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 advantages and disadvantages of Seller Fulfilled Prime vs FBA to help you make the best possible decision for your company. Let’s start with the FBA service.
Amazon FBA Pros and Cons
With FBA, Amazon handles almost everything for you, including the sorting, storage, shipments, customer service and more. FBA can be very convenient and allow you to get your products in front of more potential customers, but the process certainly comes with some challenges. Below we’ve outlined some things to consider before selecting FBA.
Pros for FBA:
- First off, when it comes to online retail activity, the Amazon Marketplace accounts for almost half of every dollar spent in the U.S., so it’s a great place to sell your product. The marketplace allows you to use Amazon’s vast distribution network and two-day shipping.
- Leverage Amazon’s infrastructure: Amazon has 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—especially at such a low cost, but by using FBA, sellers can take advantage of Amazon’s large-scale resources.
- Amazon customer service: Amazon also takes care of customer service for sellers that use FBA, handling customer inquiries about products, shipping, returns and more.
- Amazon offers relatively transparent fulfillment fees
- FBA includes international fulfillment if you sell in different countries
- FBA offers storage, packing, labeling and shipping services, so you don’t need to worry about it.
- Access to Amazon Prime members: Unless a seller can meet Amazon’s strict Seller Fulfilled Prime requirements, products 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. This is hugely important because Prime members spend almost twice as much as non-Prime members annually!
Cons for FBA:
- FBA can be very expensive, as Amazon charges for every step of the order-fulfillment process: picking and packing, handling, storage, returns and customer service. Additional charges may apply for seasonal peaks, oversized products, long-term storage of inventory in Amazon warehouses, and products requiring special handling, such as garments.
- Inventory management is crucial, and the burden is placed on the merchant.
- Your inventory is score-carded, and your fees may increase if inventory ages or does not meet the turn requirements by Amazon.
- Inventory and storage fees are high and increase 3X during peak as represented on the chart “Monthly Inventory Storage Per Cubic Foot” below.
- Amazon Weight and Dimensions defined in the table “Weights and Dimensions for Packaged Items” below.
- 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.
- Once those requirements are met, you might think an FBA user would be home free, but this is not necessarily the case. Smaller merchants need to think long and hard about whether they can protect their brand identities while selling under the Amazon umbrella. All orders fulfilled by FBA are shipped 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.
- You may need to have two inventories, one with Amazon and one with another provider to keep storage costs lower.
- 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 starts 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|
|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″|
Seller Fulfilled Prime Pros and Cons
Seller Fulfilled Prime can be a great alternative for businesses that have their own warehouses or access to a warehouse through a third-party logistics company and the resources to meet Amazon’s criteria to qualify. It allows access to the same pool of people that FBA does at a lower cost.
Pros for Seller Fulfilled Prime:
- Amazon Seller Fulfilled Prime SFP 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.
- Amazon SFP orders will display free one-day shipping and free two-day shipping messaging, making Prime customers more likely to make repeat and multiple purchases.
- Amazon will handle post-order customer service on your behalf, including order tracking, refund requests and submit returns through Amazon.com.
- 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.
- Access to the Amazon 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 Cart”, their default option is to buy the product from you.
- 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 storing your inventory at your own warehouse or your 3PL partner.
Cons for Seller Fulfilled Prime:
- In order to use SFP, sellers must prove to Amazon that they can meet the company’s strict performance standards for high seller ratings. These standards include a 99 percent on time shipping rate, premium shipping options and agreeing to Amazon’s returns policy.
- Customers have come to expect free one and two-day shipping on Amazon and this convenience comes at a cost. You need to be prepared for these costs and potentially limit how far you can ship orders with Prime deliveries to avoid overspending on shipping costs.
- You need to fulfill orders consistently on time in order to meet the SFP standard of a 99% on time rate. As your business continues to grow, this can become increasingly difficult, particularly if you are scaling your business. The inability to efficiently plan can be fatal to your growth.
SFP tends to work best for sellers who have the infrastructure and capabilities to pack and ship products quickly. For sellers without their own fulfillment centers or warehouses, or facilities 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.
Deciding which Amazon Seller option is the best for you is a very important decision. It’s vital to your success selling on Amazon and ultimately to the success of your business. When looking at the options, it’s important to determine which one is more practical for your business needs. We know this can be an important decision for your company, so if you have any questions about selling on Amazon please feel free to contact us and read more about additional Amazon shipping options.
Interested in learning more about our ecommerce fulfillment methods and capabilities? ITS Logistics knows ecommerce fulfillment and can help with expert advice and unparalleled service.