Amazon is undoubtedly the undisputed leader in e-commerce. The convenience of their model with the reach of their online marketplace is an attractive option to review for almost any business owner, whether just starting out or an established business moving into a direct to consumer (D2C) model.
While many people outsource their entire fulfillment process to Amazon, known as Fulfilled by Amazon (FBA), it is important to know that there are other option available that may be a better and more tailored fit for your business.
Primary Amazon E-commerce Models – Simplified
- Fulfilled by Amazon, aka FBA: Amazon does everything from receiving your goods to delivering to the customer.
- Pre-FBA: Using a warehouse to store inventory and replenish Amazon as needed to minimize committed goods in the Amazon fulfillment center
- Fulfilled by Merchant, aka FBM: Leveraging the Amazon marketplace, but having the orders fulfilled by a warehousing/distribution operation
When to Choose Fulfillment By Merchant
When deciding on which model to deploy, there are a few significant question you should ask about your business:
- Are you selling items exclusive to your shop? Or are your products and/or products with significant parity sold on Amazon?
Controlling your brand, packaging, and expectations may be more important to you than other organizations with commodity products. FBM offers more control in managing these aspects of fulfillment.
- Do you use alternative methods of omni-channel selling such as Walmart Marketplace?
FBM provides flexibility to distribute products to customers regardless of where the orders started. Alternatively, larger orders of inventory in a central location can be distributed via business to business (B2B) orders.
- Are you a high volume seller or a low volume seller?
If your volumes are manageable by a pick and pack operation or the fulfillment process is very straight foward, FBM can be a great model to provide the same experience to the customer without constantly worrying about inventory turn and compounding storage costs.
- What are the shipping/processing expectations of your customers?
Some businesses have customers where a same day or next day delivery is expected. If this is the case, FBM is probably not for you. However, if a reasonable time frame (2-4 business days) is acceptable, then FBM could be a great alternative.
- Do you have a large ratio of orders vs returns?
Customer returns and reverse logistics is becoming more standard with handling customer expectations. If your FBM vendor has a reverse logistics capability, then this still could be an option.
Additional Benefits of FBM
- Control – Once inventory is in an Amazon Fulfillment Center, there is very little a business can do about altering outcomes
- Better Margins – The costs of a FBM option can be negotiated and designed to fit your business, not only giving you a typically cheaper option but also control of margin through negotiation. Amazon costs are what they are – even if they change!
- Branding – Given the control, you can influence what a customer sees when they receive their shipment from the packaging to the kitting of your order
- Visibility and control of inventory in stock, what sells, and options to respond to situations to ensure smooth operations
- Predictable Expenses – There are no unexpected costs; the seller is aware of all finances every step of the way.
Want to learn more about optimizing your Amazon business? Read our latest blog on how to lower storage costs with the “Pre-FBA” model.