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Fulfillment is a vital process if your business relies on getting products to customers. Some sellers manage the order fulfillment process in-house, while others use a third-party service, or some combination of both.
One example of a fulfillment solution is Fulfillment by Amazon (FBA), which lets sellers ship products into Amazon’s fulfillment network and outsource the packing, shipping, customer service, and returns.
Fine-tuning your fulfillment process and making the most of ecommerce resources can be a great way to keep customers happy and grow your business, so let’s dive into the details. We’ll cover:
One example of a fulfillment solution is Fulfillment by Amazon (FBA), which lets sellers ship products into Amazon’s fulfillment network and outsource the packing, shipping, customer service, and returns.
Fine-tuning your fulfillment process and making the most of ecommerce resources can be a great way to keep customers happy and grow your business, so let’s dive into the details. We’ll cover:
- What ecommerce fulfillment is and why it matters
- How order fulfillment works
- Five fulfillment options
- How to choose a fulfillment method
- Fulfillment service costs
What is ecommerce fulfillment and why does it matter?
Ecommerce fulfillment is the process of getting orders to customers who make purchases online. It can involve tasks like receiving inventory, storing and packing products, shipping orders, and handling customer service and returns. Efficient, reliable fulfillment helps build customer trust and brand loyalty. The way you handle ecommerce shipping and other steps of the fulfillment process can be key to your business’s success.
Why is ecommerce fulfillment important?
Ecommerce fulfillment helps you process orders, ship products, and delight customers with accurate delivery promises. But poor fulfillment can erode customer trust.
Improper packaging might lead to a customer receiving a damaged item. A box with the wrong label could get lost or end up in the wrong place. And if products don’t arrive on time, do you think the buyer will order from you again? Fulfillment issues like these can hurt sales and negatively impact your reputation in the form of bad reviews.
Fixing small inefficiencies and avoiding common errors can prevent delays, improve the customer experience, and help you stand apart from the competition.
Improper packaging might lead to a customer receiving a damaged item. A box with the wrong label could get lost or end up in the wrong place. And if products don’t arrive on time, do you think the buyer will order from you again? Fulfillment issues like these can hurt sales and negatively impact your reputation in the form of bad reviews.
Fixing small inefficiencies and avoiding common errors can prevent delays, improve the customer experience, and help you stand apart from the competition.
Case Study
How a small startup brand grew with FBA
“We were able to launch without having a distribution center. We were able to launch without having people dedicated to fulfilling inventory. That’s a big deal.”
Matt McCauley
Founder, Hope & Henry
Learn the lingo:
Fulfillment center
A fulfillment center is a location that handles order fulfillment processes such as receiving and storing inventory, managing stock, picking and packaging products, and ecommerce shipping. Amazon’s network includes more than 100 fulfillment centers worldwide.
How order fulfillment works: 5 steps
Step 1: Receiving inventory
The first step in your fulfillment strategy will likely be to get the products you want to sell and store them in an appropriate space. This could be your place of business, a warehouse, or another storage location.
If you’re working with a third party, they might be responsible for receiving inventory. Be sure to check relevant guidelines they might have for packing and labeling to speed the process of receiving inventory and avoid damaging products in transit.
You might not handle this step of the fulfillment process if you use direct order fulfillment methods, such as dropshipping. But you might still need to coordinate with a manufacturer, distributor, or another entity in order to source products.
If you’re working with a third party, they might be responsible for receiving inventory. Be sure to check relevant guidelines they might have for packing and labeling to speed the process of receiving inventory and avoid damaging products in transit.
You might not handle this step of the fulfillment process if you use direct order fulfillment methods, such as dropshipping. But you might still need to coordinate with a manufacturer, distributor, or another entity in order to source products.
Did you know?
You can benefit from competitive rates with trusted carriers
If you want to send inventory into Amazon’s fulfillment network, you might be able to save time and money with special rates and solutions through partnered carriers.
Step 2: Inventory storage
From the time you receive inventory to the point when customers place orders, you’ll likely need to store inventory and monitor stock levels. The use of fulfillment status designations, such as “awaiting fulfillment,” “pending fulfillment,” and “fulfilled,” can help you manage inventory and also keep buyers informed as part of a seamless customer communication strategy.
