Is FBA or Seller Fulfilled Prime best for my company?

 

Over the past year there have been many articles written about the pros and cons of ecommerce fulfillment through Fulfillment By Amazon (FBA) or Amazon Seller Fulfilled Prime. Our goal is to break down the important details on both FBA and Seller Fulfilled Prime to help you make the best possible decision for your company.  Let’s start with FBA:

Fulfillment by Amazon Pros and Cons

Pros for FBA:

  1. First off, when it comes to online retail activity, Amazon accounts for almost half of every dollar spent in the U.S., so it’s a great place to sell your product. This will allow you to use Amazon’s vast distribution network and 2-day shipping.
  2. Leverage Amazon’s infrastructure: Amazon owns one of the most sophisticated supply chain infrastructures in the world, enabling them to ship products quickly and at comparatively low costs. Very few retailers or Amazon sellers can compete on this level—and to do so at such a cost, but by using FBA, sellers can take advantage of Amazon’s large-scale resources.
    1. Amazon customer service: Amazon also takes care of customer service for sellers that use FBA, handling customer inquiries about products, shipping, returns and more.
    2. Amazon offers relatively transparent fees
  3. FBA includes international fulfillment if you sell in different countries
  4. FBA offers storage, packing, labeling and shipping services.
  5. Access to Amazon Prime members: Unless a seller can meet Amazon’s strict Seller Fulfilled Prime requirements, a product must be fulfilled by Amazon. Prime members tend to gravitate towards Prime-eligible products, so as a seller, your products will be significantly more visible to Prime members if you use FBA—Prime members spend almost twice as much as non-Prime members annually!

Cons for FBA:

  1. FBA can be very expensive with Amazon charging for every step of the order-fulfillment process: picking, packing, handling, storage, returns and customer service. Additional charges may apply for seasonal peaks, oversized products, long-term storage of inventory, and products requiring special handling, such as garments.
  2. Inventory management is crucial and the burden is placed on the merchant.
    1. Your inventory is score-carded and your fees may increase if inventory ages or does not meet the turn requirements by Amazon
  3. Inventory/Storage costs are high and increase 3X during peak as represented on the chart “Monthly Inventory Storage Per Cubic Foot” below.
  4. Amazon Weight and Dimensions defined in the table “Weights and Dimensions for Packaged Items” below.
  5. Suppliers are required to adhere to strict standards of labeling, packaging and deployment of technologies.  All are part of a concerted effort by retailers and distributors to maximize fulfillment efficiency—and manufacturers are expected to do their part to make that happen.
  6. Once those requirements are met, is a user of FBA home free? Not necessarily. Smaller merchants need to think long and hard about whether they can protect their brand identities while selling under the Amazon umbrella. Orders fulfilled by FBA go out in boxes with Amazon’s logo. Increasingly, in the minds of many consumers, it’s Amazon that is the brand, not the actual maker of the product.
  7. You may need to have two inventories, one Amazon and one with another provider to keep storage costs lower.
  8. If you are thinking of expanding your product base by introducing new items, FBA can be an unforgiving—and very costly—partner. There is no grace period for you to slowly build up sales of your new products. With FBA, the meter is running right away. You will be charged long-term storage fees for all items that have been in Amazon storage for 181 days or more.
Monthly Inventory Storage Per Cubic Foot
Storage Type Standard Oversize
January-September $0.69 / per cubic foot $0.48 per cubic foot
October-December $2.40 per cubic foot $1.20 per cubic foot
Weights and Dimensions for Packaged Items
Product Size Tier Weight Longest Side Median Side Shortest Side Length + Girth
Small Standard Size 12 oz 15″ 12″ .75″ N/A
Large Standard Size 20 lb 18″ 14″ 8″ N/A
Small Oversize 70 lb 60″ 30″ N/A 130″
Medium Oversize 150 lb 108″ N/A N/A 130″
Large Oversize 150 lb 108″ N/A N/A 165″
Special Oversize Over 150 lb Over 108″ N/A N/A Over 165″

Amazon Seller Fulfilled Prime Pros and Cons

Pros for Seller Fulfilled Prime:

  1. Amazon Seller Fulfilled Prime allows sellers to ship their products directly to the end customer, cutting down on the cost per order associated with FBA, and increasing your profit margins, while still maintaining Prime eligibility. This option is particularly beneficial for sellers that sell large or slow-moving products.
  2. Amazon SFP orders will display free Two-Day Delivery messaging, making Prime customers more likely to make repeat and multiple purchases.
  3. Amazon will handle post-order customer service on your behalf, including order tracking, refund requests and submit returns through Amazon.com.
  4. The Today’s Deals page is one of Amazon most visited pages, and it features daily lists of discounted Prime products known as Lightning Deals. If you use Amazon SFP, you can earn the Prime badge and submit your products to be included in these lightning deals.
  5. Access to Amazon’s Buy Box—Products listed with Amazon SFP have an increased chance to be included in the Buy Box. That means that when customers click on “Add to Basket”, their default option is to buy the product from you.
  6. Most importantly, managing a range of orders across multiple e-commerce channels can be very complex. If you sell through different channels, Amazon SFP allows you have complete control over your inventory (and the costs involved) by holding your inventory at your own warehouse.

Cons for Seller Fulfilled Prime:

  1. In order to use SFP, sellers must prove to Amazon that they can meet the company’s strict performance standards for high seller ratings. As a result, SFP tends to work best for sellers who have the infrastructure and capabilities to pack and ship products quickly. For sellers without their own warehouses, or warehouses that may not meet Amazon’s high standards, partnering with a quality third-party logistics (3PL) provider is another way to get into the SFP program.

We know this can be an important decision for your company, so if you have any questions please feel free to contact Kasia Wenker, and let us help you out!

 

Interested in learning more about our ecommerce fulfillment capabilities? ITS Logistics knows ecommerce fulfillment and can help with expert advice and unparalleled service.