How Does Amazon FBA Work? A Practical Guide for New Sellers

If you’re thinking about selling on Amazon, you’ve probably already heard of FBA (Fulfillment By Amazon). It gets mentioned in every beginner guide, it’s what most sellers use, and the basic idea sounds simple enough: Amazon stores your stuff, ships it to customers, handles returns, and you pay fees. Job done!

According to Red Stag Fulfillment’s 2025 data, around 82% of active Amazon sellers use FBA, so yes, a lot of people make it work. But there are a few things you need to consider that most guides never mention.

The part that trips most new sellers up isn’t the FBA side of things. It’s everything that has to happen first: finding a reliable supplier, keeping quality consistent, labelling correctly, and getting your stock into the country in one piece.

None of that is unique to Amazon, but FBA has a way of making the fulfillment side look so straightforward that people underinvest in getting the rest right. That’s where most of the expensive lessons happen.

Alternatively, you may decide that FBA isn’t right for your business, in which case Fulfillment by Merchant (FBM) is the only other option. That comes with its own set of considerations.

This guide covers the whole picture. How FBA works, what you need to get right before a single unit reaches a warehouse, when FBM makes more sense, and where 3PLs and 4PLs fit into the whole picture.

How does Amazon FBA work? TL;DR:

• FBA means Amazon stores, picks, packs, and ships your products. Your items become Prime-eligible, which makes a real difference to how many people will actually buy them.
• The groundwork happens before Amazon gets involved. Supplier vetting, factory audits, sampling, and pre-shipment inspection.
• Labelling requirements are strict. Get them wrong, and you’re looking at fees or rejected shipments.
• Splitting shipments between air and sea is a sensible way to balance speed and cost.
• FBM gives you more control over how your product gets to the customer, but you lose Prime eligibility, and the fulfillment is all on you.
• A 3PL or 4PL can handle the logistics side, which matters a lot if you’re shipping from Asia into the US.

Explore more: Wayfindr’s E-commerce Logistics Service

What Is Amazon FBA, Exactly?

FBA stands for Fulfillment by Amazon. When you sign a product up for FBA, you ship your stock in bulk to one of Amazon’s fulfillment centres, and they take care of everything else.

Every time a customer places an order, Amazon picks it, packs it, ships it, and deals with any returns or delivery complaints. Ideally, once your product lands in their warehouse, you don’t ever touch it again.

That convenience is a huge benefit. However, it doesn’t fully account for the fact that 82% of sellers use FBA in some capacity. That’s down to one other major drawcard: Prime. Hundreds of millions of people have Amazon Prime globally, and a big chunk of them filter search results to show Prime listings only.

If your product isn’t Prime-eligible, you’re losing a large slice of potential buyers before they’ve even noticed you exist. That’s a tough position to be starting a business from.

The catch of using FBA is the cost, and there’s more of it than the headline fee suggests. On top of the per-unit fulfillment fee, you’re paying monthly storage fees. 

Amazon has also been quietly adding new categories every year: low inventory fees, inbound placement fees, and returns processing fees. Sadly, the list is only getting longer, not shorter.

According to eFulfillment Service’s 2025 fee breakdown, fulfillment fees for standard-size items alone run from around $3.22 to well over $30 per unit, depending on size and weight. That’s before Amazon’s referral charge of between 8% and 15% on top.

When you add it all up, Amazon’s total cut regularly sits somewhere between 25% and 40% of your selling price. If your margins are thin going in, that math is probably not going to work.

What Are the Steps to Selling Successfully on Amazon FBA?

Most beginner guides spend a lot of time on Seller Central: setting up listings, uploading images, and learning the dashboard. All of that matters, but it’s relatively easy.

The decisions that actually determine whether you make money or lose it happen earlier, long before anything gets near a warehouse. Here’s what you need to get organized:

Step 1: Can you audit a supplier (and should you)?

