Guest Post

Written by Taran Soodan

December 28, 2020

Amazon’s fulfillment network is a significant reason why it’s an indisputable eCommerce giant. The company boasts more than 175 fulfillment centers worldwide. These hubs of activities are a far cry from typical warehouses that only store products and associates work around the clock in Amazon’s warehouses to pick, pack, and ship orders in an efficient and timely manner.

With customers becoming so accustomed to Amazon Prime’s two-day shipping capabilities, it’s a competitive advantage for merchants to let Amazon handle fulfillment so small brands can focus on growing their business. But even with Amazon’s advantages, many sellers have become wary of selling on Amazon due to some of their recent business practices and seller unfriendly policies. 

Choosing the best fulfillment service as an Amazon seller can be complicated. Knowing which fulfillment service to use can be the key to achieving rapid growth while saving money on shipping and fulfillment costs.

Pros and cons of letting Amazon handle fulfillment

There are many Amazon fulfillment services available, but most Amazon sellers tend to use the Fulfilled by Amazon (FBA) service which allows merchants to tap into Amazon’s vast fulfillment network. Under this service, sellers allow Amazon to handle storing inventory, shipping orders, customer service, returns, refunds, and virtually everything else that’s part of the post-purchase experience. As great as FBA sounds, it’s vital to note that it’s not the only fulfillment service on Amazon, and it may not always be the best choice. 

In general, here are some of the pros and cons of letting Amazon handle fulfillment (regardless of which fulfillment service you choose):

Pros

  • Leverage Amazon’s huge fulfillment network to offer two-day shipping to customers.
  • There’s no need to lease expensive warehouse space or hire additional labor.
  • Enjoy great shipping discounts due to Amazon’s partnerships with carriers.
  • Get listed on Amazon’s highly trafficked marketplace to increase brand awareness.

Cons

  • All orders are shipped in Amazon’s packaging; the opportunity to promote your brand’s unique packaging and branding is virtually non-existent.
  • Amazon has repeatedly changed its fee structure and policies overnight, which can leave merchants unprepared and even result in being unable to sell specific products.
  • Storage fees during the holiday shopping period can cut deep into profits when combined with discounts.
  • It’s been reported that Amazon creates in-house products using data from sellers. If your products are popular, there could be a chance Amazon will create their own version of your product and sell it at a lower cost than your products.

Amazon fulfillment services available to sellers

For Amazon sellers, there are five fulfillment services that can be leveraged for your eCommerce business, including: 

  • Fulfilled by Merchant (FBM)
  • Fulfilled by Amazon (FBA)
  • Seller Fulfilled Prime (SFP)
  • Multi-Channel Fulfillment (MCF)
  • Third-party logistics (3PL)

Here is an in-depth look at each fulfillment service, as well as a few of its pros and cons.

Amazon Fulfilled by Merchant (FBM)

Fulfilled by Merchant (FBM) is the only fulfillment method new Amazon retailers can access because other options require demonstrated inventory turnover as well as some approvals that take time to obtain.

What is Fulfilled by Merchant?

Fulfilled by Merchant is a fulfillment model where the seller is responsible for fulfilling customers’ orders. With this model, the only thing you’ll be getting from Amazon is the listing space on the marketplace. You’re responsible for all other aspects of the business including storing inventory, shipping to customers, returns, refunds, and customer service.

​FBM is the ideal method for fulfilling orders for products exclusive to your shop and lends an air of credibility to your online store. Furthermore, it’s an excellent option for small businesses that have low order volume. At this stage, the shipping process can still be handled efficiently without compromising Amazon standards.

Pros

  • You maintain control over all aspects of your business.
  • Your margins may be greater because you’re not paying hefty fees to Amazon.
  • You have less paperwork to deal with.
  • Customers can enjoy better support because it can be notoriously challenging to get in touch with human support staff on Amazon.
  • You don’t have to worry about the inefficiency that may affect Amazon fulfillment centers during the busy seasons, or the myriad of customer complaints the company has dealt with during the pandemic.

Cons

  • You won’t have the Amazon Prime badge.
  • Fulfilling all orders on your own may become overwhelming if order volume increases.
  • Addressing customer complaints, returns, and refunds can prove to be very tiring.

F​​​​ulfilled by Amazon (FBA)

With FBA, you’re only responsible for manufacturing or sourcing the products and getting buyers to your online store. Amazon handles picking, packing, shipping, returns and refunds, and customer service for all products under this particular service.

What is Fulfilled by Amazon?

FBA is a service that provides inventory storage, packaging, and shipping, and customer support services to sellers. All sellers have to do is ship their products to an Amazon fulfillment center, and the company takes charge of the fulfillment process from there.

Pros

  • Highly subsidized shipping rates.
  • Your customers can enjoy free, two-day shipping since you have access to Prime members.
  • The FBA New Selection service gives sellers access to free shipping, free storage, free removals, and free returns.
  • You’ll have more time to focus on your business’s core aspects since Amazon will be handling most of the logistics.

Cons

  • The fulfillment fees, long-term storage fees, and other associated service fees may prove quite costly.
  • Precise product guidelines and paperwork can be challenging to adhere to.
  • Amazon can inadvertently mix your products with low-quality products from other sellers.
  • Higher return rates since customers know it’s easy and free to return items.

Seller Fulfilled Prime (SFP)

SFP is the middle ground between Fulfilled by Merchant and Fulfilled by Amazon. As a reminder, merchants that don’t qualify for FBA service cannot achieve Prime status; however, SFP allows select sellers to display the Prime badge and access Amazon Prime customers without outsourcing their fulfillment to Amazon.

