I'd assume you'd just have your finished product drop shipped to their fulfillment center.

Isn't this much, much cheaper than shipping each item individually, so the per-item cost won't change much?

Yes, that is how this kind of fulfillment works.

That's what I got from the info provided.. essentially bulk ship all of the stock you have now and then get back to producing content until you've got another worth-while batch to ship.. interesting. That's a bold move cotton, let's see how it plays out.