Amazon fulfillment has become synonymous with speed and efficiency, but sellers may be sacrificing flexibility and scalability for the coveted Amazon Prime badge.
HyVIDA, the world’s first and only hydrogen-infused carbonated beverage, experienced the latter. Using Fulfillment by Amazon (FBA) for Amazon sales and a third-party logistics (3PL) provider for eCommerce, they found early success with Amazon Prime and online sales.
However, as revenue rose, they saw the limitations of this segmented fulfillment solution.
Customers loved the product but were receiving damaged items, leading to negative reviews. The added operational burden of managing multiple fulfillment channels and redundant distribution networks increased logistics and supply chain costs, as well.
Seeing that giving Amazon so much control was hurting brand equity and repeat business, HyVIDA switched from FBA to Amazon Fulfillment by Merchant (FBM). Rick Smith, CEO of HyVIDA, was told he would see a 30% drop in Amazon sales after dropping the Prime badge. Instead, not only did Amazon sales continue growing, HyVIDA more than doubled sales on their eCommerce site year-over-year.
This recent consumer survey’s findings help show why HyVIDA’s shift to FBM was so successful. More than 80% of Prime shoppers are just as likely or more likely to purchase a non-Prime product as a Prime product – as long as 2-day delivery is still promised.
Based on these results, it is easy to see why HyVIDA is not alone. Many shops with customized packaging requirements and a multichannel selling strategy are asking how to sell on Amazon without FBA – and without sales plummeting.
What is Amazon FBA?
Amazon offers three fulfillment options for third-party sellers: FBA (Fulfillment by Amazon), FBM (Fulfillment by Merchant), and SFP (Seller-Fulfilled Prime).
Powered by Amazon’s internal fulfillment and logistics network, FBA’s primary purpose is providing 1-2-day delivery (and, increasingly, same day delivery) of the eCommerce juggernaut’s orders to Amazon Prime members.
Similarly, FBA allows third-party sellers to store products in Amazon’s warehouses, where fulfillment, shipping, and customer interaction is handled on shops’ behalf. Amazon takes a percentage of sales and delivers product in Amazon Prime packaging.
Merchants are responsible for preparing and shipping inventory to Amazon facilities. Still, this is the simplest of the 3 fulfillment options for sellers of standard size items because Amazon handles the heavy lifting. Most importantly, FBA enrollment guarantees Prime status, placing products at the top of shoppers’ Amazon search results and conveying the 2-day delivery promise today’s customers expect.
The convenience and efficiency of FBA makes it possible for essentially anyone to sell on Amazon, but serious sellers looking to scale their brand will soon begin to see the limitations of FBA.
How can I sell on Amazon without FBA?
There are 2 ways you can sell on Amazon without FBA: Amazon FBM (Fulfillment by Merchant) and Amazon SFP (Seller-Fulfilled Prime).
- Amazon Fulfilled by Merchant (FBM): Sellers list on Amazon while handling all fulfillment, shipping, and customer communications themselves or through an outsourced order fulfillment partner. As such, FBM allows for customized packaging rather than Amazon Prime packaging, giving sellers more control over branding and items arriving intact.
FBM’s main drawback is that it does not include Prime status.
- Amazon Seller Fulfilled Prime (SFP): The SFP program is the best of both worlds and a win-win for merchants and Amazon.
Launched in 2015, SFP was created to clear space in Amazon’s warehouses and make room for their new private label brands. To make SFP attractive, sellers were granted Prime status and allowed to fulfill their own orders in-house or via an outsourced fulfillment solution.
As a result, Amazon gained additional warehouse space, reduced fulfillment costs, and continued maintaining a diverse SKU profile in the Prime catalogue. Sellers like Cambridge Audio saw numerous advantages, as well.
Using SFP, the premium audio products maker created a branded-Amazon storefront and fulfilled shipments themselves. They still had access to Prime’s more than 100 million members, while having FBMesque freedom and control over inventory and branded packaging. In the end, Cambridge Audio used Amazon to drive more traffic to their direct-to-consumer (D2C) and retail channels.
It is easy to see why SFP was extremely popular out of the gate. Unfortunately, it has been closed to new applicants for more than two years, leaving interested sellers only with the option to sign up for the waitlist.