Make sure inventory is accessible so you can easily track stock levels and quickly access units in order to fulfill orders. Whether you use a garage, a spare room, or one or more warehouses, be sure the space can accommodate seasonal fluctuations in demand, like for holidays.
Make sure inventory is accessible so you can easily track stock levels and quickly access units in order to fulfill orders. Whether you use a garage, a spare room, or one or more warehouses, be sure the space can accommodate seasonal fluctuations in demand, like for holidays.
Learn the lingo:
Stock keeping unit
A stock keeping unit (SKU) is an alphanumeric string of letters and numbers. A merchant assigns a unique SKU to a product to help keep track of inventory.
Step 3: Order processing
Once a customer completes a transaction, order processing begins.
Pick-and-pack fulfillment is a common system for processing orders. It refers to selecting products in the right quantities to meet an order and packing them with appropriate materials for shipment.
A critical part of order processing is choosing the right packaging. This could be:
Pick-and-pack fulfillment is a common system for processing orders. It refers to selecting products in the right quantities to meet an order and packing them with appropriate materials for shipment.
A critical part of order processing is choosing the right packaging. This could be:
- Boxes
- Paper or bubble mailers
- Packing material such as bubble wrap or air fillers
It can also help to have a system in place for labels to ensure products reach the right customers as quickly as possible. Check out this video to see how FBA handles packaging, prep, and labeling:
Step 4: Ecommerce shipping
How will you get products to customers? For small orders, delivery might be as simple as a quick run to the mailbox. Carriers like UPS, FedEx, and the US Postal Service can handle many types of small parcel deliveries (SPD).
For larger orders, you might need to use pallet shipments and truckload deliveries, such as less-than truckload (LTL) and full truckload (FTL) shipments.
For larger orders, you might need to use pallet shipments and truckload deliveries, such as less-than truckload (LTL) and full truckload (FTL) shipments.
Step 5: Returns processing
Returns are a normal part of ecommerce, so don’t let them discourage you. Clothing is the most commonly returned type of online retail good, accounting for 75% of returns.
Make sure to have a process for dealing with returns, restocking or discarding defective products, and issuing refunds to customers. This might include providing instructions on how to return items.
Remember, with FBA, Amazon can process returns on your behalf.
Make sure to have a process for dealing with returns, restocking or discarding defective products, and issuing refunds to customers. This might include providing instructions on how to return items.
Remember, with FBA, Amazon can process returns on your behalf.
Did you know?
You can offer Prime shipping benefits through Buy with Prime
Buy with Prime lets you display the Prime logo and delivery promise on your own website. It’s been shown to increase customer conversion by an average of 25%.
5 ecommerce fulfillment options
You can fulfill orders on your own, team up with a third-party solution, or use some combination of in-house and outsourced fulfillment to meet demand for all your sales channels. Many fulfillment solutions, like FBA, are flexible and designed to be compatible with your existing operations and help you grow.
1. In-house fulfillment
You can store and ship from your place of business, although this option might limit the variety and quantity of products you can sell, and it could drive up your overhead expenses.
In-house fulfillment might be cost-effective if you sell a low volume of products, have your own functioning logistics network, or sell products with complicated packaging or other special requirements, such as a temperature-controlled environment for perishable goods.
In-house fulfillment might be cost-effective if you sell a low volume of products, have your own functioning logistics network, or sell products with complicated packaging or other special requirements, such as a temperature-controlled environment for perishable goods.
- First-party fulfillment might be your only option if you sell products that don’t qualify for fulfillment by a third-party service for one reason or another. Be aware that some carriers have limitations based on size for bulky or large products. In other cases, some products might be classified as hazardous materials or dangerous goods (hazmat).
You can fulfill products yourself and still create listings and enjoy other benefits in the Amazon store. We call this Fulfilled by Merchant. This suite of solutions can help save you time and money when you fulfill orders on your own with:
- Automation to sync your inventory, manage customer orders, and streamline your various sales channels
- Great ecommerce shipping rates and fast, reliable delivery
- Increased account-health protection for delivery-related claims
You can use Fulfilled by Merchant services for every product you sell, or just select products. You can also combine Fulfilled by Merchant with other methods like FBA.
2. Third-party fulfillment (3PL)
You can outsource fulfillment to a third party to free up time and resources so you can focus on other aspects of your business.
