As an Amazon seller, you need to face a key choice, that is, use FBA shipments, since the delivery of the MFN (Merchant Fulfilled Network) delivery, or both.
The seller needs to determine which shipping method to use based on factors such as the size and scope of the business and the product.
Let’s explore further here.
FBA vs Self Delivery: What is the difference?
Sellers using FBA need to pay a fee to store their products in Amazon’s logistics center, FBA sellers can therefore enjoy Amazon’s world-class logistics and distribution services.
When a customer purchases a seller’s FBA product, Amazon receives this information, picks the goods from the shelf, packages it, and ships it.
Amazon will also provide customer service for all FBA products.
Amazon’s FBA fees cover these services, and these charges are based on the size and weight of the goods sold. In addition, Amazon also collects short-term and long-term storage costs, so the longer the items are stored in the FBA inventory, the more the seller will bear.
From the point of view of shipment, simply refers to sellers who ship directly from their homes, businesses or warehouses after receiving orders through the Amazon platform.
This means that managing inventory, packaging, arranging distribution, and customer service are the direct responsibility of the seller.
There is also the seller SFP (Seller Fulfilled Prime), which is a relatively new logistics option for rewarding excellent sellers of self-delivery. Amazon SFP-qualified sellers can enjoy the benefits of FBA without sending goods to the Amazon Logistics Center.
This means that excellent sellers with their own logistics systems can win Buy Box as frequently as FBA sellers, and as long as they can maintain a high seller target, they will not have to bear FBA fees.
What are the advantages of using FBA and shipping?
There are many advantages to using FBA, especially for high-margin sellers that can withstand the changing Amazon FBA fees.
One of the major advantages of FBA is that you are qualified to offer Prime delivery services to your customers. This will not only give you access to Amazon’s Prime customers, but also increase your chances of winning Buy Box, because “logistics options” play an important role in the Amazon algorithm, and FBA listing will be given priority.
As an FBA seller, regardless of the size of your business, you can enjoy the logistics options offered by Amazon. You can also take advantage of Amazon’s superior transportation and distribution network and enjoy Amazon’s shipping discounts.
Amazon customers are particularly fond of quick delivery, and they are already accustomed to using Prime’s free 2-day delivery advantage.
Another advantage of FBA is that many Amazon customers know what they want and are willing to pay for it. Amazon says almost half of its customers refuse to buy from sellers who are not FBA. This makes sense, because for those who subscribe to Prime, they focus not only on distribution speed, but also customer service.
Using FBA is a way for sellers to distinguish themselves from competitors. You will get a higher ranking in Amazon search results, and customers are more likely to choose your listing.
Amazon can even allow customers to sort through search results based on which sellers are FBA sellers to further increase FBA business.
The disadvantages of using FBA
As any FBA seller will tell you, the main drawback of FBA is its cost. Since Amazon is responsible for all inventory management issues, Amazon can charge its services for what it considers reasonable.
Amazon will charge a monthly fee per cubic foot of warehouse space.
Amazon also charges long-term inventory inventory for slow-moving products. These fees are designed to prevent sellers from shipping slow-moving inventory to FBA logistics centers, thus taking up valuable inventory space.
This makes FBA particularly expensive for long tail products because long tail products may need to be idle for some time before being purchased.
One way to cope with this cost is to use Amazon’s Inventory Health Report, which shows how long inventory stays on the shelf and whether you are replenishing inventory too often or not often enough.
As mentioned earlier, FBA also collects logistics costs for purchasing, packaging, shipping and handling, customer service, and product returns, based on the size and weight of the item. Using the FBA Revenue Calculator to calculate how these costs will affect your business is critical.
For sellers shipping to multiple FBA logistics centers, because this may erode the profitability of the seller, in order to avoid this situation, the seller must pay extra for Amazon’s “Inventory Placement Service”. The unit cost, which allows the seller to ship to a logistics center that is less than Amazon recommends.
Perhaps most importantly, sellers must comply with the shipping standards of each Amazon FBA product type. Before shipping to the FBA Logistics Center, you need to make sure you know this!
The disadvantage of using self-shipment
A clear advantage for sellers using self-delivery is that they can ensure that their product packaging is perfectly suited to their product. This can reduce the number of product damages reported by customers and fewer returns.
Self-shipping sellers can also use custom packaging to distinguish them from their competitors.
Further, sellers can use custom receipts and even add a handwritten letter of appreciation to their customers.
Of course, the obvious disadvantages of having to deal with packaging and shipping are also self-shipping. What’s worse, since the delivery of the seller must handle customer service and return issues. These tasks are often time-consuming and sometimes difficult, so from this perspective, FBA fees are often worthwhile.
Another major drawback of self-delivery is that the buyer is not always happy to use it. It’s not always clear how much of an impact this will have on your business, but the fact is that Prime users spend more on average than non-Prime shoppers; moreover, they also tend to buy Prime products rather than non-Prime products. After all, this is the privilege that they have spent to enjoy.
