Amazon is the world’s largest e-commerce site, and its U.S. product sales alone are expected to exceed $367 billion in 2021. With close to 200 fulfillment facilities across the U.S., the company also operates the country’s largest fulfillment network. Given those statistics, it’s no wonder more than half of businesses selling through Amazon use the company’s Fulfillment by Amazon program (FBA).
FBA offers the same services as a third-party logistics company – storage, picking, packing and shipping, and customer service – with the added benefits of displaying the Prime logo and providing free, two-day shipping on “eligible orders” (as defined by Amazon).
While this combination has undeniable appeal, Fulfillment by Amazon has downsides that make it worthwhile to at least consider partnering with a third-party logistics company (3PL) to fulfill Amazon orders through the Seller Fulfilled Prime program, as well as orders from your other channels. Here are just a few of the more critical issues you should think about.
Surprisingly high costs.
FBA’s enormous (and growing) network is expensive to maintain, and you pay for it. According to Amazon’s website, all FBA fees are scheduled to increase on June 1, 2021. And they historically have gone even higher during the months of November and December.
Then there’s the program’s Inventory Performance Index (IPI). If you have products that don’t move as quickly as Amazon thinks they should, you’ll be hit with higher storage rates and, in some cases, storage limits for that inventory.
Even your inbound shipments to Amazon’s warehouses can be subject to extra costs if they don’t meet Amazon’s strict requirements for pallet configurations, labeling, barcoding and the like.
Plain vanilla pack-outs.
FBA-fulfilled products arrive in Amazon-branded packaging (which promotes Amazon’s brand, not yours). You can’t specify materials, sizes, shapes, labeling, inserts or other custom packaging options that add pizzazz to the customer experience and put your company front and center. Your only option: pay more to have Amazon ship your order in a plain brown box.
Lack of flexibility and live support.
Everything about the Fulfillment by Amazon program is highly structured and, for the most part, handled electronically. It is a very well-oiled machine. As long as everything flows within contractual parameters, you’re good. But stuff happens and, sooner or later, you’re going to have an issue or unplanned special request – like an inbound truck that needs to be received quickly. When you do, you’re going to have a hard time reaching a live person who can actually do something about it.
No B2B/bulk fulfillment capabilities.
If your business only sells direct to consumers, FBA may be a good option over having your own shopping cart and website. But if you plan to ship in bulk to retailers or through multiple channels, you will need a second fulfillment option – either in-house or 3PL – adding complexity to your supply chain.
Inherent conflicts of interest.
While selling on Amazon gives your products wide visibility, it’s still Amazon’s platform. Amazon products that compete directly with your products will appear first in their search results. The Fulfillment by Amazon program also gives the company access to your proprietary data – information about product sales, features and pricing they can use (and have used) to develop competitive offerings.
What are your options?
The FBA program is a good choice for smaller businesses with lean staffs that don’t mind trading flexibility and personalized service for fast, consistent fulfillment. But larger companies (maybe 10,000 orders or more per month across all channels) that are looking for a more customized experience, predictable costs, true multi-channel fulfillment capabilities and rapid shipping may want to look at the 3PL option. A firm like Amware Fulfillment has a national warehouse network that, while it can’t approach Amazon’s network in terms of proximity to customers, can handle two-day shipping to most US locations.
Unlike working with Amazon, with Amware you’ll be partnered with fulfillment experts who will take time to learn your business right from the start to ensure that our solution meets your specific objectives. In essence, the Amware team becomes part of your team, with everyone aligned around the same goals. You get the best of both worlds – the fast, efficient fulfillment capabilities of a national fulfillment leader, plus the culture and customer-centric focus of a true business partner.
To discuss alternatives to the Fulfillment By Amazon program for your order fulfillment needs, Contact Amware to start a discussion.