Providers of third-party logistics (3PL) can help ecommerce businesses scale by offering a range of services to streamline inventory management, logistics, and return management. For instance, 3PLs often specialize in kitting and assembly. If several products arrive individually and need to be packaged together before being shipped to customers, you might use this process to fulfill orders more rapidly. Third-party logistics can also do it for you.
Providers of third-party logistics (3PL) can help ecommerce businesses scale by offering a range of services to streamline inventory management, logistics, and return management. For instance, 3PLs often specialize in kitting and assembly. If several products arrive individually and need to be packaged together before being shipped to customers, you might use this process to fulfill orders more rapidly. Third-party logistics can also do it for you.
3. Multi-channel fulfillment
Multi-channel fulfillment refers to managing and fulfilling orders across various channels where customers can purchase products, such as from your own website, on social media, in the Amazon store, an ecommerce storefront on another established selling website, or elsewhere.
If you don’t need an exclusive fulfillment option for each channel, multi-channel fulfillment solutions can help you diversify your ecommerce marketing and sales channels while keeping order fulfillment manageable.
FBA supports Multi-Channel Fulfillment (MCF), allowing you to outsource fulfillment for multiple sales channels and offer fast, reliable delivery.
If you don’t need an exclusive fulfillment option for each channel, multi-channel fulfillment solutions can help you diversify your ecommerce marketing and sales channels while keeping order fulfillment manageable.
FBA supports Multi-Channel Fulfillment (MCF), allowing you to outsource fulfillment for multiple sales channels and offer fast, reliable delivery.
Pro tip
Integrate channels using software from the Selling Partner Appstore
We offer over 100 integrations to seamlessly connect MCF with all your systems. The Selling Partner Appstore is another resource that can help you integrate sales channels with software solutions to automate, manage, and grow your business.
4. Direct order fulfillment or dropshipping
Direct order fulfillment is the process of shipping products directly to the customer. For example, you can create handmade products and ship orders yourself, or use a dropshipper to ship products to customers from the manufacturer after they place purchases.
Dropshipping appeals to some sellers as a way to outsource all or most of the supply chain. The dropshipper typically handles product sourcing or production, as well as shipping and returns. Print-on-demand solutions often use this strategy too.
Dropshipping is allowed in the Amazon store if your business meets our criteria and you can follow Amazon’s dropshipping policy.
Dropshipping is allowed in the Amazon store if your business meets our criteria and you can follow Amazon’s dropshipping policy.
5. Fulfillment by Amazon (FBA)
FBA may be the right fulfillment option for your business if you:
- Are looking for a way to save time, reduce operational costs, and scale your business
- Need an end-to-end solution for inventory storage, shipping, returns, and customer service
- Want to attract and delight customers with fast, free shipping
New sellers can qualify for over $50,000 in New Seller Incentives, including discounts on FBA inventory shipments, free storage, and other perks.
Pro tip
Mix and match your fulfillment options
Your fulfillment operations might be complex, but solutions don’t have to be. Check out Veeqo, a free multi-channel shipping software that can be ideal if you want to integrate sales channels, inventory management, and reporting analytics all in one place.
Remember, you can choose to use FBA for some or all of the products you offer, enrolling as little as one product, or your entire inventory.
Remember, you can choose to use FBA for some or all of the products you offer, enrolling as little as one product, or your entire inventory.
FBA compared to alternatives
Shipping with FBA costs 30% less per unit than standard shipping options offered by major US carriers and 70% less per unit than their premium options comparable to FBA.
You can use the Revenue Calculator to help determine whether Amazon’s fulfillment services could be a cost-effective option for your business compared to your own fulfillment or other scenarios.
You might also want to weigh how much time and effort a particular fulfillment method will require, how much control you want over the fulfillment process, and other factors to decide if FBA is right for your business.
What fulfillment option is right for you? We’ll do a deeper dive into some more considerations for different fulfillment types
You can use the Revenue Calculator to help determine whether Amazon’s fulfillment services could be a cost-effective option for your business compared to your own fulfillment or other scenarios.
You might also want to weigh how much time and effort a particular fulfillment method will require, how much control you want over the fulfillment process, and other factors to decide if FBA is right for your business.
What fulfillment option is right for you? We’ll do a deeper dive into some more considerations for different fulfillment types
Did you know?
Supply Chain by Amazon automates logistics
Supply Chain by Amazon is a suite of automated services that helps sellers quickly and reliably ship products around the world.
