Whether you’re already selling on Amazon, or considering it as your next step, Amazon’s got stats: 150 million monthly unique visitors, 5 million sellers across the world, and more than 353 million products.
The decision to sell on Amazon is a no-brainer. The decision of how you fulfill your Amazon orders is a little more complicated – with the potential to impact conversion rates, profits, and ratings.
This guide looks at the Amazon fulfillment strategies for your eCommerce business – the pros and cons of each, and how to choose which one is right for your business.
Amazon fulfillment strategies
When selling on Amazon, there are two ways of fulfilling your orders:
Fulfillment by Amazon (FBA)
FBA is exactly what it says – you ship your orders to an Amazon warehouse, and Amazon handles the complete fulfillment process for you, from picking right through to returns.
Merchant fulfillment (also referred to as Seller Fulfilled Prime or SFP) is the opposite. You as the seller are responsible for picking, packing, and shipping orders yourself or by using a third-party fulfillment partner.
Before delving into how to pick between the two, let’s take a deeper look at the differences and advantages of both.
Fulfillment by Amazon
There are three main advantages to adopting an FBA fulfillment strategy.
1. It saves you time
Having Amazon fulfill your orders means that you’re spending less time in the warehouse prepping and shipping orders, and more time concentrating on your business. You’re not, however, completely off of the hook. Time (and expense) is still required for preparing and shipping your orders to Amazon’s fulfillment centers.
2. It improves your delivery standards
You started your eCommerce business because of your entrepreneurial skills – not your shipping expertise. Amazon holds high standards when it comes to deliveries (they’ve got a reputation to maintain) from the way the items are packaged, right through delivery speeds. But, mishaps aren’t unheard of. Large packaging for small products, missing deliveries, and items thrown over the backyard fence – relinquishing your control over the shipping process can have its highs and lows.
3. It automatically qualifies you for Prime
As an FBA seller, your products are automatically Amazon Prime-eligible – giving you access to Amazon Prime benefits including a wider and loyal audience, big spenders, and increased chances of winning the buy box.
4. It can be cheaper
FBA offers competitively good warehousing and fulfillment rates – with the added bonus that you don’t need to pay for warehousing staff. Fulfillment fees start at $2.41 and storage fees from $0.69. However, FBA sellers can get caught out by other high and unexpected charges including long-term storage, removal, returns processing, unplanned service, and multi-channel fulfillment fees.
Likewise, merchant fulfillment comes with many benefits and perks including:
Keeping your fulfillment in-house gives you greater control over your inventory, item handling, packaging, delivery speeds, and shipping carriers. Many Amazon sellers prefer to maintain this control to guarantee their customers quality deliveries, improving their customer lifetime value figures.
2. Cost savings
While FBA’s fulfillment and storage fees are competitively priced, as discussed you can be burnt by their other fees – fees that you can’t negotiate down. Merchant fulfillment gives you more control and options over your fulfillment costs, and can allow you to use one fulfillment service for all your marketplaces.
3. Amazon Prime
Since 2015, Amazon has allowed sellers using merchant fulfillment to qualify for Amazon Prime. Known as Seller Fulfilled Prime (SFP), those offering Premium shipping orders can complete an SFP trial to qualify for Amazon Prime benefits including the Prime badge, appearing in filtered two-day shipping listings, and increased chances of winning the buy box.
Note: Deliverr is no longer accepting new merchants for the Amazon SFP program. However, you can set up Deliverr to fulfill your standard FBM orders on Amazon, so you can manage all your fast shipping inventory in one central control room. Use our fulfillment calculator to compare rates!
How to choose the Amazon fulfillment strategy right for your business
FBA and SFP both come with advantages and considerations and choosing between the two can feel like a bit of a coin-flip. But, for certain eCommerce businesses, the decision is more clear-cut, especially if:
You sell large and heavy items
FBA is expensive for large and heavy items. Not only do you pay a premium for both delivery and storage, but if these items are also slow-moving (which they usually are), you get stung by long-term storage and, if necessary, removal fees. Keeping these items in-house increases your margins and reduces the need for you to cut prices to sell quick and avoid Amazon’s fees.
You sell on multiple sales channels
If you sell, or plan to sell, on multiple sales channels, FBA creates an added difficulty. Amazon charges a premium for multi-channel Amazon fulfillment, cutting into your profits. And some online marketplaces don’t allow FBA shipments. The alternative is ring-fencing stock by sending half to Amazon and keeping half in your warehouse, which not only complicates things but restricts your potential sales. Merchant fulfillment avoids these issues, allowing you to ship (and profit from) orders no matter what the sales channel.
You want to build a brand image
Those serious about scaling their eCommerce business and building a brand may find themselves restricted by FBA. Orders fulfilled by Amazon are shipped in Amazon packaging, complete with an Amazon receipt inside. The recipient associates their delivery with Amazon, removing you from the equation. Merchant fulfillment, even in unbranded packaging, takes the focus away from Amazon and gives you a chance to promote your brand and build a direct customer relationship.
A third strategy
Many sellers like the idea of FBA and delegating the hassle of logistics, but they don’t like the idea of handing over all of their control and business to Amazon. A third Amazon fulfillment strategy is combining merchant fulfillment with an outsourced fulfillment solution. You benefit from fulfillment expertise, lower costs, and process efficiencies, while also maintaining visibility of your inventory, being able to sell on multiple sales channels, and meeting the speed metrics for SFP. Crucially, you can scale your business without worrying if your in-house fulfillment processes can handle more orders.
There are a variety of fulfillment strategies that you can adopt to meet your Amazon orders and qualify for Prime. FBA is a great service, especially for those just starting out on their Amazon journey, but becomes increasingly expensive as you begin to scale. Merchant fulfillment allows you to retain control (and profits), while also being Prime eligible – especially when using an outsourced fulfillment partner to help you ship items quickly.
Ultimately, the decision comes down to which strategy will guarantee your customers fast and affordable delivery, while also being scalable, keeping your fulfillment costs low, and not taking up too much of your time.