Amazon is one of the largest selling platforms with over 300 million active users around the world. Its excellent coverage has helped E-Commerce businesses grow, break international boundaries, and reshape the business industry. However, to keep your business noticed by customers on the platform, you have to stay on top of Amazon Account Health.
One of the factors that risk Account Health is the customer’s negative feedback, which usually talks about the shipping (delays, broken items, etc.). So, we’ll give you a better understanding of Amazon fulfillment options by weighing their pros and cons. But before we dive into that, we’ll start with knowing how these fulfillment options work.
Amazon Fulfillment Options Explained
Fulfillment by Amazon (FBA) – is a service where Amazon shoulders the entire fulfillment process. Sellers only have to send their inventory to Amazon fulfillment centers, and Amazon will take care of the rest, from storing to packing and shipping the orders, even returns.
Fulfillment by Merchant (FBM) – also known as Merchant Fulfilled Network (MFN), is a service where the sellers handle the warehousing, fulfillment, and returns.
Seller Fulfilled Prime (SFP) – is similar to FBM, where the seller shoulders the fulfillment process but with the benefits from FBA. In this program, sellers can put Prime badges on their products without enrolling for FBA.
Pros and Cons of these Amazon Shipping Options
Fulfillment by Amazon (FBA)
- Prime Eligibility
FBA products are eligible for millions of Amazon Prime subscribers, which is half of Amazon’s customer base. With the Prime badge, you can make your products available for Amazon Prime with two-day shipping. The quick transaction usually attracts more customers.
- Increased Chances of Winning The Buy Box
The Amazon Buy Box was created to provide customers with the best option for their budget, and Amazon is the one who chooses the product to receive it. Therefore, winning would provide better potential for earning sales. And usually, in the algorithm, sellers with FBA listings win the buy box more than non-FBA ones. So, by having your products fulfilled by Amazon, you will have a better chance of winning the buy box.
Amazon has massive logistic networks in the US and all over the world, which means that the shipping duration will be as swift as possible.
Since Amazon is handling the fulfillment, the returns will also be taken care of, so you can focus on other crucial aspects of your business.
- Higher Fees
One of the drawbacks when enrolling products on FBA is the expensive fees. Amazon calculates the cost of your products by their weight and dimensions. Not only that because you also need to consider the inventory storage costs. These are the costs you will incur when using Amazon’s fulfillment facilities to store your products.
- Comingling of Products
Since Amazon keeps items from different categories together, there is a good chance that your products will mix up with those from other companies. To avoid that, it’s best to label your items properly based on Amazon packaging requirements.
- Time Duration to Market your Products
When you send your items to fulfillment centers, Amazon will check the items one by one, share them with other fulfillment centers, and package them. In these processes, your products won’t be available to sell. The process needs to be finished first before they update the inventory on the website.
Fulfillment by Merchant (FBM)
- More Control Over the Packaging
Since you’ll be the one to handle the packaging, you can customize your packaging. Add some personal messages to it, so you can build relationships and trust with your customers. Moreover, with your full control over fulfillment, you can easily take into account corporate sustainability to help conserve the environment.
- Easier Tracking of Inventory
Since your products will be stored in your owned warehouses, monitoring them is more manageable.
- Ready to Sell
With FBM, you won’t need to wait weeks for your items to be available for selling, like on FBA.
- Fewer Fees
With FBM, you won’t worry about FBA fees, along with the inventory storage fees. All you will consider is the cost of shipping with your shipping partner.
- Competition with FBA Sellers
Since FBM listings don’t have Prime badges, chances are most customers choose to go with FBA listings, which means fewer sales.
Amazon is customer-centered. So, when a customer complains about your products, especially when the issue is connected to shipping, Amazon will side to with them, and you will need to pay for the refund and shoulder the fees for shipping returns.
Seller Fulfilled Prime (SFP)
- Amazon Prime Tag
Having Amazon Prime Tag is one that separates SFP from regular FBM. And since customers trust products with Amazon Prime tags more, you’ll have more sales.
- Similar FBM Benefits
Benefits from FBM like control over the packaging, inventory tracking, and product availability to market
- Highly Regulated
Because of the Prime advantages, the program has strict requirements for sellers to be eligible and maintain the eligibility.
- Fulfillment of Increasing Orders
Fulfilling the orders can be difficult when the volume keeps on increasing—knowing that you also have to keep up with Amazon Prime requirements.
Prime products can offer next-day shipping. While it’s beneficial for the customer, it can be costly to the seller.
Now that we know how the fulfillment options work, we can say that FBA is a better choice if your business has high sales velocity, problems with logistics, and doesn’t have a warehouse to store your products. Meanwhile, FBM is feasible for business starters with a limited budget, but with sufficient space for their items.
The scale of your E-commerce business and the type of products you sell are two things to consider when choosing a fulfillment option. And with the knowledge of how FBM and FBA work, selecting one to support the growth of your business will be much easier.