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How and why to diversify your Amazon fulfillment

This article is a recap of a joint webinar between Deliverr and Teikametrics. View the webinar recording below.

The dramatic upheavals in eCommerce marketplaces this spring have highlighted the importance of flexibility and diversification in all aspects of selling on online channels, including fulfillment strategies. Brands need to have a strong understanding of all their fulfillment options and how those choices can impact their business. In this webinar recording, Deliverr and Teikametrics team up to provide you both strategic and tactical guidance on fulfillment methods, the benefits of fast tags, and how delivery time interacts with sales and advertising performance.

Highlights

FBA advantages and disadvantages: FBA has many advantages. Amazon handles shipping, returns, and customer service for you, you’ll get fast delivery times and qualify for Amazon Prime, customers trust Amazon’s name, and you don’t have to manage storage space. However, it also comes with disadvantages. It comes with storage and fulfillment fees, some lack of transparency around inventory tracking, there’s a potential for co-mingling inventory within Amazon warehouses, you hand control over to Amazon, and there are limitations to multi-channel fulfillment through Amazon.

FBA during COVID-19: The fulfillment world was a rollercoaster starting March due to COVID-19. FBA restricted inbounds, and even for essential items there were inbounding quantity limits. In April, Prime deliveries started taking up to 1 month for projected fulfillment times. Shortly after, FBM listings began beating FBA listings for the buy box if they had faster listing tims. Recently, we’ve started seeing Prime fulfillment times improve and inbound restrictions relax.

Benefits of an asset-lite network: Deliverr encountered similar logistics issues, but one unique component to the Deliverr model is we don’t own warehouses. Instead, we work with a network of warehouses that can expand and scale with demand. As a result, Deliverr continued to accept all inbounds and was able to maintain 2-day delivery (30-40% of the USA) with our network of warehouses. Between April and May, Deliverr was able to double capacity and maintained 93-95% on-time delivery.

Reasons for fulfillment diversification: It’s important to have different fulfillment options to create redundancy in your fulfillment systems. It’s very possible we’ll see what happened in March and April again with a second wave, and you want to build in backups for inventory (if they run out of FBA) and fulfillment options.

FBM and FBA listing pairing

Many merchants created an FBM listing for every FBA listing, initially for COVID-19 disruptions, but are now incorporating this practice into their overall strategy.

We are seeing many top sellers do this to have backup inventory, so their listings stay live even if they run out of FBA. Even more interestingly, by doing this they can better capture non-Prime shoppers. Since COVID-19 drove even non-Prime users to shop online, this is critical.

Non-Prime users have to pay shipping for items under a certain amount. As a reference, the sellers we saw used this strategy for items under $25. Merchants would create FBM listings $0.01 cent higher than their FBM listings to avoid violaing any rules on Amazon, and then enabled the FBM listing with free premium shipping. That means that non-Prime users could get free shipping for items through the FBM listing, and not the FBA one. Around 1/6th of all Amazon volume is non-Prime, which means this is a big opportunity that not many merchants are tapping right now.

Multi-channel benefits: By adding more fulfillment options such as Deliverr, you get the benefit of multi-channel. You can diversify your income streams, have a backup if one channel goes down, and multiply your buyer base since each channel attracts buyers differently.

Ad setup for multiple fulfillment strategies: If you have multiple SKUs or different fulfillment methods under the same ASIN, make sure you advertise all of them. If you have different goals for FBA versus FBM listings, then you should advertise them in separate campaigns.

How advertising efficiency is impacted by delivery times: Faster fulfillment means you’ll see an organic lift in conversions, drive more sales, and as a result it’ll impact advertising efficiency.

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