The Amazon Marketplace is a core part of many B2C eCommerce business models. Since a large portion of your current business is on Amazon, you would think that the logical choice for 3PL order fulfillment services would be Fulfillment by Amazon (FBA). But before you jump to that conclusion there are some major factors you should consider first.
What is often referred to as FBM or Fulfillment by Merchant does not necessarily mean the actual merchant will be processing and fulfilling orders placed on Amazon. Most eCommerce businesses that choose FBM are partnered with a 3rd Party Logistics company that provides order fulfillment on their behalf.
The term FBA can be misleading at face value. Essentially what it means is that a party other than Amazon themselves is fulfilling an order placed on the Amazon Marketplace. So unless you want to provide order fulfillment yourself, as an eCommerce business order you need to choose between 3PL FBM and FBA. Let’s delve into the top 5 reasons 3PL FBM is almost always the superior option.
Getting Started is Less Costly
Like many other aspects of FBA, the setup costs are pretty staggering. More than 37% of FBM merchants reported setup costs less than $1000. In comparison, more than 35% of merchants that opted for FBA order fulfillment stated setup costs were over $5000. That is over 5 times the cost and nothing to overlook when weighing your decision. This is also indicative of the additional costs of other FBA fees. Typically starting off with a 3PL FBM solution requires setting up your account and them shipping your inventory to the facility.
When it comes to business, time is money. The faster you can get your order fulfillment solution in place, the faster you can start making sales and focusing on making more revenue. Typically, more than half of merchants who chose FBM were able to get their first orders shipped within 6 weeks, versus less than half of those who chose FBA.
Less Restrictive Inventory Management
The first thing eCommerce businesses consider tends to be costs, but something that is often overlooked is inventory management. This is often stated as the main reason that merchants switch from FBA to FBM. The fact of the matter is Amazon restricts how much inventory you can store at their facilities on an SKU by SKU basis. This makes handling your logistics more costly and complex. Once your inventory is manufactured, you may need to store it elsewhere and slowly ship it to FBA facilities. That costs more and can make handling your supply much more complex than it needs to be. Whereas 3PL FBM merchants more often than not have more freedom regarding how much of each SKU they can store at their partner’s facilities.
Amazon fees tend to snowball. There are fees associated with every aspect of FBA from start to finish. The way these fees are applied is convoluted and variable making them hard to predict. This is the main reason why 7% more companies that sell on the Amazon Marketplace using FBM report more than $25,000 revenue per month when compared to those using FBA. This is why you want an order fulfillment partner with clear and transparent pricing you can understand and plan for accordingly to maintain your profit margins.
Maximize Sales with Expanding Sales Channels
Nothing can lead to more sales than expanding your sales channels. While FBA does offer multi-channel order fulfillment to a variety of sales channels they do not offer services for some of the largest online marketplaces like BigCommerce, Walmart, or eBay. This can really limit your sales channels options for expansion going forward. These limitations can really put a dent in your future revenue opportunities. It’s important that you confirm with your potential order fulfillment partner, whether it be 3PL FMB or FBA that they are ready willing, and able to provide order fulfillment for not just all your existing sales channels, but also ones that you may consider in the future.
Make no mistake about it, if you choose FBA each and every one of your orders will be shipped using Amazon’s iconic boxes and tape. But is this a good thing? Well, that all depends. This locks you into the cost of their packaging. Often you can bring down costs by providing your own packaging materials. Most FBM order fulfillment companies allow you shipping material flexibility. You can opt to use your own, with your unique branding on, or even have it provided by your partner or both. You will always have that option when you start and in the future. With FBA you will not. As a matter of fact, even if you sell a product directly on a website you own and operate, if FBA provides fulfillment, it will be branded with Amazon shipping materials, which will drive your customer to the Amazon Marketplace. Your next orders may be placed on Amazon, which will mean you will be liable for selling fees. This should not be overlooked. Control your brand and keep your customers on sales channels that are the most profitable for you.
In-House Customer Support
This is often pitched as an advantage of FBA, but when you look at it, is it really? Whenever you sell a product on the Amazon Marketplace, their representatives will provide customer support, but that keeps these customers in the Amazon bubble. It doesn’t expose them to your brand of customer service and support. This is particularly important when it comes to growing a customer base and encouraging repeat sales. Taking contact with your customers out of your hands and placing it in the hands of a robust corporation that often sells your competitor’s products is not always the best idea. The hidden costs can be higher than a merchant will ever realize.
International Cross Marketplace Capabilities
Each Amazon Marketplace has its own associated FBA facilities. This is another overlooked restriction. Imagine having to manage inventory levels across multiple Amazon Marketplace facilities. This is a tall task. Having an FBM fulfillment partner presents the opportunity to store and ship all of your inventory at one facility and ship it anywhere regardless of which geographical marketplace or platform it has sold on. Managing your inventory will be simpler and more straightforward. And when your 3PL FBM partner uses software like 3PL Central, you can sync your inventory across all your sales channels and marketplace platforms. When an item sells out at your facility it will be indicated across all your channels, when that same item replenishes, it will be updated across all your sales channels. All automatically.
FBA Does Not Accept Returns Outside Amazon Marketplace
Although FBA may offer order fulfillment services to select sales channels other than the Amazon Marketplaces they will only handle returns for orders that were placed on their platforms. This as you can imagine can really convolute the process. This means if FBA provides fulfillment for an order placed on your website, they will need to send it back to you, or someone else. That can be really confusing for the consumer and make a lost sale even more costly. Imagine your customer shipping the item back to the sender, which in this case would be the FBA facility, they would refuse to process the return and return the product to your inventory. They would need to send it back to you directly. That is a lot of freight on a return. Meanwhile, 3PL FBM order fulfillment companies will accept and process your return regardless of which platform your product is sold on.
Streamlined and Flexible Logistics
If you’re looking for a fulfillment partner that is agile enough to meet the fluid and evolving logistical requirements of your business, you’re looking for a 3PL FBM partner. Your business is always changing, and you would be wise to choose a fulfillment provider that is flexible enough to grow and change along with you, no matter what direction you wish to take your eCommerce business. You need a partner that will be able to meet your demands, even the ones that are out of the scope of your original agreement. That is out of the question when you opt for FBA. This is another important factor to consider. Once again, it’s not just the needs you have today you should consider, but also the needs you may have in the future.
It’s easy to understand why FBM is the preferable choice for so many eCommerce companies. If you want to enjoy freedom, keep costs down, maintain your branding, and always remain open to exploring additional sales channels, you want to explore 3PL FBM services. All this and you still get the exposure associated with having your products on the Amazon Marketplace. This is an example of having your cake and eating it too.
Not only are companies like InterFulfillment are able to provide same-day order fulfillment for orders you receive on the Amazon Marketplace, but they can do the same for all your international sales channels. Before you commit to FBA for all the reasons above and more, it is strongly recommended you explore a 3PL FBM order fulfillment company first. More often then not, when you weigh all the pros and cons you will end up opting for 3PL FMB.