Amazon sellers have a lot on their plate. They have to decide what products to sell, create the actual product listing and run their business outside of Amazon. Add shipping and fulfillment in there and it can get exhausting. That’s where Fulfillment by Amazon (FBA) comes in. It’s the alternative option to Fulfillment by Merchant (FBM) that can save sellers time to focus on other areas of their business.
Fulfillment By Amazon
FBA allows you to send your inventory to Amazon’s fulfillment centers where Amazon will handle picking, packing, shipping, customer service and returns. FBA products are eligible for Prime free 2-day shipping as well as free shipping on eligible orders.
It helps the busy seller eliminate the time needed to take care of shipping and fulfillment issues.
But it doesn’t have to be one all or nothing. You can choose to use FBA for some products and FBM for others. Whatever works best for your business.
How does FBA work?
To get started with FBA, you’ll obviously need a Amazon seller account. Once that’s taken care of, add FBA to your account.
Create your product listings through your method of choice (i.e., bulk upload, individually, API) and then prep and ship them to Amazon’s fulfillment centers.
The bulk of the work is now in Amazon’s hands. Once a customer orders a product, Amazon will handle the picking, packing and shipping. If customers have questions, request a refund or return the item, Amazon’s 24/7 customer service team has got it covered.
Amazon also offers up a few optional FBA features for sellers looking to enhance their experience:
Multi-Channel Fulfillment (MCF)
As a retailer, you’re likely to sell on other sales channels in addition to Amazon. Whether it’s through your own website or a third-party site, inventory needs to be shipped out to customers. This is where MCF comes in. Send the inventory you’d like to use for MCF to an Amazon fulfillment center. When a customer purchases an item on one of these non-Amazon websites, Amazon will receive the order and proceed to pick, pack and ship the item to the customer.
MCF can be used with or without FBA. Learn more about Multi-Channel Fulfillment here.
Inventory Placement
When you create a shipping plan for FBA products, your items may be directed to various fulfillment or receive centers. One unit may have to go to a location in Arizona while another may have to go to a location in California.
To avoid shipping your inventory to multiple destinations, you can opt to use the Inventory Placement Service. Items will be directed to one fulfillment or receive center. Once the products arrive, Amazon will split up and send the products to the different centers on your behalf.
Find out more about Inventory Placement and the costs associated with it here.
FBA Export
FBA export allows you to sell eligible products internationally without having to deal with the hassles that comes along with selling in different countries.
Amazon handles the fulfillment, import duty and customs clearance and shipping on your behalf. Learn more about the benefits of FBA Export here.
Benefits of FBA
Save Time
FBA has a lot of perks. It eliminates the time spent to fulfill and ship orders. And when you’re a small business owner without a lot of employees, this gives you more time to work on other parts of the business like marketing or website updates.
Increase Exposure
The popularity of Amazon Prime doesn’t appear to be dying down anytime soon. And a lot of Prime shoppers look for the Prime logo on a listing before purchasing a product. The Prime logo is a symbol of trust for shoppers since they know that Amazon is responsible for fulfillment. With FBA, your products are eligible for Prime free 2-day shipping. Having this on your listing may get you in front of shoppers who wouldn’t have normally looked to purchase your product.
Buy Box
There are a lot of factors that go into winning the Buy Box. Selling via FBA is one of them. Using FBA gives you a one up from competitors in the race to win the desired spot.
FBA Drawbacks
Fees
There are fees associated with FBA that could eat into your margin. Before you go forward with FBA, research the fees and see if it makes sense for your business.
Less Control
Once you send your inventory to an Amazon fulfillment center, you’ll no longer have easy access to it. And you can’t control how the packaging will appear to the customer.
Issues with Commingled SKUs
There are two ways to deal with labeling FBA inventory. Either you label each individual product with an Amazon barcode or you have commingled, stickerless inventory. If you use the latter (which is the default), Amazon uses manufacturer barcodes to group your products with the products of other sellers that are also using manufacturer barcodes for these items.
When a customer orders your item, Amazon pulls a product from the commingled products (even if it isn’t your product) and sends it to the customer. The issue here is that you are no longer in control of the quality of the item and it could even end up being a counterfeit product -- though Amazon has safeguards in place to protect against this.
Even though there are potential issues that could arise, there are also benefits of using manufacturer barcodes. It can save you a lot of time from labeling your items and end up being more convenient for you and your business.
FBA vs. FBM: What Should I Choose?
The goal of just about every Amazon seller is to increase sales and earn profits. And to do that, sellers have to pay close attention to all aspects of their business when making decisions. One of these decisions has to do with fulfillment.
Amazon offers two main fulfillment options: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Each method has its pros and cons and one isn’t necessarily better than the other. What may work well for one seller may not work well for another. Before deciding on a prefered method, it’s important to understand the differences between each one.
