How To Succeed With Fulfillment By Amazon
Tom Wicky is the co-founder and CEO MyFBAPrep, a global warehouse network that serves top Amazon sellers and enterprise brands.
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Amazon is the largest online marketplace globally, and its Fulfillment by Amazon (FBA) service helps support the platform's competitiveness by providing fast and efficient warehousing and fulfillment through its internally managed systems.
The program puts next-day shipping, Amazon's customer service and near-global distribution within reach of even small startups or private-label brands. With costs lower than many competing logistical services, I think FBA can also prove to be a smart investment for large businesses.
But to gain the full benefits of FBA, you must meet strict packaging and inbound requirements, which can easily overwhelm sellers.
The FBA program is a great service when you follow the rules. That means you have to prep packages inbound to Amazon's warehouses properly, which includes:
• Labeling and barcoding
• Using proper packaging
• Enrolling for SIPP (Ships in Product Packaging) or standard packaging
• Boxing products for shipment in accordance with Amazon's guidelines
• Planning shipments to minimize or avoid inventory placement fees
• Managing throughput to maintain the 30 to 60 days of stock to avoid fees for standing or low inventory
Air-tight FBA prep ensures your products are packaged to meet those requirements. This can be as simple as manually packaging items in boxes and applying FNSKU barcodes, adding warning labels to poly-bags or labeling sets "sold as a set."
Or it can be as complicated as breaking down inbound shipments from China and repackaging them to meet FBA requirements, then sending those shipments into an Amazon warehouse.
For many sellers, it's a lot of hands-on work that quickly becomes oppressive without a robust infrastructure with labeling and sorting capabilities. When considering a third-party logistics (3PL) partner to help with your FBA prep and management, here is my advice and overall factors to consider:
Amazon introduced multiple new fees in 2024, including an inventory placement fee, a low inventory fee and fines for deleting inbound shipment plans. That means you can no longer use tricks like planning multiple inbound shipments until you find one with minimal fees. Instead, you'll have to create a single plan based on expert knowledge of fee structures and optimize from there.
Given these constraints, it's important to reduce or completely eliminate inventory placement fees by shipping at least four to five boxes and ensuring item distribution allows them to go to four different regions.
You also want to maintain stock levels so you don't get charged for low or aged inventory, all the while minimizing storage utilization fees. Lastly, proper planning and prep can help you avoid fees for shipments that arrive at the wrong location due to incorrect labeling.
FBA has a strict list of requirements for packaging products before they're allowed to move into an Amazon warehouse. They also apply if you're enrolled in Ships in Product Packaging (SIPP) for the FBA program. In both cases, you'll have to package and label items according to Amazon's instructions for that product.
With SIPP enrollment, you enjoy discounts on FBA fulfillment (because Amazon doesn't have to re-box the product for you) and can send products in branded boxes. However, you'll still have to design and test products to ensure they meet requirements and then consistently prep those shipments to meet Amazon's standards.
FBA's current restock limits are set on a three-month sales throughput basis, with many Amazon sellers experiencing peak periods from October through December during the holiday season. If you want to increase your restock limits, you'll have to increase stock first.
To manage this, consider fulfilling orders through other channels to avoid stockouts during peak sales events and help maintain sales velocity, which can, in turn, improve your FBA restock limits.
For instance, if you anticipate that your FBA stock will run out, you can clone your product listing, create a new SKU and fulfill it directly through another fulfillment method, such as a 3PL or your own storage. While this clone won't be eligible for Prime unless enrolled in Seller Fulfilled Prime, it can still help you maintain availability and prevent lost sales.
FBA is best for standard-sized items with high sales velocity. If you sell large or slow-moving items, it can hurt your FBA allotment, and you're charged a warehouse utilization fee based on how much inventory remains in storage at the end of the month. You're also charged an aged inventory fee that can reach up to $6.90 per cubic foot if your product has sat in the warehouse for a year.
I've witnessed how large, slow-moving inventory can easily eat up your allotted storage and inventory maximums, making it a poor fit for FBA. A 3PL can deliver those products so you can use FBA for better-suited items.
One of the most compelling reasons to shift to FBA is to take advantage of Amazon's infrastructure. However, you still need to manage shipments from your supplier or manufacturer, prep individual units, repackage pallets from the supplier to boxes for Amazon, and handle shipping plans and delivery to Amazon.
Due to that consumption of resources, it can be more cost-effective to outsource logistical operations to a 3PL that's capable of maintaining and improving those procedures rather than investing in "good enough" processes in-house.
FBA is a vital tool for Amazon sellers, but it's essential to stay organized and plan ahead to avoid penalties and maximize its potential. By understanding Amazon's rules and preparing your products effectively, you can minimize fees and maintain a smooth operation.
Whether you're managing your fulfillment in-house or working with a 3PL partner that can help complement your current services and scale operations, following these best practices can help your business succeed in the competitive Amazon marketplace.
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