How to choose a fulfillment method: 9 factors to consider
There are many considerations to take into account as you weigh what fulfillment options might be best for you. To start, think about the products you want to sell, where your audience is located, and what sales channels you want to use.
Depending on the scale of your operations and your plans for growth, use this quick reference list as a guide when evaluating vendors:
Depending on the scale of your operations and your plans for growth, use this quick reference list as a guide when evaluating vendors:
- What shipping and delivery times are available?
- What are the requirements for labeling and packaging?
- Do they offer automated replenishment or allow you to track supply levels?
- Do they have a notifications system?
- Can they process returns or provide customer service?
- Do they offer distributed warehousing?
- Can they handle international shipping for global selling?
- Do they provide subscription fulfillment?
- Can they bundle products?
Another important factor to consider is cost. Let’s turn to that next.
What do ecommerce fulfillment services cost?
Fulfillment costs vary depending on the products you sell, the size of your operations, and other factors. Variables such as returns and customer service can also impact your bottom line.
Amazon fulfillment costs per unit for FBA are calculated based on product weight and dimensions. Monthly inventory storage costs are based on daily average volume for the space your inventory occupies in Amazon fulfillment centers.
Inventory management and best practices can help you avoid other potential charges related to:
Amazon fulfillment costs per unit for FBA are calculated based on product weight and dimensions. Monthly inventory storage costs are based on daily average volume for the space your inventory occupies in Amazon fulfillment centers.
Inventory management and best practices can help you avoid other potential charges related to:
- Aged inventory (storage for more than 181 days)
- Removal, disposal, and liquidation orders
- Additional inventory storage for dangerous goods or high volumes
You can see a detailed breakdown of FBA costs and explore factors that can make a difference like product and shipping categories.
Try these sales calculators to estimate costs and fees for your business and make sure you can maintain healthy profit margins in order to turn a profit.
Try these sales calculators to estimate costs and fees for your business and make sure you can maintain healthy profit margins in order to turn a profit.
The right fulfillment partner can help your business thrive
Why choose Amazon to fulfill online orders? If fulfillment tasks are consuming your time and limiting your ability to handle other aspects of your ecommerce business, you might want to turn to FBA for fast shipping, reliable delivery, and opportunities for global expansion.
To learn more, you can visit Seller University, a free educational resource to help entrepreneurs, businesses, and brands succeed selling online. You can also check out this guide to nine FBA training videos.
To learn more, you can visit Seller University, a free educational resource to help entrepreneurs, businesses, and brands succeed selling online. You can also check out this guide to nine FBA training videos.
Fulfillment FAQs
How does Amazon’s fulfillment process work?
You can sign up for a selling account to get started. Set up FBA and use the Send to Amazon workflow to ship inventory into Amazon’s fulfillment network, where we’ll take care of storage, shipping, and returns on your behalf.
What are the costs associated with Amazon’s fulfillment services?
Costs for FBA depend on the products you sell and the services you use. The fulfillment cost per unit is based on product weight and dimensions and can include picking and packing for orders, shipping and handling, customer service, and product returns. FBA storage costs are based on volume. You can estimate costs using the Revenue Calculator.
Can I integrate my existing ecommerce platform with Amazon’s fulfillment?
Amazon offers integration solutions for you to connect your ecommerce channels with FBA. Choose from pre-built and developer-friendly integrations, or build a custom integration. You can also access software and apps through the Selling Partner Appstore.
How does an FBA order get fulfilled with Amazon?
Once a customer places an order with Amazon, the product is located within the relevant fulfillment center, then packaged and shipped to the customer.
Can sellers make money using Amazon FBA?
Yes, sellers can make money and grow their business in the Amazon store using FBA. FBA can help you attract new customers by offering fast and reliable delivery. It also lets you outsource fulfillment tasks to save time as you scale, and it costs 70% less per unit than comparable premium options offered by other US fulfillment services. Use our Revenue Calculator to estimate your profits.
Is Fulfillment by Amazon (FBA) worth it?
Using Amazon’s FBA program can be worth it for many sellers who want to save time, reduce operational costs, and grow their ecommerce business. FBA lets you outsource order fulfillment, customer service, and returns to Amazon, freeing you up to focus on growing your business. It also allows you to offer fast, reliable shipping to customers and reduce fulfillment costs.
