inventory, or stranded inventory.

• Sellers can choose to view metrics such as sales, fees, and inventory age.  
• Filter options allow searching for products by characteristics or inventory status.  
• Amazon automatically suggests optimal actions like liquidation or discounting to reduce costs.  
• Sellers can search for similar products to manage them as a group.  
• Supports bulk actions such as creating discounts or removal requests.

2.3. FBA Inventory Report:  

The FBA Inventory Report displays key metrics such as daily sales, estimated storage fees, and the number of shipments sent, received, and in progress.

• Week of Cover (WoC): helps sellers decide when to restock, based on sales data from the past 30 and 90 days.  
• Days of Supply: indicates how many days the current inventory will last based on forecasted market demand, enabling timely restocking to avoid stockouts.  
• Inventory Age: shows how long products have been stored, allowing sellers to monitor aging inventory for timely action to avoid high fees and tied-up capital.

IV. Conclusion

Amazon FBA offers many benefits, but to maximize its effectiveness, sellers need to fully understand the process, associated fees, and inventory management strategies. Proactively monitoring reports, controlling costs, and planning restocking wisely will help sellers make the most of FBA’s potential—minimizing expenses while driving sustainable growth.

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