With the increase in eCommerce demand, the merchants are trying hard to stay relevant in the market. If you are also looking to outclass your competitors on the marketplaces like Amazon, you need to think a step ahead. Amazon is the largest online marketplace with approximately 9.8 million sellers selling on it, so if you want to stay ahead of them, the biggest thing to work is the customer experience. A good customer experience depends on numerous factors like: 

  • Product quality
  • Price
  • Shipping facility
  • Pickup
  • Support, in short order fulfillment. 

Order fulfillment refers to the services provided to serve the customer throughout the supply chain, ranging from order placement, shipping to delivery. Order fulfillment plays a crucial role in the brand success and customer experience. Here are some fact to support the fact-

  • 61% of consumers tend to abandon their cart if the shipping and the other charges are too high.- Baymard Institute
  • 53% of consumers say that the speed of delivery influences their buying decision.- PRNewswire
  • 51% of the digital buyers prefer real-time order status tracking.- Retail TouchPoints

Order fulfillment can be done in two ways based on the requirement- Fulfilment by Amazon(FBA) and Fulfilment by Merchant(FBM). Two out of five Amazon sellers opt for the Amazon FBA services to sell their products, and (43%) use Amazon FBM. Here is the breakdown of the Amazon seller percentage, based on the FBA and FBM usage-

  • FBA only- 57%
  • FBA and FBM- 34%
  • FBM only- 9%

Before digging deeper into the topics, let’s discuss the factors you should consider while deciding your products’ fulfillment option. 

Factors to Consider While Choosing the Order Fulfillment Option

Shipping Flexibility

While choosing between the FBA and FBM, assess your shipping capabilities along with their feasibility. There are chances that you will have to deliver the product out of the city, state, or even country (if opted for being a Global Seller). So, check whether you will be able to ship the products to these places without much hassle and within your allotted budget or not.  

Return Management

There are a series of tasks associated with the product’s return process, such as product pickup, change in the inventory listing, and payment refund. So, do check whether you will be able to manage returns and refunds while handling the ongoing sales by yourself. 

Customer Service Management

By serving in 15 international websites in countries like the USA, France, Italy, UK, UAE, Spain, Turkey, Canada, Brazil, Mexico, Italy, Singapore, Turkey, Japan, and Germany, Amazon offers a huge customer base to its sellers. Check whether you will be able to serve all of your customers properly or not. 

Speedy Delivery

According to the survey conducted by Oracle Retail, 13% of customers will never order from a retailer unable to deliver their products on time. So, check your product’s delivery speed and make sure you can deliver the products on time. 

Storage Space Handling Capacity

Be realistic about your storage space handling capacity. How many products could you realistically store in your warehouse? If not, can you rent one at feasible rates, or should you go for FBA? 

Level of Control

Be specific about the level of control you want to have on your sales funnel. If you want more control over your sales funnel and inventory. 

Budget 

Check out which fulfillment approach fits your budget. The fulfillment cost depends on variables like the product, the target market, delivery cost, etc. 

Fulfillment By Amazon(FBA)

Introduced in 2006, the FBA has taken online retail to another level. FBA is the fulfillment facility offered by Amazon to help the sellers fulfill the orders of its customers. Though FBA relieves you from various tasks, handling the entire process, from warehousing, fulfillment to customer service, and return, by itself, you need to pay the fulfillment and storage fees to Amazon. 

All you need to do is just send an inventory to the Amazon warehouse; that’s it! Amazon itself handles the rest. An FBA proves to be extremely helpful for the sellers looking to grow their Amazon startup and increase customer reach. Here are some of the pros and cons of the FBA to help you pick the best-fit approach for your business-

Pros of Amazon FBA

Time-Saving

FBA proves to be a high timesaver approach to order fulfillment, relieving you from time-consuming tasks like shipping orders, picking up returns, and handling the refund process. Another factor that contributes to saving uptime is that Amazon has its fulfillment centers located in various cities and states. Whenever the customer places an order, the product is shipped from the nearby fulfillment center, if available, leading to faster delivery.

Omnichannel Fulfillment

Today in this digitally driven world, the Omnichannel experience is creating a buzz in the eCommerce industry. Also, it can give an edge to your company over your competitors. The Amazon FBA model gives you a similar omnichannel fulfillment facility empowering you to sell on multiple channels like eBay and platforms like BigCommerce while managing the order fulfillment itself, just like selling on Amazon. So, not only on Amazon but also on selling your product services through various other platforms.

Expands Customer Reach

Amazon FBA tends to increase your customer reach and ascribe to its tremendous facilities like faster shipping, outstanding customer support, and multi-channel shopping facility. Customers love and promote the brands who serve them well, and Amazon FBA can help you with the same, leading to increased customer reach. 