Compared to your FBA competitor, using self-shipping may also reduce your chances of winning Buy Box.
Some sellers are more suitable for themselves by testing both shipping and FBA. Sometimes delivery and FBA have different advantages for the same seller, depending on the product being sold.
For example, if your product has a specific packaging problem or if the target buyer does not have a specific requirement for the delivery speed, shipping may be a better option. Moreover, for heavy or bulky items, sellers may also prefer to use self-shipping so that they do not have to bear additional shipping costs.
On the other hand, FBA may be more effective for large-volume Amazon sellers because they can’t afford to spend a lot of time (or hire employees) to handle packaging and distribution of large orders.
Which typical seller can benefit from FBA or from shipping?
Amazon sellers who can take full advantage of their shipments, usually those who already have warehouse and transportation systems. If you have a warehouse (or several), employees, and a trusted logistics network, you can consider using your own shipping to get a higher profit margin.
Even better, if you have an excellent seller metric, you can apply for Amazon’s Seller Fulfilled Prime (SFP) and enjoy FBA benefits at the same time, without having to pay FBA fees.
If you have an e-commerce site or physical store, you can complete orders more easily than others. If you can handle your shipments, you will save yourself the next storage and logistics costs.
On the other hand, FBA may be a better choice if your company cannot complete orders quickly and efficiently. Small sellers can benefit from FBA because many buyers are actively looking for products with the “Prime shipping” logo.
Larger sellers can also benefit from FBA, where sellers can strategically order shipments for some orders, and then use FBA for products that are more suitable for FBA.
Any seller with a high sales-rate product can benefit from FBA because they can avoid long-term storage fees.
Seller Experience: Praise and Complaints about FBA and Delivery
The main complaint of sellers to FBA is that Amazon’s employees are not always able to properly package their products, at least by their standards.
This seems to be due to various factors, including the fact that sellers do not always let Amazon FBA know what their products are and tell Amazon how to ship them.
For example, some sellers complain that the products shipped by Amazon FBA have been damaged at the time of delivery or leaked during transportation.
Other sellers believe that the way to avoid this situation is to mark the product as “one unit, do not open”, do not mark it as “ready to ship”, or use self-shipping channels.
Of course, Amazon sellers who think the FBA experience is poor also think that the cost of the service is too high. Even some companies that use FBA successfully will find the price too high.
To reiterate, sellers should use Amazon’s inventory health report to better manage the cost of FBA.
The main complaints from sellers about self-delivery are: They will lose business to FBA sellers
Unfortunately, at this point, Amazon is unlikely to change in the direction of benefiting third-party sellers. As Amazon expands its own logistics network, it may increase the price paid by individuals and businesses rather than decrease it.
Amazon is also unlikely to stop promoting companies that use FBA.
A small complaint from sellers about shipping is that shipping and customer service are often time consuming and difficult.
Return is another controversial area for the two camp sellers.
FBA accepts returns regardless of whether the seller agrees with the buyer’s reason for return. On the contrary, sellers from the delivery often do not accept returns, even though they may be expected to do so.
This further makes FBA more attractive to buyers, which also means that FBA sellers can enjoy a more reliable reputation as a whole.
Alternative products and FBA
For FBA sellers, alternative products are the same products that can replace each other.
For example, two brand new iPhones that are well packaged, have the same functionality, include color, and are alternative products.
In order to complete Prime orders in a timely manner, Amazon may first deliver an alternative product to the FBA inventory from another seller in the distribution center closest to the buyer.
Of course, after this Amazon will “get back to the original owner.” However, sellers will only receive payment for the items they sell. Although Amazon replaced their alternative products, Amazon does not regard these products as “sold”.
FBA VS From Delivery: Summary
FBA sellers can provide Amazon’s shipping options.
This means that FBA sellers can better separate themselves from competitors and win Buy Box. However, FBA sellers need to bear additional costs, Amazon will charge a monthly fee for the warehouse space used.
Small businesses and those who do not have the ability to distribute and provide customer service can best benefit from FBA, and high-volume sellers can benefit greatly from FBA.
Sellers who deliver goods have the advantage of packaging and shipping products in the way they want. They can also add unique personal elements to their packaging, including handwritten thank-you notes. But it also means that they must pick, pack, ship, and handle customer service.
Another downside from delivery is that many buyers are not keen to buy from sellers.
Sellers who already have transportation systems and warehouses can best use their own shipments.
The main complaint about FBA is the failure to pack and cause a return. One solution is to be more careful on the label and explain product information to Amazon.
The main complaint about self-delivery is that they will lose some of their business to FBA sellers.
Unfortunately, there is no direct remedy for this. However, sellers should be as generous as possible in terms of return policies from shippers to improve their ability to compete with FBA sellers.
Finally, top rated self-delivery sellers are eligible to apply for Amazon’s Seller Fulfilled Prime project – Amazon’s third logistics option, which enables top self-delivery sellers to enjoy the same Prime qualifications and other benefits as FBA sellers.