How To Choose the Best Amazon Fulfillment Option for Your Business
Choosing the best Amazon fulfillment option for your Amazon business is critical. It has an impact on everything, including customer satisfaction, brand perception, and profitability. With so many Amazon fulfillment options available, each with its own set of benefits and drawbacks, it’s important to determine which one best matches your business objectives and operational abilities.
This article dives deep into the three main Amazon fulfillment options accepted by Amazon: Fulfillment by Amazon (FBA), Seller Fulfilled Prime (SFP), and Fulfilled by Merchant (FBM). We’ll explore the pros and cons of each to help you make an informed decision.
Choosing the best Amazon fulfillment option for your business doesn’t have to be difficult, SPExpress is your strategic 3PL partner in Canada.
At SPExpress, we offer efficiency, scalability, and comprehensive shipping and warehousing solutions to businesses of any size, easing the burden on businesses. Get in touch with us right now to find out how our fulfillment and warehousing services may help your company. Don’t let inventory problems ruin your company; work with us to find dependable, effective solutions that give you more control. We are ready to take your Amazon fulfillment game to new levels.
Contact us today to learn how we can assist you with your inventory management and order fulfillment strategies. Together with our experts, you can start on the path to reliable and efficient inventory management right now.
How To Choose the Best Amazon Fulfillment Option for Your Business
Amazon Fulfillment
Amazon’s domination in the e-commerce sector is undeniable. Recent statistics show that Amazon accounted for 80% of marketplace sales, 40% of e-commerce sales, and 4% of retail sales in the United States by 2023, and Amazon’s retail e-commerce market share in Canada is over 40%.
A key element in this equation is catering to Amazon Prime subscribers. These premium consumers spend an average of approximately $2,000 each year on Amazon, compared to $500 for non-members. With Prime memberships exceeding 100 million, entering this market can greatly increase your sales potential. Targeting Amazon’s most valuable customers—Prime members—is an important factor to consider. Prime members spend much more money on Amazon than non-Prime members, making them an extremely desired client group.
For merchants, this represents tremendous potential to access a large customer base. However, success on Amazon is more than just listing products; it’s also about delivering them efficiently and affordably.
Fulfillment by Amazon (FBA)
FBA is a comprehensive fulfillment service where Amazon manages your inventory in its vast network of fulfillment centres. They handle picking, packing, and shipping orders directly to your customers. While you’re responsible for associated fees, including storage and fulfillment, FBA offers several advantages:
Pros of FBA:
- Leveraging Amazon’s Expertise: Sellers can leverage Amazon’s world-class operations and huge fulfillment network. This allows you to focus on building your business rather than operating your warehouse.
- Prime Eligibility: FBA products automatically qualify for Prime shipping, increasing visibility and appeal to Prime members. This significantly increases your chances of winning the coveted Buy Box and attracting Prime customers.
- Hands-Off Approach: Sellers can focus on other elements of their business while Amazon handles fulfillment logistics.
Cons of FBA:
- Cost Considerations: While Amazon boasts immense scale and operational efficiency, these advantages translate to higher costs passed down to sellers in the form of ever-changing storage and fulfillment fees. These fees can significantly impact your profit margins.
- Limited Flexibility: Once your products are shipped to Amazon, your control over them is reduced. You have less flexibility when it comes to selling on other channels and cannot readily customize packaging or add inserts. This can be restrictive for high-growth brands.
- Multi-Channel Selling Restrictions: Using FBA inventory for non-Amazon sales channels might be challenging.
Seller Fulfilled Prime (SFP)
SFP allows you to manage storage and fulfillment yourself, either at your own facility or through a third-party logistics (3PL) partner. However, you can still offer Prime benefits like free, two-day shipping to Prime members and retain the coveted Prime badge on your listings.
Pros of SFP:
- Prime Badge: Products qualify for the Prime badge, which increases exposure to Prime members.
- Complete Control: Maintain complete control over your inventory and fulfillment process, resulting in improved cost visibility and management. You can use 3PLs to further reduce costs.
- Brand Experience: SFP allows you to manage the whole customer experience, including branding on packaging and promotional materials. This promotes brand recognition and repeat sales.
- Inventory Flexibility: Maintain control over your inventory. This is crucial for sellers, who may receive large orders from retailers or experience seasonal sales spikes.
Cons of SFP:
- Strict Requirements: Sellers must achieve strict performance measures in order to keep SFP status.
- Higher Shipping Costs: Sellers are responsible for covering expedited shipping costs associated with Prime.
- Operational Challenges: Meeting Amazon’s strict Prime fulfillment KPIs might be challenging for both you and your 3PL partner. In addition, you will be responsible for incurring the expedited shipping expenses associated with Prime membership.
- Limited Support: Amazon offers less support for SFP sellers compared to FBA sellers.
