What Is Fulfillment by Amazon (FBA)? Costs & How It Work

Entering the Amazon marketplace means navigating a world of logistics, fulfillment options, and competitive selling strategies. One term you’ll encounter early on is “what is fulfillment by Amazon” (FBA) – a service that can simplify inventory storage, shipping, and customer service for sellers. But before jumping in, it’s important to understand the true cost, pros and cons, and how to effectively get started. In this article, we’ll cover everything from how FBA works, what it costs, how it compares to FBM and SFP, and expert tips to help you scale successfully.

What is fulfillment by Amazon (FBA)?

Fulfillment by Amazon (FBA) is a logistics and eCommerce fulfillment service that allows third-party sellers to outsource storage, packing, and shipping directly to Amazon. In essence, what is fulfillment by Amazon? It’s a streamlined solution where sellers focus on sourcing and marketing, while Amazon handles the operational backend.

Once inventory is shipped to Amazon’s fulfillment centers, the platform takes care of order processing, shipping, returns, and even customer service. This model enables businesses to scale faster, reduce operational overhead, and tap into Amazon’s Prime shipping benefits – a major advantage in today’s fast-paced retail environment.

Fulfillment by Amazon is a streamlined service where Amazon handles storage, packing, shipping, and customer care, helping sellers scale efficiently (Source: Internet)

Over 73% of sellers on Amazon already utilize FBA, contributing to more than half of the platform’s total unit sales. This makes fulfillment by Amazon not just a tool, but a competitive edge for those looking to succeed in online retail. Whether you’re an individual entrepreneur or a growing brand, understanding what is fulfillment by Amazon can unlock new levels of efficiency and customer reach.

Amazon fulfillment: Pros & Cons of FBA

Leveraging its global logistics network and the trust of over 200 million Prime members, Fulfillment by Amazon (FBA) has revolutionized the way eCommerce businesses operate. By outsourcing storage, packaging, shipping, and even customer service to Amazon, sellers can scale faster and focus on core business operations. However, while the benefits are substantial, FBA also comes with limitations that sellers need to evaluate carefully.

Amazon FBA Pros

Prime Shipping Access: One of the most compelling advantages of FBA is automatic eligibility for the Prime badge. This opens the door to Amazon’s massive Prime customer base and boosts product visibility. With expedited one- to two-day shipping and hassle-free returns, listings with Prime tend to convert at significantly higher rates.
Scalable Inventory Storage: Sellers simply send their inventory to Amazon’s fulfillment centers, where it is stored securely until purchased. Amazon handles receiving, storing, and organizing stock, removing the need for third-party warehouses or in-house fulfillment operations.
Built-in Customer Trust: Products fulfilled by Amazon benefit from the company’s established reputation. The Amazon-branded packaging and professional fulfillment process increase buyer confidence and enhance perceived product value.
End-to-End Fulfillment and Shipping: Amazon takes care of the entire shipping process, from picking and packing to carrier selection and delivery. This reduces operational burden for sellers and ensures faster delivery with fewer errors.
Dedicated Customer Service: When using FBA, Amazon manages all customer service inquiries related to order fulfillment, including tracking issues, product inquiries, and returns. This allows sellers to offer enterprise-level support without building their own customer care team.
Streamlined Returns Management: FBA simplifies the return process by handling product inspections and restocking if items remain in new condition. This keeps reverse logistics efficient and consistent across the board.
Multi-Channel Fulfillment: FBA is not limited to Amazon sales. Sellers can fulfill orders from other platforms, such as Shopify or eBay, using Amazon’s Multi-Channel Fulfillment (MCF), centralizing logistics operations while maintaining consistent delivery quality.

Automatic Prime badge eligibility with FBA boosts product visibility and conversion by tapping into Amazon’s vast Prime customer base (Source: Internet)

Fulfillment by Amazon Cons

FBA Fulfillment Fees: One of the biggest challenges with FBA is its cost. Fees are charged per unit and depend on product dimensions and weight. On average, fulfillment fees can account for 30 – 40% of the product’s price. It’s essential to calculate fees beforehand to assess profitability accurately.
Storage Costs and Aged Inventory Fees: Amazon charges monthly storage fees and imposes additional surcharges for aged inventory. If inventory sits too long, these fees can accumulate and significantly impact margins. Sellers must monitor inventory health and turnover rates carefully.
Inventory Capacity Limits: Amazon may restrict the volume of inventory a seller can send to fulfillment centers based on past sales performance and Inventory Performance Index (IPI) score. These capacity limits can pose challenges during peak sales periods or product launches.
Higher Return Rates: FBA’s streamlined return policy is customer-friendly, but it may lead to an increased number of returns. This is particularly impactful for sellers dealing in apparel, electronics, or subjective items prone to buyer’s remorse.

