Advantages and Disadvantages of Fulfilled by Amazon

Amazon is the largest online retailer in the world and many e-commerce sellers rely on the platform to list their products and generate revenue. Read about whether you should start selling on Amazon, as well as some of the benefits, fees and tools Amazon has to offer. While the most common method of managing orders from Amazon is still seller fulfilled (orders are exported from Amazon and the seller picks and ships stock from their warehouse), the Fulfilled by Amazon (FBA) method of order fulfilment is on the rise with nearly half of all of Amazon’s American selling partners taking advantage of FBA in 2020. 

There are a number of pros and cons of Amazon FBA to consider before committing to the method, which this blog will help you to uncover.

What is Fulfilled by Amazon (FBA)?

Fulfilled by Amazon allows you to ship stock in bulk to an Amazon fulfilment centre, where it will be stored. Upon receipt of an order, Amazon will pick and despatch the order from your stock to the customer charging you for the storage, handling, and shipping.

Can any business become an FBA seller?

Any Amazon seller is eligible to become an FBA seller. It’s really simple to begin selling on Amazon and all you’ll need is the following: 

• Business mail address or Amazon customer account
• Chargeable credit card (international cards are also accepted)
• Valid passport or ID. Identity verification protects sellers and customers
• Company registration details, including VAT number

As you set up your Seller account, you’ll be required to choose which plan best suits your business:

• Individual - for if you sell fewer than 35 items a month, you don't need advanced selling tools or programs or you're still deciding what to sell - £0.75 per item fee
• Professional - for if you sell more than 35 items a month, you want access to APIs and more selling reports or you want to sell with programs like Launchpad or Handmade - £25 per month subscription fee (regardless of how many items you sell)

Both of these plans mean you are able to use the Fulfilled by Amazon (FBA) fulfilment service.

It’s important to mention that Amazon demand a high level of customer service from all sellers - including FBA sellers, and you must adhere to the following performance targets: 

• Order defect rate (a measure of a seller’s customer service standards): < 1%
• Pre-fulfillment cancel rate (initiated by the seller before shipment): < 2.5%
• Late shipment rate (orders that ship after the expected date): < 4%

4 Advantages of Amazon FBA

FBA has many advantages for retailers and offers several benefits such as:

1. Ease of expansion 

If you’ve identified that for your order volumes, you need more space, utilising Amazon’s network of warehouses rather than sourcing additional space yourself can be a cheaper and more convenient way of expanding your operations. You can even import orders from other marketplaces, to be packed and shipped from the stock you hold with Amazon.

2. Preferential rates on courier shipments

As an FBA seller, you’ll get access to Amazon’s carrier partners, which can offer discounted rates for both your parcel deliveries and replenishment pallet shipments.

3. Offer speedy shipping options

Using Amazon’s existing shipping network is a quick and simple way to be able to offer your customers the fast shipping they want and have come to expect. These can include Prime two-day shipping as well as same day or next day delivery. In addition, FBA orders are eligible for free delivery when brought on Amazon.

4. Decrease in traffic through your own warehouse 

As you’ll be outsourcing fulfilment to Amazon, traffic within your own warehouse could be reduced. This could give you the opportunity to streamline your workforce or be more cost effective by changing shift patterns.

4 Disadvantages of Amazon FBA

There are however some cons for retailers using Fulfilled by Amazon to consider:

1. Cost

Amazon FBA is not free. You’ll be charged for storage every month and additional fees for handling and shipping will kick in once a sale is made. It’s crucial to factor these charges into your sale price, or your profit margins could quickly reduce.

2. Visibility 

Visibility is a key concern for inventory levels, order status and returns when using any outsourced fulfilment centre as business owners need to keep track of their stock and revenue.

3. Security

A third-party logistics company working for a retailer utilising Fulfilled by Amazon will need an Amazon Seller login to see key information such as order statuses and stock levels which can provide security and data concerns.

4. Replenishment Shipments

Replenishment shipments can be quite labour intensive as the full details of these shipments need to be raised with Amazon and they must meet Amazon’s specifications for goods entering their warehouses.

Fulfilled by Amazon – Fulfilled with Mintsoft

This is where Mintsoft’s FBA solution can help. With the launch of Amazon’s Selling Partner API, software companies now have more ability than ever to automate some of these processes and exchange information with Amazon without the need for CSV uploads or dated EDI connections.

Our solution provides FBA order status and stock level visibility, the ability to send orders from any channel to Amazon for fulfilment and sync Amazon FBA stock levels to third parties and raise replenishment shipment advice with Amazon all within the Mintsoft platform.

This allows sellers to increase security and warehouses to minimise the effort required to handle FBA orders and replenishment shipments while opening the FBA benefits to all your selling channels. Our aim is to provide the functionality you need to connect, optimise, and grow your business. 

Read more about our Fulfilled by Amazon solution. 

If you’re ready to take a look at it working in action, please book a personalised demo with our product experts.