Fulfillment by Amazon (Amazon FBA) has become synonymous with speed and efficiency, but sellers may be sacrificing flexibility and scalability for the coveted Amazon Prime badge. Ever-evolving fees and surcharges as well as inventory limits based on changing requirements give sellers little flexibility, and a lack of visibility hinders growth.
While the benefit of FBA is guaranteed Prime status, a recent consumer survey revealed that 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.
This guide contains everything you need to know about offering 2-day shipping on Amazon and across all of your sales channels without relying on Amazon FBA. Learn how fulfilling Amazon orders through an outsourced fulfillment partner helps you build your brand through customized packaging, more access to customer data, and the ability to sell across multiple sales channels through a single fulfillment network.
What is Amazon FBA?
Amazon offers three fulfillment options for third-party sellers: Fulfillment by Amazon(Amazon FBA), Fulfillment by Merchant (FBM), and Seller-Fulfilled Prime (SFP).
Powered by Amazon’s internal fulfillment and logistics network, FBA’s primary purpose is to provide 1- to 2-day delivery (and, increasingly, same day delivery) to Amazon Prime members. FBA allows third-party sellers to store products in Amazon’s warehouses, and Amazon handles fulfillment, shipping, and customer interaction on behalf of third-party sellers. Amazon takes a percentage of sales and delivers product in Amazon Prime packaging.
Merchants are responsible for preparing and shipping inventory to Amazon distribution centers, and Amazon disperses the inventory throughout their network. 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 Amazon 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):
With FBM, sellers list on Amazon and handle 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 product safety in transit.
FBM does not include Prime status, but by changing your default handling time in your seller dashboard, you can still offer 2-day shipping without the Prime badge (more on that later). Studies show that most shoppers care more about fast shipping than they do about the Prime badge.
Looking for more tips for selling on Amazon? Download our complete guide, Selling on the New Amazon.
Amazon Seller Fulfilled Prime (SFP):
The SFP program is the best of both worlds and a win-win for both 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 was able to maintain 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 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.
Many sellers use Amazon as a marketing channel more than a sales channel. As one of the largest product search engines, shoppers often discover new brands on Amazon. Sellers looking to drive shoppers to their direct sales channels will only offer a limited product catalog on Amazon. If shoppers want accessories or additional color ways, for example, they can only find them on the seller’s ecommerce site. Having access to valuable consumer data through SFP is the only way merchants can leverage Amazon as a marketing channel.
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)?
Amazon 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:
1. Fast Shipping
FBA comes with the Prime badge, which is said to increase Amazon sales by up to 30%. However, FBM sellers can still offer free 2-day shipping, and they can advertise their 2-day shipping promise by updating their default handling days to zero (if their fulfillment partner can guarantee same-day fulfillment).
2. Brand Control
Sellers using FBM can create a custom storefront on Amazon full of conversion-driving content and have access to customer data for each sale. Additionally, FBM sellers can ship products in their own branded packaging to avoid confusing their customers.
When a shopper makes a purchase from a third-party seller on Amazon and then receives that product on their doorstep in Amazon Prime-branded packaging, they often associate the purchase with Amazon rather than the third-party seller. When the shopper wants to make a second purchase, they will go straight to Amazon without considering finding the merchant’s ecommerce site. There is even a risk that they will find a lower-priced competitor or Amazon private label replacement.
3. Inventory Control
FBA works well for shops selling standard-sized, fast-moving items. Otherwise, FBM is preferable for those that carry 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.
FBA is also notorious for slow putaway times. Once shipped to an FBA facility, products can take weeks to be checked in and ready to sell. This slows down time to revenue and increases the chance of missed sales due to stockouts.
4. 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.
While Amazon does have a program called Multichannel Fulfillment (MCF), it’s operated through the same fulfillment network as FBA, so sellers will face the same challenges across all channels: lack of visibility, slow putaway times, seasonal surcharges, and changing inventory limit requirements.
How do I set up FBM?
Two methods exist for setting up Amazon with FBM – in-house or outsourced.
1. 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, as they began to branch in to consumer sales on Amazon, they began to experience fulfillment pain points internally — namely, meeting consumer expectations for 2-day delivery.
As order volumes continued to grow, ECR determined they lacked the expertise and bandwidth to manage ecommerce fulfillment themselves. So, they evaluated outsourced FBM partners that could support the entire warehousing and fulfillment process and promise 1-2-day delivery.
2. 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 pick and pack fulfillment to shipping, freeing up merchants’ time to grow their business.
Ultimately, ECR chose Ware2Go, a 4PL provider owned by UPS, to manage their Amazon fulfillment. Ware2Go’s on-demand fulfillment structure and ability to provide complete coverage for all warehousing and fulfillment workflows them 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.
ikewise, 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.
How to Grow on Amazon without FBA
Amazon FBA’s restrictions often prove to be inadequate for fast growing brands selling 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.