How does Amazon FBA work?

Amazon FBA streamlines eCommerce logistics by allowing sellers to outsource storage, order fulfillment, and reverse logistics. Sellers ship their inventory to Amazon’s fulfillment centers, where products are stored until sold. Once an order is placed, Amazon handles the picking, packing, and shipping directly to the customer. Additionally, Amazon manages customer service and returns on behalf of the seller. By leveraging Amazon’s vast logistics infrastructure, FBA helps businesses scale efficiently while reducing the operational burden of last-mile delivery and warehousing.

How much does Amazon FBA cost?

Understanding the cost structure is essential when considering what fulfillment by Amazon (FBA) and how it impacts your profit margins. Amazon FBA pricing consists of several fees, with the most common being referral fees and fulfillment fees. Referral fees are category – based and generally range from 6% to 20% of the product’s sale price, with an average of 15%, regardless of whether you’re using FBA or Fulfilled by Merchant (FBM). The FBA fulfillment fee, however, is calculated based on the product’s size tier (standard-size or oversize) and shipping weight, covering picking, packing, handling, and customer service.

For example, in 2025, fulfillment fees for a standard-size item (under 1 lb) start around $3.22 per unit, whereas larger items incur higher charges. Additionally, sellers must account for monthly inventory storage fees, typically between $0.87 and $2.40 per cubic foot, which can increase during Q4. There’s also an aged inventory surcharge applied to items stored over 180 days. Amazon provides tools like the FBA Revenue Calculator to help sellers estimate these costs based on real-time data.

Amazon FBA fees - like referral and fulfillment charges - vary by product size and category, directly impacting your profit margins (Source: Internet) — Amazon FBA fees – like referral and fulfillment charges – vary by product size and category, directly impacting your profit margins (Source: Internet)

How to start selling on Amazon FBA?

For those new to eCommerce, understanding what is fulfillment by Amazon is the first step toward building a scalable online business. Below is a step-by-step guide to help you get started with Amazon FBA effectively:

Step 1 – Create an Amazon Seller Account: Begin by registering on Amazon Seller Central. You can choose between an Individual or Professional seller plan depending on the volume and scope of your business. The Professional plan is recommended if you plan to sell more than 40 units per month or need access to advanced features like advertising.
Step 2 – Research and Source Your Products: Conduct market research using tools like Jungle Scout, Helium 10, or Amazon’s Best Sellers page to identify profitable niches. Once you’ve validated demand, source your products from reliable suppliers, such as manufacturers on Alibaba or local wholesale distributors.
Step 3 – List Your Products on Amazon: Optimize your listings with relevant keywords, high-quality images, bullet points, and clear descriptions. Ensure your product complies with Amazon’s listing policies and FBA product restrictions. Tools like Amazon’s Listing Quality Dashboard can help assess your content’s effectiveness.
Step 4 – Enroll Your Products in FBA: Within Seller Central, choose the FBA option during product setup. Create a shipping plan that includes labeling, packaging, and delivery to Amazon’s fulfillment centers. You can ship your products directly from your supplier or use a prep center to ensure Amazon’s FBA requirements are met (e.g., barcoding, packaging standards).
Step 5 – Ship Inventory to Amazon Fulfillment Centers: Amazon provides shipment creation and routing tools. Depending on your product type, Amazon may direct you to send inventory to multiple fulfillment centers. You are responsible for freight arrangements or may opt for Amazon-partnered carriers for discounted rates.
Step 6 – Launch and Optimize: Once your inventory is received, your product goes live on Amazon. Use Amazon PPC (Pay-Per-Click) to drive visibility, request reviews via Amazon’s “Request a Review” button, and continuously monitor your product metrics. Tools like Amazon Brand Analytics help analyze search terms and customer behavior.

Use tools to research profitable niches, then source products from trusted suppliers like Alibaba to start your Amazon FBA journey (Source: Internet)

The right way to use fulfillment by Amazon (FBA)

Besides understanding what is Fulfillment by Amazon, it’s equally important to explore the right way to use Fulfillment by Amazon (FBA) to maximize efficiency, reduce costs, and enhance your brand’s performance on the platform:

