Commerce Rev

Which Amazon Fulfillment Method Should I Use?

There are many ways to walk the path to success in the Amazon marketplace. Many sellers employ various strategies with different degrees of success. Fulfillment method is one area in which highly different strategies provide benefits depending on the specific company’s needs. Amazon Sellers are presented with a choice between Fulfillment by Amazon (FBA), Fulfillment by Merchant (FBM), or Seller Fulfilled Prime (SFP). Choosing the right method for your business can have a big effect on profitability and Amazon success.

What are other sellers doing?

Amazon FBA Fulfillment Metrics

2020 State of the Amazon Seller | junglescout.com/amazon-seller-report/

The choice of fulfillment method does depend highly on business model, but almost all Amazon Sellers incorporate some form of FBA into their product shipping mix. In 2020, 94% of Amazon Sellers use FBA to fulfill at least some of their products, and 34% use Fulfillment by Merchant because it better suits their needs. However, almost 2/3 of Amazon Sellers use FBA exclusively while merely 6% use an FBM only strategy. Below, we look at some of the reasons for and against choosing either FBA, FBM, or a mixture of both.
FBA graphic

Fulfillment by amazon

Fulfillment by Amazon means that you, the Seller, send your products to an Amazon warehouse and they take it from there. Amazon assumes all the responsibility for ensuring that your product arrives on time to the customer. FBA also reduces some of the headache associated with customer returns, because Amazon handles that process on your behalf. Using FBA automatically makes the Seller eligible to win the Buy Box; FBA is also a great option for Sellers that lack their own warehouse or have otherwise limited storage space.

Fulfillment by Amazon and automatic Buy Box eligibility sounds like a win-win for Sellers

If the biggest reason to choose FBA is the guaranteed Prime eligibility, then high Amazon fees and FBA storage rates are the biggest argument against using FBA. Several other reasons exist that Sellers should bear in mind when considering FBA for one of their products as well, these reasons can include:
  1. No Seller control over fulfillment process
  2. Shipments sent to FBA must adhere to time consuming policies (i.e. individual labels)
  3. Can be difficult to track inventory and maintain optimal stock levels throughout the year
  4. Unable to customize package design or add-on (like a brochure or coupon)
  5. Can be difficult to prove Amazon’s fault over lost or damaged products
Receipt and Put Away

Fulfillment by Merchant

Choosing FBM comes with a lot more freedom than its FBA counterpart. Sellers are able to gain total control over the storage and shipping process, so you are never in the dark about the exact status of your valuable items. Amazon is liable for damage that it causes to your products in FBA storage and for lost items and will reimburse Sellers, but it can sometimes be difficult to prove that the damage or lost items were a result of an Amazon mistake. FBM gives you the option to incorporate more of your brand identity into your products and packaging. FBM usually saves the Seller money, but it doesn’t eliminate the costs of product storage and shipping, and may not always be cheaper then FBA.

Fulfillment by Merchant gives you total control and may save money, but you will not be eligible for the Buy Box unless you qualify for Seller Fulfilled Prime

Seller fulfilled prime graphic

Seller Fulfilled Prime

For Sellers that can offer their own high-quality fulfillment, Seller Fulfilled Prime may offer the best of both worlds. Seller Fulfilled Prime is a form of FBM that allows your business to be eligible for the Buy Box, however, Seller Fulfilled Prime isn’t the answer to every Seller’s prayers. Only 16% of Seller’s were previously able to meet the 2-day shipping standard required by SFP, leading to changes coming from Amazon that will officially go into effect on February 21, 2021.

Seller Fulfilled Prime is a great option for certain companies, but the hassle may not be worth the reward to every Seller

  1. Sellers will no longer be able to specify zip codes eligible for fast shipping and must be able to provide 2-day shipping nationwide
  2. All merchants using Seller Fulfilled Prime must now offer Saturday delivery and pick-up.

www.amwarelogistics.com/blog/changes-to-seller-fulfilled-prime

Which is best for your Business?

Every fulfillment option comes with unique benefits and challenges. We recommend choosing a fulfillment method on an individual product basis. Below are several factors to consider when deciding which method is best for your product.

  1. Product Dimensions
    • Amazon’s FBA pricing structure does not benefit large or heavy products. Choosing FBA for bulky items may reduce your profits through storage and fulfillment fees.
  2. Product Popularity
    • Popular items that turn over quickly will improve your inventory score and won’t incur as many storage fees. Slower moving items may be cheaper to fulfill by merchant.
  3. All Costs and Fees
    • FBA fees can be intimidating, but Sellers considering FBM should also bear in mind the cost of storage, shipping, packaging, and labor to fulfill their own products. Products fulfilled by merchant that do not qualify for SFP may sell slowly due to the loss of the Buy Box, resulting in reduced revenue.
  4. Customer Reviews
    • Shipping speed and quality can heavily influence customer feedback. Amazon Sellers using FBA have less control over the customer experience, but they also have less to worry about when it comes to negative feedback.
Amazon Sellers needs to carefully consider all these factors when deciding on fulfillment. We can’t tell you exactly which to choose, but we are here to offer advice or even take the hassle out of your fulfillment with our 3rd Party Seller Fulfilled Prime eligible warehouse. Please contact us and let us help you find the optimal method for your business so you can focus on maintaining profits.
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