I recently read with great interest an article targeted at retailers who might be considering whether or not Fulfillment by Amazon was the right solution to be their ecommerce fulfillment service provider. For anyone who might be considering the FBA option, I wanted to share a checklist of my own as a further aid in your decision making process.
Let’s get one thing out of the way before we begin: I shop at Amazon. I’m an Amazon prime subscriber. I like Amazon and do business with them regularly. But, I don’t think they’re always the best choice for merchants with online retail businesses that are sufficiently large to warrant having a third-party partner.
Flexibility
If you need flexibility from your third party logistics provider Amazon probably isn’t your best choice. Amazon’s distribution network is massively impressive in scale and throughput capabilities, and notcoincidentally mandates compliancy and uniformity from its suppliers, vendors and clients. Be prepared to adhere to stringent inbound inventory management requirements including labeling, adoption of a specific Amazon product identifier for your products, and – depending on your product assortment – it may be necessary for you to solicit and secure specialized approval to sell some goods if they fall in a protected category or product type.
Amazon’s need for this rigidity is clear: they are a shipping machine. But the very scale that makes them so desirable as a potential outsourcing partner may be their biggest weakness. If, for instance, your business needs include kitting, assembly, or frankly any specialized customization I can almostguarantee that Amazon isn’t your best choice.
Personalization
OK – so maybe you’re willing to make some sacrifices in order to reap the rewards of the vast FBA network. But, make sure you include the following in your decision-making process:
- Do you want your packages to reflect your brand? It seems like a small detail, but it’s not an available option to Fulfillment by Amazon customers. FBA clients can choose standard Amazon branded packaging, or FOR A FEE can elect to use brand neutral packing materials.
- Is a 10 a.m. cutoff acceptable to your west coast customers who want to place next day delivery orders on your website? It better be, because for multi-channel fulfillment customers of FBA, the cutoff time for order delivery is 1 p.m. ET.
The scale of the Amazon network is unquestionably staggering, but that size comes at the cost of personalized solutions where your 3PL vendor is as invested in the growth of your business as you are and places as much value on relationship-building and partnership as they do on service levels and KPIs.
Reach
Basketball coaches will tell you height can’t be taught – either you have it or you don’t. Geographic reach is pretty analogous in the order fulfillment industry and warehouse locations are often chosen to maximize proximity to customers, clients, or carrier hubs.
Amazon’s global network can’t be beat, but don’t make the mistake of over-buying, if your needs aren’t global. And, make sure youdon’t overlook the cost of shipping goods to your warehouse when calculating the total cost of your distribution network Remember you have to get your inventory to their warehouse before they can deliver it for you.
Sanity check: from Jay Group’s Pennsylvania location ground shipments reach 55% of the US population in less than 2 days. We’re also conveniently located in the mid-Atlantic region close to east coast ports and metropolitan centers of commerce and industry. Just sayin’…
Cost
It would be impossible in this article to assert any sort of competitive analysis regarding pricing, but here are some general guidelines you’ll want to carefully consider and make sure to ask your vendors about when you’re reviewing costs.
- What will inbound freight to get your products to them cost you?
- What will adherence to their rigid requirements add to your total product handling costs?
- Do you need a vendor who’ll work with you on net terms? FBA is set up to either charge your credit card or offset from net sales to customers.
Exclusivity
For all of the good that comes from partnering with Amazon, one thing they can’t offer you is exclusivity. If you sell your products through their marketplace, their shopping experience forces retailers to directly compete for each consumer at the point of purchase and for all tenants of the store to share content (whether that’s a time-saver or stifles your ability to differentiate is up to you).
Worse still, are the horror stories told by customers who find that their independent online stores are competing – and losing to the 800 lb. gorilla that is Amazon whose SEO mojo is incredibly difficult to beat.
I wouldn’t classify either of these use-cases as ideal.
Conclusion
The FBA product offering is compelling and may be a great fit for some businesses, but for companies who may desire specialized services or who want to differentiate themselves from their competitors it’s an inflexible platform that may leave you vulnerable to additional costs to mitigate compliancy issues. Before you asume FBA is best, why not consider putting your job out to an RFP and seek our input?
Contact us for a free evaluation!
