Is Fulfillment By Amazon (FBA) Right For Your Business?

Amazon is a fantastic sales channel that cannot be ignored by most eCommerce retailers. Fulfillment By Amazon (FBA) has also presented an attractive simplification of the eCommerce channel for some organizations by eliminating the complexities associated with managing a third party fulfillment vendor, ensuring effective data flows between Amazon and 3PL systems and earning and maintaining prized Prime seller status.

In recent years however, the evolving rules of Fulfilled by Merchant (FBM), the FBA pricing model and the benefits of experience among 3PL’s has given merchants a lot more options and pro’s and con’s to consider.

Here are four factors to research that may help guide your decision:

1) Seller Fulfilled Prime For FBM Merchants

Prime seller status is quickly becoming table stakes for success on Amazon. Fortunately, new rules now allow for FBM merchants to earn Prime status (SFP – Seller Fulfilled Prime).

It takes a disciplined and experienced fulfillment partner to ensure that the data, packing and shipping processes are in place to maintain Prime status. But this new option allows merchants to enjoy the Buy Box privileges and access to ~50MM members that Prime status affords, without the limitations and costs of FBA.

2) Higher and Unexpected Costs of FBA

Amazon has invested a tremendous amount in their DC infrastructure and the automation within it to ensure that they can process the maximum number of orders with a minimal amount of labor. The goal of moving material quickly through automation however means that materials that don’t move quickly or don’t suit the automation can incur much higher and often unexpected costs.

Amazon storage rates can be difficult to calculate for some merchants and when they are calculated, its often surprising how much higher they are than through other national fulfillment vendors. Further, these rates increase during the holiday season when most in demand – not a common practice in third party fulfillment.

Finally, if inventory does not move as planned during or prior to holiday season, Amazon assesses aggressive Long Term Storage fees to disincent vendors from maintaining inventory of slower moving SKU’s. In many cases, the need for extremely tight inventory control at Amazon to minimize these storage fees result in the need for an active and aggressive inventory management and replenishment effort, which may result in increased instances of stock-outs and increased replenishment shipment frequency and inbound freight expense.

Further, merchants need to ensure that their product dimensions allow for efficient and cost effective handling by Amazon. The material handling equipment and processes in Amazon DC’s and therefore Amazon’s pricing structure, favor smaller format product. The size limitations of products that trigger considerable increases in pick ‘n pack rates for FBA “Oversized” materials may surprise some merchants.

3) Do You Want to Say More to Your Consumer Than FBA Allows?

Customized packing materials, a Pinterest-worthy opening experience, Print On Demand materials and most other personal touches that may be able to enhance your brand’s connection with the consumer are not an option through FBA. Nor is a high-touch customer service organization – often co-located with your actual materials. Your consumers can benefit from knowledgeable representatives who understand your brand, the physical packaging of the product and your brand itself.

4) What If YOU Need a Little Extra Help?

Things go bump. Your manufacturer is going to ship the brown product with the black product label on it. Your carrier is going to damage your materials on their way to the warehouse. You are going to make a mistake in your Seller Central set-up that could cost you customers or margin.

A knowledgeable third-party-fulfillment vendor that knows you by name and cares about your brand is there to consult, repack, kit, sort, relabel and generally bend-over-backward to ensure that you are successful.  We make our living by providing knock-your-socks-off customer service to both our merchant partners and their consumers.

Please contact us if we can help you better understand your options for your Amazon sales channel fulfillment!