Amazon e-commerce fulfillment: Which option is best for you?

FBA vs FBM: Which e-commerce fulfillment option is right for you?

By Nick Bartlett on September 29, 2021
You’ve developed your product, listed it on Amazon, found a customer base, and the orders have finally been placed. How about Fulfillment?

You’ve developed your product, listed it on Amazon, found a customer base, and the orders have finally been placed. Now, however, comes the difficult part: fulfillment.

In the ever-changing landscape of e-commerce, fulfillment — or, in simpler terms, getting goods to customers’ doors after an order has been placed — remains a constant source of stress for many businesses. 

Read About CBIP’s Global 4PL Logistics Services

Today, nearly 40% of shoppers say they’ll skip an order if it’s expected to take longer than a week to arrive. And when time is of the essence, you can’t afford any missteps.

The good news is that you have options for fulfillment and last mile shipping of your goods listed on Amazon.

Let’s take a closer look from a global e-commerce company’s perspective to see how each type of fulfillment works and what best fits the unique needs of your business best.

OPTION 1: FULFILLMENT BY AMAZON (FBA)

FBA PROS

Amazon fulfillment began in 2006, allowing small businesses to use its massive network of warehouses and shipping providers. Though its capacity to list goods grew exponentially, there wasn’t always a clear way to ‘fulfill,’ or get products to the customer’s door. Now, Amazon has integrated shipping with its listings through FBA.

In order to use Amazon fulfillment, e-commerce merchants pay two fees. The first is a which a fulfillment fee covering packing, shipping, and customer service in addition to a monthly inventory fee.

For companies listing their goods on Amazon, the selling points of FBA include:

  • Prime Shipping: These days, Amazon Prime alone accounts for roughly 200 million users worldwide. Sellers today often opt to have orders fulfilled by Amazon to keep up with the rising expectations of fast shipping that Amazon helped to establish.
  • Customer Service: retailers can access Amazon customer service, which is available 24/7 with a quick turnaround time (typically  2-3 days at a maximum).
  • Return Managementhandling returns can be a source of serious frustration for many retailers.  With FBA, Amazon takes over and handles returns for you.

If your company can follow Amazon’s guidelines and cover these costs, the integrated system allows you to begin sales quickly. Despite these advantages, though, there are still a number of other factors to take into consideration before deciding to fulfill exclusively through Amazon.

RELATED: How to Take Your E-commerce Business Global

FBA CONS

While any seller can opt to carry out fulfillment through Amazon, that doesn’t always mean it’s the right fit.

One reason is that Amazon uses a warehousing practice called commingling. Commingling refers to the practice of putting the inventory of different companies together in a warehouse.

While it can simplify fulfillment for companies and help to increase the speed of deliveries, there is also the potential for fraudulent or counterfeit products to end up alongside your goods — or worse, get labeled as your order. 

In addition to the costs and commingling, another potential disadvantage to using Fulfillment by Amazon is that you have to play by their rules. That means you could be out of luck if you:

  • Like to conduct warehouse inspections yourself
  • Want to adapt on the go to consumer preferences and changes in your stock.
  • Don’t want to take on a long-term storage fee. This is key for small retailers who are still ramping up the volume of their stock — after 6 months, Amazon applies a semi-annual long-term storage fee that could drive up your costs significantly early on
  • Want more access to inventory. With Amazon, you won’t get a dedicated space for your own inventory, in turn limiting your growth potential.

OPTION 2: FULFILLMENT BY MERCHANT (FBM)

FBM PROS 

Fulfillment by Merchant (FBM) is when your business takes on logistics itself or outsources the operation to another logistics partner other than Amazon.

In times of major shifts in the logistics landscape like COVID-19, having Amazon in full control caused serious problems for many sellers. 

Amazon shifted its policy and delayed shipments of all goods that weren’t already in a warehouse. This created massive delays and left many sellers unable to ship orders for a full 30 days — a far cry from the two-day delivery they’d come to expect. While Amazon’s system was the cause of the issue, companies themselves had to deal with the consequences. This event led many businesses to create plans to handle at least part of their own fulfillment.

Today, 43% of sellers on Amazon handle at least some of their shipping using other non-Amazon providers. This number is up nearly 10% from the previous year.

