Blog Posts Find the Best Fulfillment Option for Amazon Marketplace Orders
Amazon Marketplace sellers who utilized a Merchant Fulfilled Network (MFN) reported higher profit margins and greater lifetime profits than those who opted for Fulfillment by Amazon (FBA), according to a recent study by Jungle Scout. They also launched their businesses faster and spent less money to do so.
Of course, a MFN isn’t the right option for every marketplace seller. Saddle Creek’s latest ebook is designed to help you determine whether MFN or FBA is the best fit for your business.
Following is an excerpt…
FBA or MFN? 5 Factors for Comparison
Both FBA and MFN have advantages. The right choice depends on your needs and priorities. Following is a comparison of each fulfillment option in light of 5 key factors.
1. Cost to fill orders
With FBA, you pay a per-unit fee for each item sold that covers picking and packing orders, shipping and handling, customer service and product returns. Current fees range from $1.97 to $5.42 for each standard size, non-apparel item and $2.92 to $5.95 for apparel items, with additional charges for oversized or heavier items.*
You also will pay storage fees based on the daily average inventory volume that your merchandise occupies in Amazon’s fulfillment center. These fees can quickly erode narrow margins.
Since you’re handling your own fulfillment and distribution, you can eliminate the cost of shipping products to Amazon’s fulfillment center as well as FBA storage and per-unit fees. As a professional seller, you can set your own shipping rates (except for books, music, videos and DVDs) and receive that amount as a shipping credit.
With MFN, you also have the ability to create efficiencies and reduce supply chain costs.
2. Order volume
If you have a low monthly order volume, FBA could be an effective option since you’re unlikely to achieve the economies of scale required for efficient and cost-effective fulfillment and distribution. As your volume grows, however, FBA fees can add up.
In addition, if specific items start to move rapidly, Amazon often purchases quick-moving SKU’s and resells them themselves.
By selling high-moving items directly to consumers, rather than wholesale to Amazon, sellers are able to retain higher margins. As business grows, order volume is likely to reach a tipping point – typically around 10,000 orders per month – where it makes more sense to shift to a MFN.
One of the key selling points for FBA is convenient, turnkey service. This is especially valuable if you are just getting started and lack the expertise and resources to handle fulfillment and distribution themselves.
If you have experience in fulfillment and distribution, you may prefer to retain control of those processes. Another option is to enlist the help of a third-party fulfillment provider. A 3PL will have the facilities, staff and technology necessary to manage these operations for you.
4. Fast, Free Shipping
Free, two-day (and now one-day) shipping are a popular feature of Amazon Prime, and using FBA makes sellers eligible for Prime shipping. However, during the coronavirus pandemic, Amazon suspended delivery guarantees for Prime shipping.
With a MFN, you have the option to participate in the Prime program using Seller Fulfilled Prime (SFP). You (or a 3PL on your behalf) simply pick, pack and ship your own Prime orders and meet the specified one- or two-day delivery requirements. Alternatively, you can bypass Prime and opt to offer free or low-cost shipping on your own.
5. Control of Customer Relationship
In giving ownership of your fulfillment operation to Amazon, you also must give the company full access to your consumer data. In doing so, you lose the opportunity to build a relationship with your end customers.
With MFN, you have complete control over your product and the fulfillment process. You’ll also maintain your own customer data, which can help to ensure data security. This additional level of control allows you to communicate directly with consumers and work to develop a loyal customer base.
To learn more about the options – and how a third-party provider can help to support a Merchant Fulfilled Network, read the ebook.
* As of June 2020