If you run your business online or are an eCommerce seller, you may be faced with the question of whether to sell your products on Amazon, or if you already sell on Amazon your business will have to make a decision how to fulfil your eCommerce orders.
When it comes to fulfilment there are various options your business can choose from; either your business can fulfil its orders in-house, but if your order volumes have outgrown being able to fulfil in-house you will have to choose between a variety of fulfilment centres to partner with your business. You can choose from either fulfilment by Amazon (FBA), or an independent fulfilment centre, like UK Fulfilment, to fulfil your eCommerce product orders.
Whilst there are some benefits of Amazon’s FBA, there are also disadvantages of using Amazon FBA.
What is Amazon FBA?
FBA is Fulfilment by Amazon, originally when an eCommerce seller makes a sale, they would fulfil the order themselves and organise the picking & packing, packaging, shipping returns and refunds for their customer’s order. But, using the FBA model once a business has sent their stock and products to an Amazon warehouse, they will have total responsibility for the product’s fulfilment from then on. From storage to packaging and shipment FBA will handle it like a normal fulfilment centre.
What is an Independent Fulfilment Centre?
There are a number of fulfilment centres in the UK who offer a wide variety of similar fulfilment services, many of whom have been operating for a much longer time than FBA. A normal fulfilment centre offers all the same services of fulfilment, from warehousing and storage, picking and packing, supplying packaging options, to handling returns. Fulfilment centres, like UK Fulfilment, who will integrate your sales platforms - your website or the marketplaces like Amazon, eBay, Etsy and WooCommerce, to their warehouse management software so your eCommerce orders will be processed seamlessly.
The Pros & Cons of Amazon’s FBA Service
The Advantages of Amazon’s FBA
1. Rank Higher Amazon’s Sales Pages for Your Product Category
When it comes to your products ranking on Amazon’s selling platform in its category, product’s that are fulfilled by Amazon are always higher up the product rankings. Even cheaper products, even if you categorise them from lowest to highest price.
Amazon’s algorithms favour sellers who use FBA, because these Amazon prefers clients who they provide fulfilment and customer service for, as they will be more likely to make a repeat purchase. This is a big advantage for selling using FBA, and will increase the chance of a sale.
2. Access to Amazon Prime’s Shipping
When using FBA your product’s will automatically qualify to be fulfilled by Amazon Prime’s fast shipping network. Amazon Prime currently has a subscriber base of 85 million, who will all use Amazon as their priority platform to make an eCommerce purchase.
3. Gain Credibility from selling with Amazon
Using FBA, Amazon’s network and brand’s logo you will benefit from the credibility and trust that Amazon’s brand has created. Having your products use Amazon’s FBA will boost your product’s credibility as you will benefit from association with their brand.
4. Access to Amazon Prime’s Shipping
When using FBA your product’s will automatically qualify to be fulfilled by Amazon Prime’s fast shipping network. Amazon Prime currently has a subscriber base of 85 million, who will all use Amazon as their priority platform to make an eCommerce purchase.
5. Convenience
When it comes to using Amazon’s FBA one of the main advantages in its convenience and they will handle everything for you. Amazon will provide your eCommerce business with the warehousing and shipment of your products, whilst driving traffic through their platform and providing customer service.
The Disadvantages of Amazon’s FBA
1. High Costs & Charges using FBA
Using Amazon’s FBA however comes at a much higher financial cost and will cut deeply into your margins. Amazon charges fees at various points along their fulfilment process; your business will be charged on how much space your stock takes up and for how long you store it there, like most fulfilment houses, but at a higher cost. Unlike other fulfilment centres, Amazon also charges a £30 monthly fee for selling and having an Amazon selling account. This is all in addition to the per unit selling costs that Amazon charge, which is very high and is approximately 30% of the sales price for every unit you sell.
2. Your Business will have Complete Reliance on Amazon & will have to Adhere to Amazon’s Rules & Regulations
Amazon will require your business to comply with their rules and adhere to a certain standard to be able to sell on their platform, which can be costly. You will have to have a registered business for each product category you sell, along with having your stock shipment’s to be Amazon compliant
Using a normal fulfilment centre, like UK Fulfilment, you will have greater flexibility and will be able to use your own logistics choices, which can give you greater control in getting your products to your clientele and at a lesser cost.
3. Losing your Branding to Amazon
If you use Amazon’s FBA you will lose out on your brands and business’s identity as your product’s will come packaged in Amazon’s own brand packaging, which will result in losing the opportunity to build brand reputation with your customer base. There are minimal options to personalise your product’s branding to give your customer personalised product branding.
This is a large factor as your product’s will look and appear like the come from Amazon, rather than your brand.
4. Inability to Build a Customer base List for Marketing Emails
Using and selling on Amazon will not allow you to build and grow a customer details database, removing any chance of re-marketing options to your existing customer base.
5. Amazon is Very Competitive Marketplace
Amazon’s marketplace is very competitive and has millions of sellers your business will be competing with. Even if you use FBA, to have any chance of success you will have to keep in mind this will be long-term not short-term, and you will still be competing with all of the other sellers on Amazon using FBA.
Alternatives to Fulfilment Amazon’s FBA
If you don’t want to use FBA for fulfilment for your business due to the high costs, there are numerous other specialty fulfilment centres, like UK Fulfilment, who offer the same, if not more services than FBA.
It’s best for your business to compare the costs for the fulfilment of your business’s products and decide what is best and most profitable for your business.
Most eCommerce sellers new to the fulfilment process will probably see that Amazon’s FBA costs outweigh the advantages of it. More flexible fulfilment houses, such as UK Fulfilment, can provide all the services that FBA offers, at a much lower cost whilst being more agile. With an independent fulfilment house, you will have much more control over your fulfilment process for your business and have a much more personable relationship with your fulfilment partner.
If you would like to compare costs of an independent fulfilment centre, like UK Fulfilment, you can receive a free quote here.