If you’re sourcing from a manufacturer you haven’t worked with before, it’s advisable to get an independent audit done first.

A third-party inspection company visits the factory and checks whether it’s legitimate, whether it can actually produce what it’s promising you, and whether it’s operating to the standards it claims.

If your reaction to that is: “Seriously, can a small business actually do that?” — yes, absolutely. This is a well-established industry with companies set up specifically to serve importers of all sizes.

Providers like Sofeast, AQI Service, and Asia Quality Focus operate across China, Vietnam, and most other major sourcing markets. A basic factory audit in China typically costs around $200 to $300. 

Vietnam runs slightly higher at $300 to $400, largely because there are fewer providers there. You don’t need to be a large brand to use these services, and many first-time Amazon sellers do.

You don’t need an audit every time you reorder from a supplier you know and have worked with reliably for years. But for a new factory, especially one you found through Alibaba or a similar platform, it’s cheap insurance relative to what a bad batch can cost you.

One practical note: use auditors who are familiar with your product category. Someone who mostly audits garment factories might not understand the potential problems with consumer electronics.

Step 2: Should you order product samples?

One sample from one supplier tells you almost nothing useful. Order from at least three suppliers, two or three units from each, then buy a unit or two of your main competitors’ products and test everything side by side.

There are two things you’re checking. First, consistency: one good sample doesn’t mean the factory can maintain that quality at volume.

Second, market position: if a competitor’s product at a similar price is noticeably better made than yours, that’s information you need before you’ve committed to a supplier, not after you’ve placed a 500-unit order.

Step 3: What Are Amazon’s Labelling Requirements?

Amazon’s labelling requirements are strict, and getting them wrong will cost you. There are two barcodes involved, and they do completely different jobs — which is where most beginners get tangled up.

The first is a UPC (Universal Product Code). This is the standard retail barcode you’d find on any product in a shop. You need it to create your product listing on Amazon.

Think of it as your product’s passport: it proves the product exists and is legitimate. Most private label sellers buy one from GS1 before they start listing. Once you’ve used it to set up your listing, that’s mostly the last you’ll think about it.

The second is an FNSKU (Fulfillment Network Stock Keeping Unit). This is Amazon’s own barcode, and it’s what needs to be on every physical unit before it enters an Amazon warehouse. You don’t buy this one. 

Amazon generates it for you automatically once your FBA listing is live in Seller Central. It ties each unit directly to your seller account, so when a sale happens, Amazon knows to credit you and not someone else selling the same thing.

So yes, you need both, but not at the same time and not for the same purpose. The UPC gets your product listed. The FNSKU goes on the box.

How to organize your labelling

If your packaging already has a UPC printed on it, the FNSKU label needs to go over it, covering it completely. Amazon’s scanners need to read one barcode per unit, and that barcode needs to be the FNSKU.

Which means someone has to apply those labels: your manufacturer, a prep company, or previously Amazon itself, for a per-unit fee. We should note that Amazon ended its own labelling service for U.S. sellers at the start of 2026, so that last option is no longer on the table.

If you’re producing custom packaging anyway, the easiest solution is to have the FNSKU barcode designed directly into the packaging artwork before it goes to print. That means you won’t be messing about with stickers, and the label will always be in the right spot.

Stock arriving without the right labels gets hit with an unplanned service fee and takes longer to be processed into Amazon’s system. That means your inventory isn’t available to sell when it should be. It’s one of the more avoidable ways to lose time and money, so it’s worth sorting out before anything leaves the factory.

Step 4: How do you arrange a pre-shipment inspection (PSI)?

A PSI is carried out by a third-party company at the factory, usually when production is around 80% complete. They physically check your products against your specs: dimensions, materials, functionality, packaging, labelling, the works.

The same providers who do factory audits also do PSIs, and costs are similar. AQI Service, for example, charges around $258 per man-day for inspections in Vietnam, with China typically coming in lower.

