Sellers fundamentally have two Amazon shipping options: give Amazon control of fulfillment or do it yourself.
- Fulfilled by Amazon (FBA): Amazon controls storage of your products, packaging, shipping and returns.
- Fulfilled by Merchant (FBM): By contrast to FBA, the seller owns warehousing, fulfillment and returns.
- 2a. Seller Fulfilled Prime (SFP): A subset of FBM but the seller gets the Amazon Prime tag and all of its requirements.
There’s a great deal of nuance to understanding each option and what business considerations to account for when calculating your ROI. We’ll dive into those pros and cons next and how that intel can inform a winning fulfillment strategy.
Pros and Cons of Amazon Fulfillment Options
- Fulfilled by Amazon (FBA)is a popular choice for many sellers and for many good reasons. However, FBA has some downsides that merchants should be aware of before they set it and forget it.
Coverage: Access to Amazon’s logistical network across the U.S. and globally is an enormous benefit to sellers. For smaller businesses, this coverage opens up a world of opportunity to sell products to customers both nationally and internationally without incurring significant overhead costs.
Shipping Speed: Because of that massive coverage, Amazon can afford to offer next day and in many places same-day delivery.
- Shipping Cost: For standard size products, FBA can’t be beat on price. It’s the cheapest option the majority of the time. The lighter your products, the greater the savings in shipping.
- Entry Fees: FBA takes a lot of the burden off sellers but it comes with a price tag. Sellers must prepare their items for Amazon following strict and complex guidelines. Next, sellers must ship their products to Amazon — an often neglected price to pay for entry into the Amazon marketplace. These fees make it difficult for sellers to calculate a unit’s cost as you have to account for FBA preparation and inbound (to Amazon) and outbound (to customers) shipping.
- Time to Market: Amazon picks up, checks in, splits and shares your products to their fulfillment centers. Your products aren’t available to sell on Amazon until that process is completed. The lead time to get into the Amazon network can mean you’re out of stock for two weeks or more. If that’s the case, and with no backup option to fulfill, Amazon can and will remove your product listing, costing you sales during that down period.
- Control: Sellers give up a good deal of control with FBA. For some, it’s worth the price, but for other sellers, losing that direct contact with customers is a big disadvantage. When you don’t handle returns directly, you may miss important product insight and the chance to win that customer over at a future date. With the lead time required to get into the market, sellers also forfeit control over their inventory’s packaging and the opportunity to upsell with offers inside the box.
- Fulfilled by Merchant (FBM)puts sellers in the driver’s seat while benefiting from the reach and scale of the Amazon marketplace.
- Ready to Sell: Managed on your own, your products are always live and ready to sell immediately. There’s no lead time waiting for Amazon to receive and process your products, nor additional preparation time and shipping fees to get products into the Amazon network. This immediacy also benefits ecommerce businesses with expiration dated products. You can shift your promotion strategy to sell those items closer to expiration faster without potentially throwing products away.
- Shipping Flexibility: With FBA, you have no choice in shipping costs or carriers. Although FBA will win out on price for most products, non-standard (e.g., heavier, larger) products may see greater efficiencies (i.e., cheaper) on FBM shipping. With more carrier options at your disposal, you also don’t need to have warehouses everywhere — a major advantage over Seller Fulfilled Prime (SFP).
- Control: Storing and fulfilling on your own means total transparency and control over your inventory and customer experience. You communicate directly with customers via fulfillment and returns, and gain insights that you may not be privy to otherwise. Managing supply also works in your favor as you won’t lose time (and potentially your listing) waiting on Amazon to restock your products.
- Amazon Prime Bias: The halo effect of the Amazon Prime tag benefits ecommerce sellers far beyond the guaranteed shipping date. Consumers trust the Prime tag and that sentiment extends to the brands that display Prime status.
2a. Seller Fulfilled Prime (SFP) is a type of FBM that may seem like the best of all worlds, as it combines the pros of Fulfilled by Amazon (FBA) with the Prime tag. But as with all Amazon fulfillment options, SFP also has some distinct disadvantages.
- Amazon Prime Tag: What is a con for FBM is the main selling point for SFP. SIB data shows that Prime drives sales up to 50% more, plain and simple. Consumers trust it and equate that trust with reliability and quality, whether right or wrong.
- Ready to Sell: Same as FBM.
- Highly Regulated: For all the Prime advantages, the program has steep requirements for sellers. Amazon controls shipping on every single order to ensure two-day delivery to customers. A seller must meet delivery speed targets, defined as “two-day or less” product page views of 55% for standard products and 30% for oversized products; while one-day shipping requires 20% for standard size and 5% or more for oversized items.
- Currently Unavailable: Amazon is not accepting sellers into SFP at this time. Ecommerce businesses can sign up to join a waitlist but there’s no further information on when and if an opening will become available. Further, Amazon is in the driver’s seat and could choose to sunset the program, impacting all those who rely on the service.
- Expensive: SFP is complex operationally for ecommerce businesses and can cost far more than FBM in overhead. For example, Sellers must have coverage across the U.S. in order to meet Amazon’s SFP requirements for standard-size products. If you need to ship to the West Coast but you’re based in Baltimore, expect to pay more as Amazon controls which carriers can fulfill that delivery. In addition, sellers are required to commit to weekend delivery and pickup options. This can translate into considerably higher costs to fulfill products if Amazon requires you choose UPS Ground versus a cheaper option from USPS.
Amazon Fulfillment Strategy
With FBA as your core fulfillment option, you benefit from Amazon Prime and the halo effect it has on sales.
- With FBM as backup, you’ll never be out of stock or delisted on Amazon. As soon as your FBA runs out, you can shift to FBM with the same products under a different SKU and even a slightly higher price.
- Once your FBA is replenished, you’re back in business with Amazon Prime shipping and incur zero delays or lost sales thanks to FBM.
- IPI problems might lead you to needing to do more FBM due to storage issues
- Q4 Amazon logistic deadlines, absurd storage fee increase, and lengthy wait times might make FBM a better strategy.