What is Seller Fulfilled Prime?

SFP is essentially a self-fulfillment model on Amazon that gives sellers access to Amazon Prime customers as long as they can ship their orders within two days.

Pros

  • You can boost your sales significantly because you can display the trusted Amazon Prime logo.
  • You and your customers have access to Amazon’s customer service.
  • The required charges are not as expensive as FBA fees.
  • You’re in charge of order fulfillment and have more control over your brand image.

Cons

  • There are stringent eligibility requirements that may be difficult to meet.
  • Businesses may struggle to fulfill orders while adhering to Amazon’s requirements as volume increases.
  • Your business will likely incur higher shipping costs because you have to offer free standard shipping on all Prime orders.
  • You’ll have to use Amazon Buy Shipping services, including purchasing shipping labels and tracking your shipments through Amazon.

Multi-Channel Fulfillment (MCF)

Multi-Channel Fulfillment (MCF) is a fulfillment service that allows you to store your inventory at Amazon warehouses and helps you process orders across multiple sales channels. For example, if your eCommerce business has a Shopify store and sells on Amazon’s marketplace, Amazon will fulfill the orders that come in on both Amazon and your Shopify store

What is Multi-channel fulfillment?

The service is a subset of FBA but does not require items to be ordered exclusively through your Amazon store. Sellers can integrate orders from other channels, such as their brand website, and Amazon will act as the third-party logistics (3PL) company that delivers the goods to customers. And under MCF, you can reroute sales from other channels to Amazon, which then handles fulfillment like any other 3PL company.

Pros

  • By storing your products at Amazon’s fulfillment centers, you don’t have to handle inventory or operate a warehouse.
  • MCF gives you access to fast and efficient shipping because you can leverage Amazon’s vast fulfillment network.

Cons

  • The MCF service currently supports a limited number of marketplaces including brand websites, WooCommerce, and Shopify. If you’re selling on other popular channels like eBay or Walmart, you cannot fulfill your orders with Amazon.
  • Amazon restricts the types of products you can sell via MCF and can implement new restrictions at any time.
  • Amazon packages orders with their branding materials, which can impact your company’s branding efforts.
  • Amazon does not handle returns on MCF orders.
  • Service is currently restricted to orders in the United States.
  • There are reports that Amazon uses data generated from third-party sellers or customers to create competing products under Amazon’s house brands.

Third-party logistics (3PL)

Third-party fulfillment involves using a 3PL company to process your orders. Essentially, it’s a self-fulfillment model that gives you more time to focus on the core aspects of your business. Rather than personally handle warehousing, packaging, and shipping, you’ll outsource these services to a third-party logistics company, and they’ll do everything for you.

What is a 3PL?

Third-party fulfillment is a fulfillment model where the seller outsources fulfillment services and other aspects of the supply chain to a third-party fulfillment company.

Pros

  • You can customize packaging and branding materials to your taste, generally boosting your company’s branding efforts.
  • Using a 3PL company is typically less expensive than using Amazon’s fulfillment services.
  • The 3PL company is not a direct competitor and is less likely to use your sales data to their advantage.
  • You’ll enjoy better customer support and may even have access to a dedicated account manager.

Cons

  • You cannot sell your merchandise to Prime customers.
  • Most 3PL companies will not handle customer support and return logistics.
  • Some 3PLs are notorious for hidden fees that can quickly cut into your profits.
  • Amazon FBA sellers typically enjoy a more transparent fee structure than sellers working with 3PL companies.

Which Amazon fulfillment model is best?

The best fulfillment model on Amazon is completely subjective. Depending on the size of your business, the sales channels you use, the types of products you sell, etc., choosing the best fulfillment model for your Amazon business will vary.

Amazon fulfillment FAQs

Fulfillment for your Amazon store can get confusing. Here are some common questions we’ve seen about fulfillment.

Can you sell for free on Amazon?

No, there will always be some sort of fee for selling a product on Amazon. These fees include referral fees, fulfillment fees, storage fees, fees per item sold, and a few others.

What is a fulfillment fee?

A fulfillment fee is the rate a company is charged when a third-party fulfillment provider fulfills an order for shipping.

Is Amazon FBA worth it in 2020?

FBA can be a worthy investment for sellers that don’t want to fulfill orders at all. If you don’t want to rent warehouse space, hire labor, or provide customer service, then FBA might be the right choice.

How much is Amazon FBA per month?

The pricing for Amazon’s FBA service varies based on the weight and dimensions of products sold, monthly storage fees, and listing fees, not to mention the $39 monthly FBA subscription fee.

Is there a good fulfillment service outside of Amazon FBA?

There are hundreds of local, national, and international fulfillment services that can provide services similar to FBA. Leading fulfillment services like ShipBob, ShipHero, Rakuten Super Logistics, and Red Stag Fulfillment can all help with fulfillment for your Amazon orders and other sales channels.

Conclusion

There’s no hard and fast rule for choosing the right fulfillment method for your business, and entrepreneurs need to have a thorough understanding of each method’s pros and cons, as well as how it affects their business. While most businesses benefit from Amazon’s vast fulfillment network, the company’s near obsession for control can make 3PL companies or self-fulfillment a better option in certain cases.

To further improve the fulfillment and post-purchase experience for your customers, consider sending them delivery updates via SMS, Messenger, or email. With ManyChat, merchants can send delivery updates to customers with ease.

Try ManyChat for free today!

The contents of this blog were independently prepared and are for informational purposes only. The opinions expressed are those of the author and do not necessarily reflect the views of ManyChat or any other party. Individual results may vary.