For simple products, one inspection at 80% is normally enough. For anything more complex, it’s worth booking at 30%, 60%, and 100% of the production run. Catching a problem at 30% is annoying but manageable. Catching it after everything has been finished and packed for shipping costs a lot more to fix and delays the whole launch.

Don’t release your final payment to the supplier until the PSI has cleared. Every reputable supplier will expect this. It’s standard practice, not a sign of distrust.

Step 5: How do you ship to Amazon’s fulfillment centres?

Before you book freight, get your Seller Central setup sorted: listing live, shipping plan created, product dimensions and weights confirmed.

Amazon uses those figures to allocate your inventory to specific fulfillment centers. If the numbers are wrong, you’ll be dealing with the fallout at the other end.

The most useful call at this stage is how to split your shipment. Sending everything by sea is cheapest, but you’re looking at 4 to 6 weeks in transit before your store has any stock.

A lot of sellers ship a smaller quantity by air, enough to start satisfying early orders, while the main bulk of the order comes by sea behind it. Air freight costs more per unit, but it means you’re not waiting around to get your business up and running.

Before you finalise the freight booking, check whether Amazon classifies your product as oversized. Oversized items carry higher fulfillment fees and tighter inventory limits.

If your product is borderline on dimensions, a small packaging change might be enough to keep you in the standard-size bracket and save a meaningful amount per unit.

If you’re importing from Asia, getting your head around customs clearance at your port of entry is worth doing before you book anything. Documentation issues are one of the most common causes of delays, and every day your stock is stuck in customs is a day it isn’t available to sell on Amazon.

What Does FBA Actually Cost?

The honest answer is: it depends, and you really do need to work it out for your specific product before you commit to anything.

Size, weight, selling price, and how quickly your inventory moves are the main variables. Here’s a rough guide to what you’re looking at for US sellers in 2026.

A useful rule of thumb: if your total FBA fees are eating more than 30% of your selling price, it’s worth questioning whether FBA is the right model for that product. That’s particularly true if it’s bulky, heavy, or selling slowly.

What’s the Difference Between FBA and FBM?

FBM stands for Fulfillment by Merchant. It means you take care of storage, packing, and shipping yourself, or you hand it to a logistics provider.

In practice, that means Amazon takes the sale, and you own the rest. According to RevenueGeeks’ 2025 seller data, around 36% of Amazon sellers use FBM as either their main model or alongside FBA.

FBM tends to make sense when FBA’s fee structure just doesn’t work for what you’re selling. Big items, slow-moving stock, products with unpredictable demand, or anything where you want more control over how your product is packed and presented are all situations where FBM is often the better call.

You can also fulfil orders from the same pool of inventory across multiple sales channels, which is a bit more difficult when selling through FBA.

Let’s say you’re selling via your website, Amazon, Facebook, and one or two other channels. FBM allows you to fulfil all those orders via one logistics setup.

The main drawback of FBM is Prime. Or, more accurately, the lack of Prime. Without it, a significant portion of Amazon’s buyers will filter you out before they’ve even seen your listing.

There is a workaround called Seller Fulfilled Prime (SFP), but it requires hitting delivery standards that most smaller operations struggle to maintain consistently. It’s worth understanding how FBA and FBM actually compare before you decide which way to go.

When Does a 3PL or 4PL Come Into the Picture?

Third-party logistics (3PL) and fourth-party logistics (4PL) providers can manage two separate problems.

The first is getting your products from your supplier into the country: transport, shipping, and customs. If you’re sourcing from China or Vietnam and selling into the US or Europe, you’ll most likely need help with this regardless of whether you’re using FBA or FBM.

The second is everything at the other end: warehousing, pick and pack, last-mile delivery, and returns. If you’ve chosen FBM, a 3PL or 4PL can manage the full process from shipping through to fulfilment. Having one company to manage everything is a big plus.

The key difference between the two is scope. A 3PL typically owns its own assets, so it tends to operate in a specific region or market, like the US or Europe. That works fine if you’re only selling in one place.

