Fulfillment by Amazon (FBA): Is It Right for Your Brand?
Amazon has become the unquestionable leader of ecommerce and has changed the way consumers shop online. Because of its market dominance, many brands use Amazon as a channel for their online sales. But what about order fulfillment – who should brands trust to get their orders into the hands of customers? Some choose Amazon’s fulfillment service, Fulfillment By Amazon (FBA). While FBA is certainly bigger than other third-party fulfillment providers, that doesn’t mean it’s better or more cost-effective.
If you sell through Amazon and are on the fence about which fulfillment partner to work with, be aware that FBA does have its shortcomings. Opting for a third-party fulfillment provider could turn out to be the best business decision you make. Here are 6 reasons why:
#1 - Cost
You would think a highly-competitive sales machine like Amazon would offer highly-competitive fulfillment costs. Surprisingly, they often don’t. What other fulfillment companies charge for storage can be significantly less than what FBA charges. Another item worth noting is that FBA fulfillment and storage fees change frequently. Staying up-to-date on all the price adjustments can be challenging. For example, some of FBA’s 2017 pricing changes took effect on February 22. Changes to monthly inventory storage fees went into effect March 1. New fees for inventory placement service will go into effect on July 19. You get the idea. A lot of change leads to a lot of confusion. Brands that choose a third-party fulfillment provider outside of Amazon won’t have to sweat over frequent pricing changes. Besides higher storage costs, costs for picking and packing based on Amazon’s model can also be significantly higher based on order volume and type of item being sold.
A service that Amazon launched in mid-2015 does have potential to help Amazon sellers reduce their fulfillment costs. Until last year, Amazon sellers that wanted to have their products eligible for Amazon Prime needed to use FBA. Now, Amazon offers the Seller Fulfilled Prime Program. With this program, Amazon sellers can fulfill their own orders and still offer Amazon Prime. Of course, there are requirements for Seller Fulfilled Prime eligibility but it can be a good alternative for those sellers looking to reduce their FBA fees and fulfill their own Amazon orders.
#2 - Commingling
With warehouses all over the country, Amazon has the ability to get orders delivered fast. They pass this speed and efficiency along to FBA sellers by offering a commingling option. When sellers choose this option, they’re choosing to commingle their inventory. This means their product becomes interchangeable with the same product from other sellers for order fulfillment. This pooling together of products by Amazon can have hard-hitting consequences for the seller. Sellers no longer have control over the product received by the buyer – a knock-off or damaged item could be shipped in place of their inventory. If that happens, buyers are more likely to return the product and leave a negative review – ultimately damaging the seller’s reputation. FBA sellers need to carefully consider if the advantages of commingling outweigh the disadvantages.
#3 - Data
Of course, Amazon collects tons of data on the millions of transactions that take place on their site. Unfortunately for sellers, Amazon doesn’t share those business insights and customer data with third-party sellers. Look at just about any online Q&A forum for Amazon sellers, and you’ll see lots of questions about whether third-party merchants have access to Amazon data. And according to Amazon’s website, unsolicited communications with Amazon users, including marketing communications of any kind, are prohibited.
#4 - Scalability
The top goal for most any brand is to get more sales and grow the business. Sometimes those sales and big growth happen overnight. If a celebrity endorses your beauty product or clothing line on Instagram, you may find yourself with skyrocketing customer orders and a need to expand your sales into new specialty or retail markets. FBA can manage the fulfillment of other online sales channels; but beware it comes with a high cost. If your brand has big plans for growth (and why shouldn’t it), you want to be sure you choose a fulfillment provider that wants your business to grow and succeed as much as you do. They should be flexible, scalable and capable of working with you through unexpected situations that may arise.
#5 - Brand Experience
More and more brands care about having a ‘wow’ factor as part of their shipments’ packaging. They want customers to have a memorable, highly-branded experience – from the moment they see their package to the moment they open it and see what’s inside. That ‘wow’ experience might include a uniquely-colored envelope or box. Or the contents of the package could include a custom insert or product that is carefully wrapped in special paper. FBA can’t deliver this level of customization. They’re focused on processing and delivering orders fast. Their packing and shipping models don’t allow for customized options.
#6 - Customer Service
FBA’s customer service is best described as a one-size-fits-all approach. This approach doesn’t fare well for high-touch model accounts that often require personalized and responsive customer service with easy access to account reps who can answer questions and provide proactive recommendations. Getting fast, hands-on customer service with FBA can be challenging. Other third-party fulfillment companies will strive to deliver personal customer service to all their accounts, regardless of model. They’ll take time to understand your business goals and develop a customized fulfillment solution for your unique needs. You’ll likely have a dedicated account rep you can reach out to any time for support. With FBA, you might find yourself traversing through layers of CSRs before you reach someone who can help resolve your issue.
Pros and Cons
While Amazon can offer a huge customer base to brands, and sometimes even faster delivery times, their FBA service may not offer everything you need for your back-end fulfillment operations. So carefully weigh the pros and cons of FBA compared to another third-party fulfillment partner, and determine which solution makes the most sense for your business.
Contact PFC to learn more about the benefits we can deliver to your business when it comes to cost, data, scalability, brand experience and customer service. Call 1-800-493-7063 or contact us online.