Amazon’s global scale is staggering. Touting state-of-the-art international logistic capabilities across 19 countries, catering to more than 300 million customers worldwide, they are a powerhouse when it comes to e-commerce fulfillment capabilities.
WHAT IS FBA?
Fulfillment by Amazon (FBA) is what Amazon calls its fulfillment service, where they help sellers store, pack, ship orders and handle returns and exchanges. Amazon operates 185 fulfillment centers worldwide in over 150 million square feet of space, most of which are located in the US (110) and EU (40), with more to come.
FBA enables sellers to offload warehousing and shipping duties to Amazon. This simplifies inventory management and allows sellers to focus their efforts on other areas of the business. Sellers send inventory to the fulfillment center, and Amazon packs and ships it to customers when they place orders. With Amazon’s vast network of fulfillment centers, FBA allows sellers to offer fast shipping, including same-day delivery for eligible orders. It also simplifies customer returns, all which are essential in cultivating the best possible customer experience.
HOW DOES FBA WORK?
- Ship your inventory to a designated Amazon fulfillment center.
- Amazon receives your inventory, sorts, distributes them throughout their network, and stores them in their fulfillment centers.
- When a shopper places an order for your product on Amazon, Amazon processes the transaction, picks and packs for shipping, and sends it on its way to the customer.
- Amazon updates the customer with shipping notifications, tracking, follows up with customers automatically to request a product review, and processes customer returns, if any.
THE BENEFITS OF UTILIZING FBA
- FBA is responsible for your inventory’s warehousing and logistics, enabling you to free up additional resources for other aspects of the business. This flexibility could mean bigger profits and little legwork.
- Amazon partners with major couriers such as USPS where they receive below-market rates; hence, utilizing FBA’s fulfillment is often the most cost-efficient way to go.
- Amazon handles customer service for all FBA orders including processing customer returns.
- When FBA distributes your inventory across their network, they will allocate inventory based on regional demand. This ensures orders are delivered to customers using the fastest option.
- All FBA product listings will sport a Prime badge. This means that it is eligible for fast and free shipping for Prime members. Amazon’s search algorithm values swift delivery times and consequently gives your listing a better chance of showing up to Prime members.
- Remote fulfillment lets you sell your FBA inventory across borders, saving you the trouble of managing multi-country inventory, cross-border logistics, and import duties. FBA Inventory in the US can be Prime-eligible and fulfill orders to customers in Canada and Mexico.
- Sellers who manage other sales channels can utilize Amazon’s Multi-Channel Fulfillment (MCF) service to fulfill non-Amazon orders via FBA.
THE DOWNSIDE OF AMAZON FBA
- Amazon started restricting storage limits for FBA in early 2020. It then implemented ASIN-level restock limits which, as of Q2, 2021, is replaced by storage-type restock limits. If your limit is being used by slow-moving products, preventing you from restocking your winners to meet demand, you’re losing sales.
- Storage and fulfillment fees can add up, making accurate forecasting and inventory optimization a must.
- Products and boxes shipped to Amazon’s fulfillment centers must comply with Amazon’s packaging, and prep requirements or they may issue fines or, worse yet, reject them.
In short, Amazon’s FBA service offers various perks that enable sellers to grow their business and give them a competitive edge. At the same time, you’ll have to play by its rules and abide by stringent policies, which in turn forces you to stay on top of everything.
Conversely, sellers can opt to self-fulfill orders through Amazon’s Merchant-Fulfilled Network (Fulfillment-by-Merchant or FBM); it’s hard not to find FBA appealing with its many perks and features.