Fulfilled by Merchant (FBM)
FBM allows you to manage your own inventory and fulfillment entirely. This involves processing orders, managing returns, and working directly with customers, all from your own facilities or with a 3PL partner. Unlike FBA and SFP, FBM merchants are not granted the Prime badge.
Pros of FBM:
- Complete Control: Sellers have full oversight of inventory and the fulfillment process. Maintain complete control over your fulfillment costs, allowing for potential cost savings.
- Cost Management: Potential for lower fulfillment costs, especially for larger or heavier items.
- Flexibility: It is easier to manage inventory across multiple sales channels.
- Brand Experience: Able to customize the customer experience by managing packaging, marketing materials, and branding.
Cons of FBM:
- No Prime Badge: FBM listings don’t qualify for Prime, potentially reducing visibility and sales is the most significant disadvantage. Without it, your listings may be overlooked by Prime members, a crucial customer segment on Amazon.
- Operational Burden: Managing storage, packaging, shipping, and returns may be time-consuming and resource-intensive, particularly for businesses with limited experience or high order quantities.
- Competitive Disadvantage: Products may be less attractive to Prime members compared to Prime-eligible listings.
Choosing the Right Amazon Fulfillment Option for Your Business
While we’ve covered the main Amazon fulfillment options, it’s necessary to think about various factors before making a decision. Choosing the best Amazon fulfillment option depends on a variety of elements specific to your business, including:
Product Characteristics: The size, weight, and value of your products can all influence the best Amazon fulfillment option. Consider your products’ size, weight, and any specific handling requirements. Are there any seasonality or demand fluctuations?
Sales Volume: Your expected sales volume will influence your inventory management and fulfillment requirements, which include:
Current and projected order volumes
Growth trajectory and scalability needs
Profit Margins: Your profit margin is the ability to absorb fulfillment charges; moreover, evaluate if your prices are competitive in your product segment.
Operational Capabilities: What are your current in-house fulfillment capabilities and expertise, and is your business capable of fulfilling Prime shipping standards (for SFP)?
Multi-Channel Strategy: What is the value of selling on platforms other than Amazon, and what is your specific need for inventory flexibility between channels?
Customer Expectations: Determine your target customer’s expectations for shipping speed and delivery options.
Brand Control: Does your brand require customized packaging and inserts, as well as direct client communication preferences?
Your specific needs and business strategy will determine the best Amazon fulfillment option for you. Here’s a quick summary to help you decide:
FBA: Choose FBA if you prioritize convenience, fast shipping for Prime members, and are comfortable with Amazon managing your inventory. However, be prepared for potentially higher fees and less control.
SFP: Consider SFP if you want to offer Prime benefits and maintain control over inventory and fulfillment. However, be prepared to meet Amazon’s strict performance metrics and bear expedited shipping expenses.
FBM: Choose FBM if you have complete control over the fulfillment process and brand experience. Nevertheless, you will not have access to the Prime badge, which may limit your ability to reach Prime customers.
Alternative Options
If possible, trial multiple fulfillment options to compare real-world performance. You may consider:
Hybrid Approaches: Some vendors rely on multiple fulfillment strategies for different products or seasons.
Third-Party Solutions: 3PL providers can offer alternatives that combine the benefits of different Amazon fulfillment options.
SPExpress is committed to supporting your Amazon fulfillment needs, regardless of whether you choose FBA, SFP, or FBM. Our expertise and resources can help you optimize your fulfillment strategy and achieve your business goals.
At SPExpress, we offer efficiency, scalability, and comprehensive shipping and warehousing solutions to businesses of any size, easing the burden on businesses. Get in touch with us right now to find out how our fulfillment and warehousing services may help your company. Don’t let inventory problems ruin your company; work with us to find dependable, effective solutions that give you more control. We are ready to take your Amazon fulfillment game to new levels.
Contact us today to learn how we can assist you with your inventory management and order fulfillment strategies. Together with our experts, you can start on the path to reliable and efficient inventory management right now.
The best Amazon fulfillment option can significantly impact your business’s success, affecting everything from operational efficiency to customer satisfaction. While FBA gives convenience and Prime benefits, SFP and FBM provide greater control and flexibility. Assess your company’s demands, growth goals, and resources to determine which solution best corresponds with what you want to achieve
Remember that your Amazon fulfillment strategy isn’t set in stone. As your business grows, be prepared to analyze and change your strategy to make sure you’re continually optimizing for success in the fast-paced world of Amazon sales.
Read more:
Shift From In-House To Outsourced Fulfillment – When it’s Better & How to Do it Right
How Third-party Logistics Services Can Ensure E-Commerce Growth?
The Top 6 Reasons For Outsourcing in Supply Chain Management For Your eCommerce Business
At SPExpress, we offer services from order fulfillment to supply chain management, which includes freight forwarding, transportation, warehousing, picking and packing, inventory and supply chain management, and order fulfillment. We work closely with our customers to ensure their 3PL needs are being met properly. We understand how valuable working with a reputable 3PL provider can be and how it can help our customers focus on growing their businesses.