Consumers always have and will always prefer a seamless shopping experience whether they are shopping in on offline brick and mortar store or online from a mobile device or desktop. This has made omnichannel a top priority for retailers. With businesses offering more sales and fulfillment options, inventory management has become even more sophisticated, making it the biggest hurdle retailers face in this modern age. Well, that’s not the only thing to worry about because when it comes to order fulfillment, they also have to deal with the costs and operations associated with logistics and warehousing.
So, what is Fulfillment by Amazon (FBA)?
Simply put, the premise behind FBA is ‘You sell it, we ship it’. Vendors can outsource the more tedious tasks related to order fulfillment i.e., picking, packing, and shipping. They can also minimize or do away with the costs related to warehousing. As a result, the vendors can sell more, thus enabling them to compete more effectively and grow faster. Fulfillment by Amazon ideally allows the retailers to take advantage of the robust Amazon’s logistics network. As with anything else on this planet, FBA has its ups and downs, which we shall discuss further in this read.
The Pros of FBA
Stress-free and Less Expensive Shipping
The shipping process can be a hurdle, particularly when dealing with hundreds or thousands of orders per day. Fortunately, with FBA, Amazon does all the hard work, from locating the goods in the warehouse, packing the orders, printing the shipping labels and sending them to the customers. This allows you as the retailer to focus on business growth oriented things and spend less time on logistics and warehousing. Also, the shipping is often cheaper compared to what you would incur if you were handling the process on your own.
Vendors that utilize fulfillment by Amazon get listed higher than those who don’t. Simply put, your products are more likely to appear on the first page of search engine results than a competitor who doesn’t utilize FBA services. This boosted visibility usually leads to more sales.
FBA vendors automatically qualify for Amazon Prime. That means Prime customers can get two-day free shipping on any product and standard customers can benefit from free shipping on orders above $25. This consumer part is vital as most of Amazon Prime subscribers use their membership exclusively for shopping online. People who shop on Amazon, particularly the Prime ones know, like and trust the company. They won’t have to do extensive research on your company as long as they use Amazon and know that you offer authentic products and excellent customer care.
A Simple Returns Process
If you have shipped products on your own, then you probably know how complex returns management can become, especially when selling through multiple facets and without the proper software in place. However, you don’t have to worry about that with FBA as Amazon handles the whole returns process from communicating with the consumer, receiving and inspecting the product, sending a replacement or issuing a product and putting the item back into inventory.
If you want to read more about Amazon FBA, then VatGlobal have a comprehensive piece on it.
The Cons of FBA
Limited Re-marketing capabilities and Brand Awareness
E-commerce vendors usually lack the opportunity to interact with their customers face to face. As such, they have to rely on customer data for marketing and brand awareness. By availing FBA, vendors miss out a lot of these opportunities. That’s because Amazon uses their Amazon-branded boxes to deliver orders and a non-public database to store consumer information. As a result, you don’t get the same recognition and exposure you would if you sold directly to your audience.
Amazon also holds retailers accountable for certain fulfillment by Amazon fees. These include order fulfillment fees, storage fees, weight handling fees and pick and pack fees. These charges are unavoidable and be hard to calculate for the most part. If you want to avoid making losses, you’ll have to calculate these costs in a precise manner.
Handling Split Shipments
Another common disadvantage with fulfillment by Amazon is managing split shipments to several Amazon fulfillment centers. These locations often reduce delivery times for consumers, but the process is not only inconvenient and time-consuming for the vendors, but it’s also expensive and hurt their profit margins.
As you can see, there are benefits and downsides to availing FBA for your business. Before making a decision, it is important to consider how both the pros and cons may affect your business or brand. Deciding on whether to utilize FBA or not boils down to how well you know your business. You need to understand your business model and then weigh the pros of fulfillment by Amazon against the cons. keep in mind that this decision can have a significant impact on the growth of your company, so take your time.
Ray is a manager at ECA Tech Inc. , Toronto's top Ecommerce software, website development and digital marketing company. He has 23 years of experience in the field of Ecommerce website, software and app development. Ray volunteered in numerous IT related free training courses all over North America and contributes articles on numerous blogs.