Fulfillment by Amazon: Is It Right for Your Business?
Factors to Consider When Selecting a Fulfillment Partner
By Esther Kestenbaum Prozan
Everyone knows the retail behemoth that is Amazon, but not everyone knows Amazon also has a fulfillment arm to their business. Sellers can use Amazon for processing and shipping e-commerce orders to buyers. This is certainly an attractive option for some, depending on your retail ecommerce business. With more than 110 fulfillment centers in the U.S., Amazon customers use FBA to ship, pack, and handle customer service and returns.
Given this, Amazon may seem like a no-brainer partner for ecommerce brands. And for some it is the right choice. HOWEVER it might not be right for every business. Sure, having Amazon’s name and scope to reach potential buyers is tempting, but it also means you may not have a strong brand connection with your customers, which ultimately impacts your brand reputation in both good and bad ways. Here are other key factors to consider when deciding if FBA is right for your business and what else to think about when selecting a 3PL:
COST: FBA charges for every service it provides, including inventory storage, long-term storage, inventory removal, order fulfillment, returns processing, and “unplanned” services (for example when inventory arrives at the fulfillment center without proper labeling or preparation). There’s also Amazon’s Inventory Performance Index, which grades customers on how good a job they’re doing in balancing inventory levels and sales. A low score results in Amazon placing limits on storage of the poor performer’s goods.
For a new, small, or growing e-tailer, dealing with such a big entity for its fulfillment can be daunting.
ABILITY TO SCALE: Depending on where the e-tailer is in its growth, it makes sense to research smaller, but well-established fulfillment providers. While it may sound simple, the task of fulfillment is rather complicated and needs to be done by experts in that domain. From picking and packing, to storing inventory, to working with transportation providers for shipping, it’s crucial to select the right partner for ecommerce fulfillment. Look for a provider that has the ability to scale quickly to meet fluctuating demand, as this most certainly can impact customer service.
BRAND CONTROL: Again, while some may find comfort in having the expertise of Amazon, others are wary of leaving their brands in Amazon’s hands. Brand is a company’s most valuable asset and nothing can jeopardize that. Furthermore, a fulfillment provider will be trusted with your inventory! So look for fulfillment providers that want the relationship to be less transactional and more of a partnership to help you deliver on your retail promise.
Often e-tailers are looking for a more personalized relationship with their fulfillment providers so they can be sure their providers are equally invested in making sure the brand succeeds. After all, a fulfillment partner will be entrusted with all of your inventory!
Again, outsourced fulfillment isn’t a transactional business. It’s actually the opposite. It’s the most important vendor relationship you’ll have in the supply chain process. Particularly for DTC brands, ecommerce fulfillment is the single biggest line item. Thus, it’s important to research the pros and cons of each provider before making a selection.