All the advantages, disadvantages and costs of selling with Amazon FBA in the UK 2023

Martin Jezy30 August 2024

Find out all the advantages and disadvantages of Amazon's FBA programme in the UK:

We'll give you a complete overview of Fulfilment by Amazon and how it works - including info on the costs, opportunities to save on FBA fees, the start-up capital required and alternatives to selling with Amazon FBA.

So, is Amazon FBA worth it? We give you the answer!

What is Amazon FBA?

  • "Fulfilment by Amazon" (= Amazon FBA) is a service of the American e-commerce giant that enables online merchants to use Amazon's extensive logistics network and have their items shipped directly by Amazon.

To participate in the FBA programme, you must register online as an Amazon FBA merchant in Seller Central, list your products and send them to Amazon. Amazon will take over the storage of your items and automatically take care of all incoming orders.

Amazon's FBA service is an effective way to grow your online business while minimising your overhead. By outsourcing your fulfilment to Amazon, you save significant resources on warehouse rent and staff. Amazon's logistics centres take care of your orders and ship Amazon packages to your customers.

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Amazon itself has provided a clear video that shows you in 2 minutes what Amazon FBA is.

Here's how to get started with Amazon FBA in three steps:

  • Register online as an FBA merchant,
  • List your products,
  • and send them to Amazon's fulfilment centres.

Amazon will store your items and automatically take care of all incoming orders. Your job is to market your products on the sales platform and keep Amazon's inventory well stocked.


How much money do I need to start successfully with Amazon FBA?

The amount of Amazon FBA start-up capital you need depends on the size of your business and the products you want to sell. In the following section you will find general information about the costs and fees for Amazon's FBA service.

  • We recommend a minimum of £5,000 in start-up capital if you want to enter the Amazon business as a growing company and aim for long-term profitability. This amount also includes various overhead costs that you should consider. 

Expenses other than Amazon FBA fees include:

  • Business registration (varies)
  • Registration as a "professional" seller in the Amazon Seller Account ( £25 /month - makes sense if you sell more than 35 products per month, otherwise £ 0,75 per sale)
  • Marketing costs (varies, approx. >10% of the value of goods at the beginning)
  • Costs for products, orders, shipping to Amazon and customs fees (varies greatly depending on the product)
  • Application for barcodes and EORI/EAN number with your customs authority for product identification and customs clearance (varies, approx. 60€ if applied for online, depending on country)
  • Possible import VAT depending on product and applicable law in your country (20% in the UK, Germany 19%)
     

In addition, there are other running costs for your Amazon business, such as:

  • Accounting
  • Product photos
  • Employees
  • Licenses
  • Certificates
  • Sample products
  • Amazon Seller Tools
  • Flyers and other promotional material
  • Trademark application
[Translate to EN:] Amazon FBA Costs

How does Amazon FBA work?

  • You deliver your products to an Amazon warehouse, where they are stored.
  • As soon as customers buy your items, Amazon automatically packs and sends the items and takes care of the entire process, including invoicing.
  • Amazon also takes care of customer service if something doesn't work out and handles all returns.
  • Every two weeks, Amazon transfers the collected earnings to your bank account.
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In the video: A quick overview, how Amzon's FBA programme works and what you need to do.

Obviously, Amazon doesn't do this for free. Various fees apply depending on quantity, size and weight. You pay a certain amount for storage fees and shipping costs. However, the shipping costs are relatively cheap, since Amazon, as the world's largest shipping platform, has negotiated specific contracts with most shipping service providers.

The cost of Amazon FBA

Don't worry, even if you use Amazon FBA services and pay for them, Amazon takes care of a lot of tasks for you. They take care of storage, packaging, delivery, customer service and even returns. Amazon FBA fees cover all of these services.

The exact FBA fees depend on various factors, such as the category, size and weight of your product. Therefore, we cannot make any specific statements here. 
 