In what ways is Fulfillment by Merchants (FBM) better than Fulfillment by Amazon (FBA)?
FBA is convenient for some sellers, but due to its strict size requirements and loss of brand control merchants should consider FBM for 4 reasons:
- Fast Shipping – FBA comes with the Prime badge, which is said to increase Amazon sales by up to 30%. Yet, as HyVIDA found, Prime customers’ biggest expectation is 2-day shipping and shops can offer fast shipping without Prime. All FBM listings should include a free 2-day shipping promise wherever customers expect to see the Prime badge.
- Brand Control – Sellers using FBM can create a custom storefront on Amazon full of conversion-driving content, along with stuffing customized, branded packaging with promotional flyers.
- Controlling Inventory – FBA works well for shops selling standard-sized, fast-moving items. Otherwise, FBM is preferable for those specializing in heavy/bulky wares, high value products, and seasonal items.
Products larger than a shoebox or weighing more than 20 pounds come with extra charges under FBA. Additionally, sellers with highly seasonal products often pay more for unused space in Amazon’s warehouses. This is because storage and average daily volume (ADV) minimums are based on peak season sales.
Profitability is hit even harder if most sales come in the fourth quarter due to Amazon’s peak season surcharges.
- Streamlined Fulfillment – Amazon is usually just one of several sales channels. FBM allows for integrating omnichannel fulfillment through a single network and platform. On the other hand, FBA requires segmenting Amazon orders separately from non-Amazon purchases, the latter of which would be fulfilled in-house or through a 3PL.
How do I set up FBM?
Two methods exist for setting up Amazon with FBM – in-house or outsourced.
- In-house FBM – Sellers who handle the entire fulfillment process themselves use their own warehouses, software, staff, and preferred shipping carriers. This can work well for companies in established markets, but expanding to new channels can create logistical challenges and divert precious time away from growing the business.
In-house fulfillment got the job done for ECR4Kids, a provider of children’s furniture and toy equipment, while they were selling B2B to established daycares, schools, and wholesalers. However, their D2C shift was so successful, they began to experience fulfillment pain points internally, including meeting consumer expectations for 2-day delivery.
As order volumes continued to grow, ECR determined they lacked the expertise and bandwidth to manage D2C fulfillment themselves. So, they evaluated outsourced FBM partners that could support the entire warehousing and fulfillment process and promise 1-2-day delivery.
- Outsourced FBM – Merchants rely on an outsourced fulfillment expert to take over the fulfillment process. A technology-first fourth-party logistics (4PL) provider handles everything from picking to packing to shipping, freeing up merchants’ time to grow their business.
Ware2Go is a 4PL created by UPS to help small-and-medium-sized online shops offer affordable 1-2-day shipping.
Ultimately, ECR opted for Ware2Go’s on-demand fulfillment structure and ability to provide complete coverage for all warehousing and fulfillment workflows. This allowed ECR to scale as-needed and promise 1-2-day delivery speeds, which has proven vital for maintaining Prime status. They also have saved 30% on shipping expenses and free up $700,000 annually existing a leased warehouse.
HyVIDA is another example. They moved away from FBA and consolidated fulfillment through Ware2Go’s network. This drove traffic to the beverage company’s most profitable sales channels and increased Average Order Value (AOV), doubling eCommerce sales year-over-year.
Likewise, UPS introduced Cambridge Audio to Ware2Go. The premium audio company required a strategic fulfillment partner with a nationwide distributed warehouse network that could guarantee 2-day shipping across their Amazon, online, and retail sales channels.
Implementing faster shipping led to a 58% increase in D2C sales. Also, Cambridge Audio’s expanded nationwide delivery footprint better serves their retail partners, many of which have minimal inventory storage space and keep few products on-hand.
The Bottom Line
FBA’s restrictions often prove to be inadequate for fast growing eCommerce shops selling unique items across multiple sales channels. Working with a 4PL, such as Ware2Go, allows these merchants to sell on Amazon without FBA and deliver affordable 1-2-day shipping.
To learn more about how Ware2Go can help you sell on Amazon without FBA, reach out to one of our fulfillment experts.