While sellers need to make sure their goods meet Amazon’s requirements in terms of labeling, utilizing this method means they can take full control from start to finish. Partnering with a competent logistics provider using FBM unlocks a host of benefits, including:

  • Fewer fees from Amazon and a way to only take on costs of services you use in a given month
  • Much more control over your fulfillment process from start to finish, including the ability to make warehousing changes
  • More opportunities for organic growth
  • The ability to react faster to changes in the market

FBM CONS

Even though FBM puts a company in control of its logistics, there are a few potential downsides worth noting.

If your e-commerce business doesn’t use FBA, it can be costly in the beginning to find a logistics plan that matches up to their rapid delivery system.

Another consideration is Amazon Prime. For some shoppers, the promise of two-day shipping is perhaps the most important selling point. As noted in the case of COVID-19, however, receiving deliveries in two days isn’t a guarantee 100% of the time. Though FBM doesn’t make your goods prime-eligible, it also doesn’t mean you’re unable to deliver quickly and efficiently another way.

If your company wants to grow organically and independently, these potential downsides are likely to be insignificant in the long run. By partnering with a competent, experienced logistics team, you’ll be able to pave the way for your e-commerce business to develop in a way that makes sense — not by always deferring to Amazon.

WITH CBIP, YOU GET AN INTEGRATED TEAM OF LOGISTICS EXPERTS FOR YOUR E-COMMERCE BUSINESS

If you want to maintain control of your domestic and global e-commerce fulfillment operations but need a trusted partner to keep things running effectively, we’ve got you covered. We handle the complex aspects of your supply chain so you can focus on growing your business.

At CBIP, we think the days of shipping through one super-provider are over. We combine proprietary order tracking and warehouse management softwares with a bespoke supply chain  tailored to your needs that is transparent and adaptable.

Have a say in your fulfillment. Get in touch today for a free assessment to craft a logistics plan tailored to your business.

About Author

Nick Bartlett

Nick Bartlett is CBIP’s director of sales and marketing. His expertise lies in marketing, supply chain management, and corporate retail experience. He honed his skills over 10+ years working across the Asia Pacific region and beyond.

Nick keeps a close eye on new markets and believes successful business operations come through value-based relationships.

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FAQs

Every e-commerce brand or seller is a little different. So, the best way for us to provide you with a detailed quote is to fill out our online questionnaire here and from here we can walk you through the various options available to you with CBIP Logistics.

No, we do not charge the higher fee associated with long-term storage. No matter how long the goods remain in our warehouse. They are charged the same rate for inventory storage.

Yes! We can store your inventory and replenish Amazon as necessary, helping you adhere to Amazon’s strict rules and regulations for packaging, labeling and shipping.

We charge for storage by either cubic meter, sqft or per pallet / racking space per week. It depends on the request from the customer as one-size doesn’t fit all. It would be better if you schedule a call with us

We provide a variety of services in the logistics landscape which includes Ocean Freight, Airfreight, Domestic Delivery, Warehouse & Distribution and Customs Clearance & Brokerage.

We offer several types of warehouses that are tailored to your requirements and vary among countries, e.g. Bonded Warehouse, General Warehouse, Consolidated Warehouse and Distribution Center.

Yes, you can track it from our platform by using the “Log In” function and access to “B2B” which is dedicated to track any shipment you have with us. This is a real-time platform which integrates with some major carriers so from here you can get the visibility of vessels on the globe map.

  • Origin Management: digital PO management and connected suppliers supported by agnostic 3PL vendor management capabilities.

  • Shipment Tracker: real time tracking also vessel tracking to let you know where the goods are.

  • Destination Management: platform manage the delivery to Distribution Centre and update frequently on platform.

  • Paperless Handling: we centralize the document hub on the platform for shipment-by-shipment. From here you can get the full documentation of a particular shipment within a click.

We offer the consulting services to enterprises who looking for either:

  • Optimizing their existing operations for cost, operation & performance effectiveness.

  • Scale their B2C or B2B business

Yes, our consulting services range from completing assessments on existing business, strategy & planning, tendering & RFP development, vendor selection and transitions & special projects.

Every business, we have a dedicated Account Manager who is the focal contact point that you can get in touch for daily operation.

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