Optimize Product Selection: Choose products that have high demand and low competition. Conduct thorough market research using tools like Jungle Scout or Helium 10 to identify profitable niches. Ensure that the products you select have a good profit margin after accounting for FBA fees.
Understand FBA Fees: Familiarize yourself with the various fees associated with FBA, including fulfillment fees, storage fees, and long-term storage fees. This understanding will help you price your products competitively while maintaining profitability. Use the FBA Revenue Calculator to estimate your costs and profits accurately.
Efficient Inventory Management: Monitor your inventory levels closely to avoid stockouts and overstock situations. Utilize Amazon’s inventory management tools to track sales trends and set up replenishment alerts. Keeping a healthy inventory level is essential for maintaining your seller ranking and ensuring customer satisfaction.
Leverage Amazon’s Customer Trust: Products fulfilled by Amazon are eligible for Prime, which can significantly increase your sales. Take advantage of Amazon’s reputation for fast shipping and excellent customer service to attract more customers.
Utilize Multi-Channel Fulfillment (MCF): If you sell on multiple platforms, consider using MCF to fulfill orders from your website or other sales channels. This allows you to centralize your inventory management and take advantage of Amazon’s logistics capabilities across different marketplaces.
Regularly Review Performance Metrics: Use the FBA dashboard to monitor your sales, customer feedback, and inventory health. Regularly analyzing these metrics will help you make informed decisions about your product offerings and marketing strategies.

Efficient inventory management is key to successful FBA - use Amazon’s tools to avoid stockouts, reduce overstock, and maintain high seller performance (Source: Internet) — Efficient inventory management is key to successful FBA – use Amazon’s tools to avoid stockouts, reduce overstock, and maintain high seller performance (Source: Internet)

Tips to maximize your FBA sales

Comparing FBA, FBM, and SFP: Key distinctions

Understanding the differences between Fulfillment by Amazon (FBA), Fulfillment by Merchant (FBM), and Seller Fulfilled Prime (SFP) is crucial for optimizing your logistics strategy. Each fulfillment method has its own advantages and disadvantages, which can significantly impact your business operations and customer satisfaction.

>>> more: FBA vs FBM, FBA vs MFN, FBA vs FBM vs SFP, FBA vs Overseas Warehouse, 3PL vs Amazon FBA

Feature	Fulfillment by Amazon (FBA	Fulfillment by Merchant (FBM)	Seller Fulfilled Prime (SFP)
Fulfillment Responsibility	Amazon handles storage, packing, and shipping	Seller manages storage, packing, and shipping	Seller manages storage and packing; Amazon handles shipping for Prime orders
Customer Service	Amazon provides customer service and returns	Seller is responsible for customer service and returns	Seller is responsible for customer service and returns
Prime Eligibility	Automatically eligible for Amazon Prime	Not eligible for Prime	Eligible for Prime if requirements are met
Fees	Pay FBA fees for storage and fulfillment	No FBA fees; seller incurs shipping costs	Pay for shipping costs; no FBA fees
Inventory Management	Managed by Amazon warehouses	Managed by the seller	Managed by the seller
Scalability	Highly scalable due to Amazon’s infrastructure	Limited by seller’s capacity	Scalable, but requires adherence to Prime shipping standards
Control Over Shipping	Limited control over shipping methods and times	Full control over shipping methods and times	Some control, but must meet Amazon’s Prime shipping standards

Should your business use Amazon FBA?

In conclusion, whether your business should use Amazon FBA depends on your specific needs, resources, and growth objectives. If you value streamlined logistics, access to a vast customer base, and enhanced customer service, FBA could be a beneficial option. However, it is essential to weigh the associated costs and potential loss of control against these advantages. Conducting a thorough analysis of your business model and financial projections will help you make an informed decision.

Using Amazon FBA can benefit your business if you need efficient logistics and access to a large customer base (Source: Internet)

Simplify FBA: Fast, Efficient, and Affordable with Keys Logistics

When it comes to streamlining your Fulfillment by Amazon (FBA) operations, Keys Logistics is your trusted global partner. We specialize in one-piece fulfillment for TikTok, SHEIN, TEMU, and independent eCommerce sellers, offering seamless international warehouse services in the US, UK, and Germany. Our robust infrastructure includes self-operated fulfillment centers across these key markets, along with processing hubs in Hong Kong, Vietnam, Shenzhen, and Dongguan.

Through our ASEAN – China trade corridor, we’ve established optimized shipping routes to the US, UK, and Germany, providing reliable international freight options via air, sea, and rail. Our transit logistics service ensures smooth coordination across your retail points, warehouses, and cross-border trade partners – making your FBA supply chain faster and more cost-effective.

Keys Logistics empowers Amazon and eCommerce sellers to scale by offering:

Fast and on-time delivery, ensuring Prime-level fulfillment speed
Optimized route planning to significantly reduce transportation costs
Flexible shipping modes tailored to your product volume and urgency
End-to-end logistics solutions covering storage, last-mile delivery, and returns

From warehousing to global order fulfillment, Keys Logistics simplifies every step so you can focus on growing your business. Contact us today to streamline your FBA operations.

Last but not least, understanding what is fulfillment by Amazon is crucial for any seller looking to streamline their operations and enhance customer satisfaction. By carefully analyzing your business needs and utilizing effective strategies, you can maximize your FBA sales. For a simplified and cost-effective approach to FBA, consider partnering with Keys Logistics to optimize your fulfillment process.