There is simply no denying that Amazon has become synonymous with eCommerce for the majority of shoppers. After all, as of September, amazon.ca was ranked as the 5th most visited website in Canada, and 1st for eCommerce and shopping.
For many Canadian businesses, it is simply a given to have a presence on Amazon, and many even go as far as to utilize Amazon’s FBA or Fulfilled By Amazon service as a means of further streamlining their supply chain.
As with so much of business, however, not every solution is right for every business, and despite all of its benefits, Amazon FBA may not be the right fit. That’s why today we’ll be looking at the service, and helping you decide if it is the right choice for you.
What is Amazon FBA?
If you are familiar with 3rd Party fulfillment, then the core concept behind Amazon FBA should be nothing new.
In short, a retailer stores their products at Amazon fulfillment centres, where they are picked, packed, and shipped to customers by Amazon employees.
It’s clearly a system that works: a 2021 study from Jungle Scout showed that 92% of Amazon merchants globally use FBA in some capacity, and 57% rely exclusively on FBA for their fulfillment!
FBA is certainly not the only option for merchants. Of that same group, 35% utilized a combination of FBA and FBM, or Fulfilled by Merchant. This model, as the name states, sees the merchant handling fulfillment directly.
Why Use Amazon FBA?
There are, of course, good reasons behind Amazon FBA’s strength as a service beyond simply the size and reach of Amazon.
Hands-Off Warehousing and Pick and Pack
As with any 3rd party fulfillment service, Amazon FBA’s greatest strength lies in saving merchants time and money by handling every step of the fulfillment process.
By storing inventory at an Amazon fulfillment centre and allowing Amazon to pick, pack, and ship orders, sellers save on the costs of staffing and warehousing, or otherwise spending the time and resources to fulfill orders themselves.
Amazon Prime Benefits
With over two million Amazon Prime members in Canada alone utilizing a service that taps into that market seems like a no-brainer.
Merchants who use Amazon FBA get the opportunity to offer free Prime shipping on eligible products, as well as having their products listed with the Prime badge, all with no additional cost.
It’s not uncommon for some companies to expect a high level of exclusivity from a business they are dealing with. One would assume that, in utilizing Amazon for their fulfillment needs, this would be the case.
Quite on the contrary, Amazon MCF or Multi-Channel Fulfillment, allows merchants the option to use FBA to fulfill orders not only from Amazon, but from other sales channels they wish to list on.
Cons of Amazon FBA
As mentioned earlier, every business is different, and there are drawbacks to Amazon FBA that may affect your business enough to steer you in the direction of alternate options.
Long-Term Storage Fees
If you don’t plan on having fairly rapid turnaround on your inventory, you may want to look elsewhere for your warehousing.
For any inventory that is held for longer than 365 days, Amazon will charge sellers a long-term storage fee based on either unit volume or per unit, whichever is greater.
Cost of the Service
At the end of the day, Amazon FBA has costs attached to the service, and depending on the state of your own business, these costs need to be factored in.
Specifically, smaller, inexpensive items may in fact cost more to hold in an Amazon fulfillment centre than one could reasonably charge for them.
For sellers who want more information, amazon offers a revenue calculator to aid in making an informed decision.
Product Preparation Requirements
Preparing your products to be shipped to an Amazon fulfillment centre is a notoriously intensive multi-step process. Sellers need to make sure every step of the prep process meets Amazon’s requirements to the letter, otherwise, risk having their inventory being prepped by Amazon employees for an additional fee, or even returned to the seller at their expense!
3 Key Steps for Preparing to Ship to Amazon
- Set Inventory Quantities
In the FBA Dashboard, select the quantity of each item you plan on shipping to the fulfillment centre. Be mindful of notifications such as an Excess Inventory warning and adjust accordingly.
- Prepare and Label Your Products
Ensure that all your products adhere to Amazon’s FBA prep requirements, all UPC labels are clear and accurate, and products are packed with the correct dunnage, and in the correct packaging.
- Prepare Your Shipment
Select the correct shipping method for your products (LTL or Parcel) and choose the carrier you will be using. Once you have scheduled and paid for your shipment, apply the correct shipping labels to your products.
Freightcom can Help with FBA and More!
Amazon FBA can be a great tool if your business is in the right position, but it can be a lot for a small business owner to manage on their own. With Freightcom, you can manage your shipments to Amazon fulfillment warehouses directly on our platform as you prepare your shipments with our carrier partners.
If you find that Amazon FBA is not the right fit, Freightcom has solutions for you for your FBM Orders! Looking to automate your Amazon FBA process, our ClickShip platform is designed to manage order integration and shipping for many product categories, including eCommerce integrations with multiple online platforms and marketplaces!
Looking to give your business an edge? Contact one of our shipping experts today by calling 1-877-335-8740 from Monday to Friday, 9am to 5pm EST, or by email at firstname.lastname@example.org and see how Freightcom can help with all your shipping needs.