A 4PL manages a network of 3PLs and freight forwarders all around the world. They don’t own assets themselves; they coordinate other logistics providers, which is why they’re sometimes called a “control tower.”

That becomes useful when you’re selling into multiple markets and don’t want to manage multiple logistics providers, which can become very time-consuming. You can read more about how 4PLs manage supply chain operations if you want to go deeper on this.

How the different logistics options work

Here are three different scenarios to show how each logistics model works in practice:

Scenario 1: You’ve chosen FBA, but you need to get your products from Vietnam to the US. A freight forwarder (a specialist that handles transport and customs, and nothing else) is often the simplest option here. A 3PL can also do this, and can add services like warehousing and delivery directly to Amazon’s fulfilment centre if you need them.

Scenario 2: You’re manufacturing in Vietnam and selling in the US via your website and Amazon. You’ve decided FBM is the better fit. A strong 3PL can manage the full picture: shipping from Vietnam, customs clearance, warehousing, pick and pack, last-mile delivery, and returns. You have one provider handling everything.

Scenario 3: You’re manufacturing in Vietnam and selling in the US, Europe, and Australia across Amazon and your own website. A 4PL can manage shipments from Vietnam to each market, set up local warehousing, and select the right local 3PLs to handle fulfilment in each region. You have one point of contact across the entire network. If you’re building into multiple markets from outside the country, understanding how last mile delivery works in each one is a good place to start.

Case Study: LotusWheel’s US market entry

Client: LotusWheel is a New Zealand-based therapeutic wellness brand, manufacturing in South Korea and expanding into the US market.

The problem: Every US order was being shipped internationally, one by one, from South Korea. Delivery times were long, costs were high, and neither of those things was going to improve as order volumes grew. They needed a proper US fulfilment setup but had nothing in place to build from.

What changed:

• Wayfindr set up LotusWheel’s first US warehouse and built out the full logistics operation, covering freight forwarding from South Korea, local warehousing, and same-day order fulfilment
• US customers now receive their orders within 2 to 4 days on domestic delivery, rather than waiting for international shipping
• Over 95% of orders go out the same day they’re placed
• Consistent inbound freight keeps stock levels stable and avoids the stockouts that damage Amazon search ranking

Worth noting: LotusWheel sells directly through their own website, not through Amazon FBA. But the underlying logistics problem is the same one facing any brand shipping physical products into the US from overseas.

Whether you’re sending bulk stock to Amazon’s fulfilment centres or to a 3PL warehouse, you still need the freight forwarding, customs clearance, and US distribution working before anything else. 

The only difference is who handles the last mile. Amazon takes care of that for FBA sellers. FBM and DTC brands need a 3PL or 4PL to do it for them.

Read the full LotusWheel case study

Final Thoughts

There’s a lot more to selling on Amazon than setting up a listing and waiting for orders. The FBA decision is actually one of the simpler ones.

FBA makes sense for standard-size products with healthy margins and consistent demand. FBM gives you more control and works better for bulkier products, slower-moving stock, or situations where you’re selling across multiple channels and want one pool of inventory to serve all of them.

The harder questions tend to be the ones this guide has spent most of its time on:

• Who’s your supplier, and have you actually verified they can deliver?
• Have your products been inspected before they leave the factory?
• Is your labelling right?
• How are you getting your stock into the country, and who’s managing customs?

These aren’t exciting questions, but they’re the ones that determine whether the whole thing works. And, as your business grows, logistics takes on much greater importance.

Selling into one market with a straightforward setup is fine for FBA. Selling into three markets across several channels is a different challenge entirely, which is where a 3PL or 4PL starts being the better choice.

Wayfindr is the tech-enabled 4PL logistics partner helping global brands scale effortlessly. If you’re trying to work out where you fit across any of this, talk to the team. It’s usually a pretty quick conversation to figure out what’s worth sorting first.