For more than 600,000 sellers, Fulfillment by Amazon (FBA) is a pathway to reaching a huge audience, streamlining operations, and scaling with global infrastructure and logistics support.
As Amazon’s fulfillment service, FBA gives you access to hundreds of millions of customers and comes along with several features, including:
- The ability to offer fast, free shipping through Amazon Prime
- Opportunities to grow sales and customer loyalty via programs like FBA Subscribe & Save, Multi-Channel Fulfillment, and FBA Export
- Customer service and returns processing on your behalf
If you want to navigate around supply chain issues and grow your business without the need to purchase or lease warehouse space, keep reading to learn about how FBA can compare to other fulfillment options and see if it might be the right fit for your business.
Is FBA right for you? 5 factors to consider
Amazon Sales Volume
As an ecommerce seller, you have several options for handling fulfillment—a term that refers to the end-to-end processes that go into storing, packing, and shipping products to customers.
Some businesses can handle these tasks on their own (fulfillment by merchant or Amazon FBM). For others, it’s more cost-effective to outsource in order to increase capacity for greater sales volumes.
So, which one is better? When’s the best time to take the leap and outsource fulfillment? Here are some considerations to help you decide.
1. Time and effort
If you have the time and resources to handle fulfillment yourself, then Amazon FBM (fulfillment by merchant) might be the best option for you. However, if you’re short on time or don’t want to deal with the hassle of storing and shipping products, then consider using FBA so you can focus on other aspects of your business.
For instance, you can outsource some or all the following to FBA:
- Receiving inventory from suppliers or manufacturers
- Inventory storage
- Picking and packaging orders for shipment
- Shipping orders to customers and collecting tracking numbers
- Customer service
- Returns processing
Once we got set up with FBA, business exploded. Rather than getting 30-40 orders per day, we’re now shipping off 10 pallets of product a week to Amazon warehouses and fulfillment centers.
2. Cost
With you fulfill orders directly (fulfillment by merchant), you’re responsible for paying costs that can inflate over time, which can eat into your profit margins. Examples of costs associated with handling fulfillment on your own can include:
- Buying or leasing storage space
- Packaging and labeling materials
- Shipping and delivery fees
- Inventory management and shipment tracking
- Responding to customer inquiries and complaints
Whether you’re working with a team or not, taking care of tasks like these can consume valuable time and resources. This leads many businesses to turn to a fulfillment solution like FBA.
The cost of Amazon FBA starts with the plan you select. You can get an Individual selling plan or an Professional selling plan for a flat rate of $0.99 per item sold or $39.99 per month, respectively. Apart from that, you’ll pay referral fees plus additional FBA cost depending on the scale of your operations and business needs:
- Fulfillment cost (based on weight and product category)
- Inventory storage cost (based on factors like how much space you’ll need and how long you’ll want to store products)
- Returns processing
Add up all your costs to see if FBA can save you money, in the long-run. On average, FBA is 70% less expensive than comparable two-day shipping alternatives, and FBA cost are on average 30% less expensive for standard shipping methods than other major logistics providers.
You can also use the Amazon Revenue Calculator to estimate costs, calculate fees, and find out how much you can save with FBA.
3. Control
When your business fulfills orders directly, you have complete control over the fulfillment process from one end to the other. For example, maybe you like to add a special touch to your brand’s packaging, such as a handwritten note. You can also choose your own packaging materials and shipping carriers, and you’re not limited in terms of what types of products you can sell.
To use FBA, you must observe applicable Amazon policies and rules for product categories, as well as inventory restrictions. Consider whether trade-offs like these are worth it to gain peace of mind knowing fulfillment experts can properly handle products throughout the fulfillment process.
4. Sales volume
If you’re starting out or have low sales volume, then the fulfillment-by-merchant approach may be the better option for your business. On the other hand, if you sell more than 40 units a month, your sales volume might be high enough to make the costs of FBA worth it.
Take into account the time you’ll save, plus the ability to scale through FBA. Tapping into Amazon’s global fulfillment networks of storage centers around the world and efficient transport options can be a total game changer.
5. Shipping speed
Today’s consumers want fast, free shipping. One study found that 64% of customers expect free shipping orders to arrive in less than three business days, while 56% of abandoned carts are related to delivery concerns.
With FBA, you have backup from fulfillment centers and personnel to ensure orders ship within a few days. Joining FBA also makes products eligible for free, two-day shipping through Prime, which can be enticing to customers. In some cases, FBA can even provide next-day or same-day delivery.
How to start Amazon FBA: 3 steps
Interested in using FBA? Here are the three main steps:
- Create an Amazon seller account
- Set up an Amazon FBA account to send inventory straight to Amazon fulfillment centers
- Manage inventory and process orders for the products you enroll in FBA
You can enroll as little as one single product in FBA, or your entire catalog. Learn more from our FBA coaching guide for beginners and check out Seller University for helpful tips and guidance.
More fulfillment resources to grow your business
No matter how you decide to get products to customers, the following resources can help with a variety of different fulfillment methods:
- Brand management: Benefit from Brand Registry and other ways to build your brand
- Brand analytics: Learn about your audience to connect with more customers
- Service Provider Network: Plug into a community of professionals who can help with accounting, photography, legal concerns, and moreMaybe FBA isn’t an option you want to explore at this time. If so, there are other options you can consider.
You can also check out these fulfillment options, features, and tools:
Multi-channel fulfillment
You can use Amazon Multi-Channel Fulfillment to coordinate fulfillment across your ecommerce channels. Benefit from predictable pricing, prebuilt integrations, up-to-the-minute tracking, and other convenient aspects to support your business.
Buy with Prime
Is it possible to enjoy FBA benefits without having an Amazon storefront? Absolutely. You can sign up for Amazon’s Buy with Prime program to display the Prime seller badge on your own website and provide customers with a familiar shopping experience. Buy with Prime has been shown to increase conversions by an average of 25%.
Our brand awareness grew substantially with Amazon’s search capabilities, and Fulfillment by Amazon ensured that we quickly delivered on our promise of a good night’s sleep to new parents.
Scale your business with FBA
Revolutionize your potential for scalability and earn customer trust by enrolling products in Amazon FBA. You can also unlock a range of tools and support exclusive to Amazon sellers to help you prosper.
To get started, you can sign up for Amazon FBA, or check out this beginner’s guide and these 10 tips for selling online if you want to earn money from home and build a successful online business.
