The three options you can choose are:
Which one is best? There’s no “right answer” for every business.
It depends on a number of factors, including your cash flow, ability to manage inventory, and overall business model.
Here’s what you need to know about each Amazon fulfillment option.
FBA
FBA is the easiest option for vendors. Unfortunately, it could be the most expensive.
When you choose FBA, you’re outsourcing shipping, handling, and customer service to Amazon. All you have to do is list your products on the site and ship them to an Amazon fulfillment center.
When a customer orders a product you’ve listed, an Amazon employee will go to the fulfillment center, grab the product, package it, and ship it.
If the customer has any questions or complaints, an Amazon employee will handle those as well. Amazon also handles returns.
The advantage of FBA is that it gives you more free time to help you grow your business. That’s because you’re not bogged down with day-to-day shipping, handling, and customer service responsibilities.
Of course, you’re going to pay for letting Amazon do the heavy lifting for you. That’s why you should check out the company’s fee schedule before you select FBA. You’ll find that the costs will eat into your margin quite a bit.
You get a lot for your money, though. Here’s what Amazon handles for you:
- Order handling
- Pick & Pack
- Weight handling
- Inventory management
- Customer service
Besides those benefits, you also get access to prime customers when you select FBA. That’s great news because, as of this writing, there are around 65 million of them.
Prime customers tend to prefer prime merchants. So you’ll have more trouble reaching them if you opt for FBM.
Remember also: prime customers get free two-day shipping. That makes it easier to market to them instead of non-prime customers.
Finally, if you choose FBA you’ll have a better chance at winning the Buy Box. That could give you a real boost in sales.
FBM
If you want greater control over shipping and customer service while avoiding Amazon FBA fees, then you should select FBM.
Keep in mind, though, that you’ll find it’s difficult to reach prime customers. If, for whatever reason, that’s not a problem for your business, then FBM might appear really attractive.
That means you’ll need a place to keep inventory. If you don’t have a warehouse and your office isn’t big enough, then FBM isn’t a viable alternative.
You’ll also have to set up a customer service phone line. That means you’ll be personally dealing with irate customers who’ve received damaged/defective products.
Finally, you’ll need to pick, pack, and ship the products yourself.
Of course, you could always hire employees to handle some of the routine tasks associated with FBM. That will take a bite out of your profits, though.
That’s why you should get with your accountant to determine if hiring employees might actually save you money as compared to going with FBA.
SFP
There’s a “hybrid” shipping option as well: SFP.
It’s a hybrid option because it combines the advantages of FBA with the cost savings of FBM. It’s a great alternative for established businesses.
If you go with SFP, you’ll pick, pack, and ship the product yourself, just as you would with FBM. You’ll also handle customer service.
So what’s the difference between SFP and FBM? It’s a big difference, actually.
You’ll have access to prime customers.
In other words, your business will compete right alongside FBA vendors who are paying those hefty fees. You stand to earn a better profit per sale, though, because you won’t be paying for FBA.
So why wouldn’t every business select SFP? Because they have to qualify for it.
If you want to use SFP, you’ll have to go through a trial period that involves a minimum of 300 orders.
During that trial period, you’ll have to satisfy these requirements:
- Maintain a cancellation rate of less than 1%
- Maintain an on-time shipment record of at least 99%
- Use Buy Shipping Services for at least 95% of orders
Which Option Should You Choose?
So which fulfillment option is best for your business? It depends…
Surprisingly, using Seller Central or Vendor Central does not influence this decision.
If you’re unsure, go with FBA. The added convenience will cost a pretty penny, but you can use the free time you have to find ways to improve your margins and grow your business.
On the other hand, if you’re running a well-established business with plenty of storage space and employees who can handle day-to-day tasks, then you should fulfill orders yourself.
Keep in mind, though, you won’t have great access to prime customers with FBM. That’s why you should strive to qualify for SFP. You’ll increase your market by tens of millions of customers and put yourself in a better position to win the Buy Box.
If you’re running a struggling, cash-strapped startup, then FBA is probably your best bet. Again, though, run your Amazon business with an eye towards using SFP.