Automatically Adds Prime Badges to the Products

With the increased dependency on the digital channels from shopping to entertainment, prime membership is gaining massive popularity due to its various advantages like free and faster delivery. Approximately half of the U.S.-based Amazon users are already prime members and prefer to purchase the products with a prime badge. This can be extremely useful for the sellers. If the sellers opt for FBA, the prime badge is automatically attached to their products. 

Source: The Wall Street Journal

Winning the Buy Box to Win over Competitors 

Amazon is crowded with so many sellers, few of which sell the same product increasing the competition even more. Buy Boxes proves to be extremely useful here. Buy Box refers to the white box present on the product page- where the buying options for the product are present. 

FBA-FBM-Amazon Buy Box

According to BigCommerce, 82% of Amazon sales take place from the Buy Box. If you are eligible for the buy box, you can sell your products directly through the buy now button.

Facilitates Customer Services and Support

FBA also facilitates customer services and after support, allowing you to focus more on the business and sales than on the order fulfillment process. Whether the customer places a replacement or return of the product or needs any other related support, Amazon does everything at its end. 

Cons of FBA

No Control on Sales Funnel

In the case of FBA, the entire control of the product management and order fulfillment is with Amazon itself. Once the product is placed in the Amazon fulfillment Centre, the product is managed by Amazon; the seller has no control over anything. So if you are a seller who wants to handle and control your inventory by yourself, FBA might not be the right choice for you.

FBA Fees

Inclusion of FBA fees in the product cost can be both advantageous and disadvantageous based on the product’s type and the merchants’ expertise in fulfillment. If your product is fast selling and in high demand, FBA will give you better exposure. Hence, the cost won’t come as a pressure for the sellers. But if your product is slow-selling, the price might worry you. Here is a breakdown of the cost of selling on Amazon.

Packaging Requirements

Amazon has norms for everything from the product type you can sell to the product’s pricing strategy. If you want to submit your product to the fulfillment center, you need to first fulfill the product packaging criteria. Once the packaging approval team approves your product, you can submit it in the inventory, and it is ready to sell.

Fulfillment By Merchant(FBM)

In the Fulfillment by Merchant(FBM) approach, the order is not fulfilled by Amazon. Instead, the merchant has to manage it from either the third party or by himself. Regardless of what way the merchant chooses, he needs to maintain the Amazon standards related to the product packaging as well as shipping. So, if you are a seller who offers exclusive or slow-selling products can go for the FBM approach. Here are some pros and cons of the FBM approach-

Pros to FBM

More Control over the Sales Funnel 

With FBM, the seller has more control over his sales funnel as he fulfills the entire order himself, taking care of the inventory, delivery, shipping, and return. This gives him more control over the entire process as well as sale.

Greater Margins

As in this approach, the seller is not dependent on Amazon for the order fulfillment, and they need not pay the fulfillment commission on the product sale. This tends to increase their margin share on each product sold. They can also save on the warehouse cost by finding a cheaper warehouse option and reducing the shipment charges by shipping the product themselves or choosing a more affordable third-party agency. 

More Scope for Brand Building

FBM offers a greater scope for brand building for the retailers. Through this approach, they can serve their customers in their own way. They can promote and market their brand in a way that complements their business idea. Also, they can interact directly with the customers, helping them to offer a more personalized experience.

Minimal effect from the changes in Amazon policies

Amazon often changes its fulfillment fees, storage fees, and pricing policies to improve its business. This tends to impose pressure on the sellers to make the changes accordingly. The FBM sellers do not need to worry about it.

Less Amazon fees

As the FBM sellers fulfill their orders themselves, they need not pay any charges for the fulfillment. The FBM sellers are only required to pay charges for the seller account, which is way less than the one with the FBA.

Cons of FBM

Limited Inventory Space

Amazon is the world’s largest marketplace, having infinite products as well as spectacular services for the sellers. With more than 150 million customer base, Amazon is leaving no stone unturned to serve its customers to its best. To contribute to the fact it currently has a 100+ fulfillment center with huge inventory storage spaces. The customers who opt for FBA need not worry about the inventory space. However, the FBM sellers need to make arrangements to store their inventory safely.

Less Powerful Buy Box 

To become eligible to win the buy box, the FBM sellers need to put in a lot of effort. They need to focus on product delivery and performance. FBA, on the flip side, has a slight edge in this respect. The probability of winning the Buy Box is comparatively high in FBA. 

Customer Service and Returns Responsibilities

With FBM, you need to handle your customer service and return yourself. You will have to pick up the order yourself in case of a return request. Though handling the customer service and support can give you a better insight into your customers and their demands, the cost associated with it cannot be denied.

Which option should you choose for your order fulfillment?

Every seller aims to make a profit and grow their business- the purpose of joining Amazon. However, merely joining Amazon cannot help if you are not cautious and careful during each step of selling your product on the marketplace. Order fulfillment is one of the essential processes in this. By now, you might have decided on the fulfillment option for your products, based on their advantages and disadvantages. However, if still on the fence, reach out to our Amazon marketing experts who will help you analyze your business needs and pick your business’s right option.

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