In general, the following Amazon FBA fees apply:

  • Amazon Seller Account: You pay £ 25 per month for your Amazon seller account.
  • Sales or referral fees: These range from 8% to 15% and are charged on the selling price of your products.
  • Storage fees: These vary depending on the size and weight of your products. It is important to keep track of the dimensions and weight as they will affect the fees.
  • Shipping fees: Again, the cost will depend on the dimensions and weight of your products.
  • Refund fees: If there are any returns, there will be a refund fee of 5% of the sales fee, up to a max of £5.
  • Additional service fees: Additional fees may apply for media products.
[Translate to EN:] Amazon Seller Fees

All costs with all Amazon FBA fees can be found

It is important to take these costs into account when pricing your products.
 

Important to know: If you ship your products via Amazon FBM (Fulfilment by Merchant), the storage and shipping fees are waived because you take over these tasks yourself or entrust them to a fulfilment company of your choice - such as Quivo.

How to save on Amazon FBA fees

To minimise your Amazon FBA fees, you basically have several options:
 

  1. Storage: In order to minimise inventory and thus reduce Amazon storage fees, you can use your own warehouses or interim storage facilities, which can be significantly cheaper. Especially with larger products, this can lead to considerable savings and you can still take advantage of Amazon's FBA service.
     
  2. Pricing: You can influence your profit margin, and therefore the fees charged, by adjusting the selling price of your product accordingly. Strategic pricing can reduce the impact of FBA fees.
     
  3. Packaging: Compact and effective packaging of your products will result in them falling into a lower shipping category, resulting in lower shipping costs. By optimising Amazon packaging, you can both improve customer engagement and reduce your costs.
     
  4. Product optimisation: By constantly optimising your products, you contribute to continuously reducing your costs. This can be done, for example, by finding cheaper suppliers, improving product quality or using cheaper materials or production methods.
     
  5. Sales optimisation: By increasing your sales figures, you can reduce the FBA fees in relation to your turnover. Invest in targeted marketing and optimise your listing to reach more potential Amazon buyers and increase your sales opportunities.
     

Amazon FBA UK Revenue Calculator

Before starting your Amazon business, make sure you do a thorough calculation of the costs!

An accurate cost analysis will allow you to identify potential savings and create a solid foundation for your pricing and business strategy!

Amazon Fulfillment

The advantages of Amazon FBA:

Here are some of the biggest advantages of Fulfilment by Amazon:
 

  • Logistics: 

Amazon takes care of your entire logistics process. From storage to packaging and shipping. You just have to make sure that there is enough product in inventory. This relieves a massive burden for sellers.

  • Storage: 

Amazon stores your products in its fulfilment centres for a fee and handles your logistics from there. You don't have to look for warehouse locations, or worry about staff or warehouse rentals – just make sure that your products meet Amazon's guidelines and that the inventory in the warehouse remains well stocked.

  • Speed:

In addition to normal shipping at Amazon, you can also ship for free with Prime. Your products are certified as such and Amazon ensures lightning-fast shipping to your customers. This adds considerable appeal to your products.

  • Shipping: 

It is no surprise that the largest shipping platform in the world has very good terms and has specifically negotiated contracts with almost all shipping services. This means that your shipping costs can also decrease if Amazon takes care of your fulfilment.

  • Returns management:

If your customers return the goods they ordered, the package is sent back to Amazon, who takes care of the entire return process, including refunds. Another normally tedious process, taken care of by Amazon's fulfilment service.

  • Customer Service: 

As a retailer on Amazon, you can use the in-house customer service, which is available at all times and takes care of the concerns of your Amazon customers. There are rarely bottlenecks or long waiting times and your customers can communicate their issues directly.

  • MCF - Multi Channel-Fulfilment: 

It is now possible to sell your products across multiple platforms – e.g. on both Amazon and eBay – and let Amazon handle all of your fulfilment. This is called MCF (Multi-Channel Fulfilment). This allows you to offer your products to a wider group of customers.

The disadvantages of Amazon FBA:

No two companies are the same and requirements can vary greatly. Here are some of the most common disadvantages of Fulfilment by Amazon:
 

  •   Storage at Amazon: 

Like most fulfilment providers, Amazon doesn't like it when there's too little movement in their warehouses. If products sit unsold for too long, storage fees become more expensive. It is important to note this and, if necessary, to calculate it – or you monitor your stock continuously and precisely so that your storage costs do not get out of hand. 

