In this article, we will explain the benefits, the disadvantages and the alternatives to Amazon fulfilment.
Fulfilment by Amazon (FBA) is the process of Amazon almost entirely taking care of all stages of the order fulfilment. The customer orders, the order is sent to an Amazon fulfilment centre for picking, packing and delivery.
Sell and fulfil using a single company (Amazon) seems to be a good call, however, the choice it’s not that simple. Be one of the millions of partners of the world’s largest retailer means you have benefits but also many limitations and almost no negotiation power.
In this article, we will explain the benefits, the disadvantages and the alternatives to FBA.
There are two clear benefits to use FBA:
1. Amazon does all the work for you (logistics and shipping). You have to manage only one platform to sell and to fulfil your orders.
2. Automatic Amazon Prime qualification.
The main disadvantages from FBA are:
1. Storage limits
FBA has strict inventory storage and restock limits. These can be a challenge during busy periods and require a lot of time to manage and forecast inventory. It’s a critical issue for sellers with a seasonal product assortment or experiencing temporary stock out issues.
2. Extra fees and hidden prices
If you don’t follow the strict rules from Amazon, get ready for extra fees.
3. Control (or a lack of)
FBA exerts considerable control over what you ship, when you send it and what packaging you use. For those looking to build an independent brand, this lack of control can be fatal.
4. Prep requirements
Before sending your products to Amazon, you have to meet a list of requirements from packaging to shipping and labeling. Some of these requirements can be tricky.
5. Multi-channel and international fulfilment
Restrictions on branding, product categories, channels and fees can limit your growth ambitions.
Fulfilment by Merchant (shortened to FBM) is the term used for sellers fulfilling orders themselves, instead of using FBA. This involves storing, picking, packing and shipping items in-house or using an outsourced fulfilment provider (we’ll come onto these).
There are many benefits of FBM, the primary ones being:
⇒ Control: Fulfilment by Merchant gives you control over the entire fulfilment process. This includes where you store items, how you label items, what packaging you use and with which shipping carrier you partner.
⇒ Cost: FBM sellers have a tighter rein over their fulfilment overheads. Rather than being tied to FBA’s fees, you decide where to invest money and where to save it.
⇒ Expansion: Finally, FBM makes it easier to expand to multiple marketplaces or your own eCommerce platform, without worrying about excessive FBA fees or running a multi-provider fulfilment operation.
We recommend FBM to merchants with:
⇒ Expertise – you need to know how to fulfil orders or partner with someone who does.
⇒ Resources – you must have the resources to fulfil orders in the UK or internationally.
⇒ Capability – you need to match Amazon’s shipping speeds and standards, even during peak periods such as the holiday season.
There are, in summary, two FBM options: 3PL and In-house fulfilment
In-house fulfilment involves fulfilling orders yourself, using your own storage space, warehouse team (or willing helpers), packaging materials and shipping carrier.
The benefits of fulfilling by merchant in-house include gaining a first-hand insight into the fulfilment process, being able to cut costs by fulfilling orders yourself and having immediate access to your inventory.
It’s challenging to meet Amazon’s fast shipping speeds in-house, especially when order volumes spike. In-house fulfilment is also incredibly resource and time-intensive. These are the costs associated with companies fulfilling orders themselves:
⇒ Security (alarms, guarding)
⇒ Telecoms (phones, Broadband, systems)
⇒ Full-time monthly staff costs
⇒ Part-time monthly staff costs
⇒ Cleaning (staffing, consumables)
⇒ Building Maintenance
⇒ MHE (materials handling equipment)
⇒ Insurance (buildings, contents)
⇒ Consumables (packaging, tape, void fillers)
⇒ SHEQ (safety, health, quality, environment)
Outsourced fulfilment involves using a third-party fulfilment partner to fulfil your orders. With a 3PL partner, you have the best of both worlds: control over your fufilment process and also over your costs.
eCommerce 3PLs know shipping like the back of their hand. They disburse, store, pick, pack and ship your orders for you, in the same way that FBA does. They’re experienced in providing the fastest and most cost-effective delivery service, which can boost your delivery speeds while saving you money.
A third-party fulfilment team has the resources to match Amazon’s shipping speeds, even during peak retail periods. You can scale your requirements throughout the year, so you’re never paying for space you’re not using.
A 3PL like Huboo can grow with your business, providing more space, locations and resources when you need them. They also have economies of scale to increase your delivery capacity at the lowest cost possible.
So, you’re using FBA, and you’re either happy, frustrated or at your wit’s end. When is the right time to consider alternatives?
FBA becomes restrictive and less cost-effective when selling on non-Amazon channels. If you’re expanding to channels such as eBay or opening your own Shopify store, use it as an opportunity to refresh your fulfilment strategy and consider a multi-channel fulfilment alternative.
Sellers experiencing significant growth on Amazon sometimes find they’ve outgrown FBA. If you’re becoming frustrated with the restrictions FBA places on your development, consider your options.
Analyse alternative fulfilment providers which accommodate national and international orders, by shipping internationally and distributing stock to European warehouses.
Any brand looking to grow and establish a name for itself should always analyse its fulfilment strategy against its current and future needs. FBA is ideal for small, first-time Amazon sellers, but if you’re a growth brand, is FBA supporting that growth?
Finally, just because you’re new to eCommerce and fulfilment, doesn’t mean you have to fulfil with FBA or do it all yourself. By using an FBA-alternative like Huboo, you get the benefits of Fulfilment by Amazon with the benefits of Fulfiled by Merchant.
|Depends on you
|Depends on you
|Customisation (packaging, delivery, branding)
|Yes but subject to storage limitations
|High but with an associated cost
|Space for Growth
If you search for “FBA Calculator”, you can find many tools to help you forecast your profitability. You can see the impact of FBA on your profits and improve your margins with fulfilment alternatives.
FBA is a great service for online sellers, but there are many comparable and better alternatives out there – it all depends on your business vision and goals for growth.
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