Fulfillment by Amazon
As an FBA seller, you send your desired inventory to an Amazon Fulfillment Center. Once it gets there Amazon handles the picking, packing, shipping, customer service and even returns on your behalf.
FBA Pros
Time Savings
FBA is a time-saver when it comes to fulfillment. Instead of focusing on shipping items to customers on time and handling the process of returns, you can focus on other aspects of your business. This is especially useful for those who do not have extensive resources to store inventory and handle the fulfillment process.
Another potential time-saver when it comes to FBA is the Multi-Channel Fulfillment option. With this option, you send inventory to an Amazon fulfillment center and when a customer purchases an item from a non-Amazon sales channel, Amazon will handle the fulfillment.
Prime Eligibility
FBA items are eligible for Prime free 2-day shipping as well as free shipping on eligible orders. And having that Prime badge next to an offer can do wonders for business. It can get you in front of customers who normally wouldn’t have considered a non-Prime item and increase product exposure.
Shoppers know that Prime is associated with Amazon. Having the Prime badge next to your offer will give the shopper a sense of trust in your item and may increase the likelihood that they proceed with the purchase.
Increase Buy Box Chances
FBA offers are more likely to win the Buy Box. And since the competition can be tough, it’s a great way to increase your odds.
FBA Cons
FBA Fees
FBA is a time-saver. But saving time ain’t free. Amazon charges fulfillment fees along with monthly storage fees. And it doesn’t stop there. There’s also long-term storage fees for items sitting at a fulfillment center longer than 180 days. You’ll want to consider how much these fees will cut into your margins before opting for FBA.
Less Control
Inventory for FBA is stored at an Amazon Fulfillment Center where you’ll no longer have access to it. This gives you less control over certain aspects of your inventory such as how the packaging will appear for the customer.
Commingled SKUs
Amazon has two options for tracking inventory. Either you can use Amazon’s barcode or you can choose to go the stickerless route and not label your products. If you decide to not label your products with the Amazon barcode, Amazon will use the manufacturer barcode to group your items with products of other sellers also using the manufacturer barcodes for those items.
When a customer orders your product, Amazon will choose a product from the group (that isn’t necessarily yours) to send out to the customer.
The issue here is that you are no longer in control of the product quality and there could even be potential counterfeit issues. While Amazon does have policies to protect against this, it is still something to be aware of.
Fulfillment by Merchant (FBM)
With FBM, you handle all aspects of fulfillment. This includes packing, shipping, returns and customer service.
FBM Pros
More Control
FBM gives you control over all parts of fulfillment. Unlike with FBA, you don’t have to worry about what happens to your product once it gets to the Amazon Fulfillment Centers. You can also choose how you want to package your product and even include personalized touches like a handwritten note.
No FBA Fees
FBA fees won’t eat into your profit margins. While you still have other Amazon fees, you won’t have to take as much of a hit.
However, while your fees may be lower without FBA, you may not sell as much volume of product.
FBM: Cons
More Responsibility
With FBM, comes more control. And with that control comes more responsibility. You’ll have to make sure you are on your game when it comes to shipping on time and replying to customers. If you’re not, your seller metrics may suffer.
Cost
Even though you can avoid FBA fees, there are still other costs associated with fulfilling your own products. One of these being potentially pricey warehouse costs.
Harder to Win Buy Box
FBA offers are more likely to win the Buy Box. Without FBA, you’ll have to work extra hard to earn the space.
All hope isn’t lost though. There is another option for sellers who want to fulfill their own inventory and still have a fair shot at the Buy Box. That option is Seller Fulfilled Prime (SFP).
SFP allows you to fulfill your own orders while gaining access to Prime customers. There are still certain eligibility requirements that need to be met. For more information on SFP, click here.
FBA vs. FBM
Now it's decision time... FBA or FBM?
FBA is good for products that sell in high volume and have a quick turnover so they don’t incur those long-term storage fees. Large margin products are also good for FBA so the fees won’t eat up all of the profits. Also, if your product is struggling with a low Buy Box share, FBA may help.
FBM may work better for merchants who already have a solid fulfillment and storage process in place. If that’s the case, then Amazon’s fulfillment services may be unnecessary.
FBM is also good if you sell items with small margins since you wouldn’t have to worry about FBA fees cutting those margins down further.
Conclusion
Deciding on a fulfillment strategy is challenging. There are a lot of factors to consider. In the end, it doesn’t have to be one or the other. You could use FBA for some items and FBM for others, depending on what works best for your business.
FBA can be a great tool for many Amazon sellers. It’s a way to cut out some of the time and hassle in regards to fulfillment and increase the chance for a Buy Box win. As with all Amazon tools, do the research yourself and see if it is a good solution for your business.