You must also ensure that the products you sell through Amazon meet a precise list of requirements in order to even be accepted into the FBA program. Depending on the product type, some of these can be difficult for sellers to fulfil. 

You can find the exact product requirements for Fulfilment by Amazon - here.
 

  •   The cost of FBA: 

How much does Amazon FBA cost? The service has many great advantages, but they don't come for free. For start-ups and smaller companies with less capital, fulfilment with Amazon may not pay off in the end due to various fees. Sending cheap items via Amazon can be expensive, because the storage costs can be high. If the products are also big and heavy, your profit will melt away.

In addition, Amazon prioritizes the payment of its outstanding fees over your business. So you cannot use the incoming sales to settle any outstanding debts with Amazon, but must always remain liquid so that your fulfilment continues unhindered.

Amazon offers a handy FBA calculator for this, so that you can find out if it's worth shipping through them.
 

Would you like to have your fulfilment in your own hands in the future? We can help you with this. Without commitment, fixed costs or minimum volume. Simply send us a message.

Amazon Package
  • Returns processing:

It is often reported that, due to Amazon's flexible return policy, product returns are increasing. Although Amazon takes care of the logistical processing, sellers assume the costs for damaged returns, which can have a negative impact on your profit. You have no influence on which returns are accepted and which are not.
 

  • Competition, identity and customer loyalty:

The number of potential customers on the world's largest sales platform is obviously enormous – but so is the competition! You should invest heavily in your marketing and present your products in the best possible way so that they have a chance to be seen and bought on Amazon. 

There is almost no customer loyalty through Amazon's FBA program, because the items are bought "via Amazon" and the packages are branded accordingly. Of course, your products are still included, but Amazon is always named as the contact point, which reduces the recognizability of your company. 

The fact that Amazon provides you with comprehensive customer service is definitely a huge relief for your day-to-day business. Amazon is also very accommodating in its replies to inquiries, which makes it extremely popular with customers around the world. However, since their service employees often answer inquiries for different retailers, there is little direct feedback – which also affects customer loyalty and reduces the awareness of your business. schmälert.

Amazon FBA alternatives:

Amazon Delivery

Regardless of the pros and cons of Amazon FBA, one thing is clear: you are handing over an important part of your business to Amazon and are dependent on their processes and fees. That is why many sellers are looking for alternatives to the FBA model without giving up their Amazon customer base and the Prime label.

As an e-commerce retailer, you can position yourself more broadly, become more independent and build better customer loyalty through more branding options.

As a retailer, you have one great FBA alternative to sell your goods on Amazon

 

FBM – Fulfilment by Merchant:

  • You sell your products via Amazon, but take care of storage, shipping and returns processing yourself, or hand over your logistics to an external fulfilment provider like Quivo.

The advantage of FBM is that you get the opportunity to design your packages the way you want. Many fulfilment providers like us also enable the targeted branding of your parcels and are Amazon Prime certified.

This way you can reach your customers personally and directly, strengthening your brand.

In addition, there are fewer restrictions and fees, and we are usually more flexible than Amazon, especially when it comes to storage space, because you only pay for the space you currently use. We can also keep the warehouses stocked for multi-channel fulfilment customers who use Amazon's FBA service in addition to FBM through us. 

If the order volume is low, you can take your logistics into your own hands and use our Send it yourself service in Germany, Austria and France - soon also in the UK. Alternatively, if your package volume is so large that internal fulfilment is too time-consuming, we will be happy to take care of it!

That is our speciality – from transporting your products to our warehouse, to automated packaging, to your customer's doorstep. 

Sources

- The exact data might change, mistakes could occur. Please check the official websites for detailed current info.

Information on fees and costs of FBA among others from Amazon.com Seller Central documentation - as of July 2023.
Page: https://sellercentral.amazon.com

Page: The Pros And Cons of Joining the Amazon FBA program
URL: https://sellerinteractive.com

Page: Amazon's FBA shipping service: advantages and disadvantages for retailers
URL: https://www.ecosistant.eu

Amazon © YouTube Channel
Amazon Seller Central UK and US Pricing Pages

Picture sources:

Logsta / Quivo © 2023
Amazon
pixabay
unsplash.com
wikipedia

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