In today’s world, the majority of people shop online, and Amazon is the leading e-retailer in the United States with over $386 billion in sales in 2020 alone. As an Amazon seller, you are most likely familiar with their FBA (Fulfillment by Amazon) program. Essentially, FBA sellers ship the inventory to Amazon, advertise their products for sale on their platform, and Amazon takes care of the rest: pick, pack and ship as well as provide customer service.
Amazon is also the largest third party logistics (3PL) provider in the world, permitting sellers to utilize Amazon’s infrastructure to provide e-commerce fulfillment on their behalf. While convenient, it is not always easy to sell products on Amazon.
There are multiple setbacks that small- to medium-sized organizations may encounter while using Amazon as a 3PL for e-commerce and may otherwise benefit from using services from a separate third party logistics company.
Amazon fulfillment by 3PL
Today’s market is the consumers market, there are three key elements involved in the successful sale of physical goods which are:
· Product quality
· Quick and reliable shipping times
· Product differentiation
While finding and developing the right product for your target customers is up to you, marketing and distribution are areas that can be outsourced to others.
Amazon works well when it comes to order fulfillment; its billion-dollar operation is a model of efficiency that cranks out thousands of orders every day. However, this is also one of their biggest weaknesses. To handle this huge volume, Amazon’s processes have to be as streamlined as possible. This means zero deviation from the center. Every item is packed, wrapped, and sent the same way every single time. And by default, they are packed with Amazon-branded boxes (unless the seller opts to pay more for a generic one).
This process is fine when you are shipping everyday items or low-cost consumables. But if you want to stand out from the crowd then this method is not right for you.
For the customer or consumer experience, everything should be about your brand—not the vendor. The customer should know the brand, which leads to a high brand recall and helps to increase profitability of your brand by increasing revenue.
One of the best options to accomplish this goal is implementing branded packaging, gifting or some other means of differentiation in your fulfillment process. This is only possible when you use the services of the right 3PL provider who is flexible and understands your needs. Partnering with the right 3PL eliminates this block.
Expert Account Management Fulfillment Services
No one wants customer service that doesn’t take care of your issues in a personalized manner. What happens when your customer has an issue with your product? How would you handle it?
If you use Amazon FBA and Seller Central, you are in the same boat as one of Amazon’s end customers. You have a 1-800 number which is an automated system, and an entry-level call-center worker will try to resolve your issue. This worker is unfamiliar with your business and your company’s history and less likely to resolve the issue through a personable manner.
Another issue is the back-and-forth emails where cases are mistakenly “closed” before the problem is fixed.
You might get passed around from one customer service center to the next as you wait for a resolution that never arrives. This presents a risk where you may ultimately lose revenue or time which would otherwise be used for enhancing your business.
A separate, customer-focused 3PL service provider solves this personalization issue. Working with a 3PL service provider is extremely beneficial because you get a dedicated customer service representative who not only takes care of your issues with personalization but also understands your business.
Fulfillment Center Inventory Control
Having no or less control of your inventory can affect your business the highest. Buying trends keep on changing and savvy online sellers stay ahead of the competition by adjusting their strategies to meet these changes.
One major disadvantage of Amazon’s FBA program is that few sellers are required to send a huge portion if not all of their inventory to an Amazon fulfillment center. By relinquishing physical control of their inventory, they can’t adapt as quickly which puts them at a huge disadvantage.
In this COVID-19 pandemic in March 2020, Amazon prioritized essential products in their marketplace. As a result, sellers who were deemed as selling non-essential goods faced huge delays in delivery times and Amazon was not accepting inbound goods from them to replenish their stocks.
This was a huge loss for few sellers as sales dried up and they could not sell their product elsewhere since their inventory was stuck at an Amazon fulfillment center. Amazon also restricted FBA entry for the 2020 holidays which harmed many sellers.
With the growing number of sales channels like Big Box stores, online retailers, and marketplaces (Walmart, eBay, etc), it’s always advantageous to have control of the physical inventory so sellers can more easily meet the demands of their end-consumers. Also, for most growing brands, your business is constantly changing and adjusting to your customers’ needs is essential. Having access to your inventory and being able to access your own fulfillment center or that of your 3PL logistics providers to make these changes is something that has to be considered. Hence, a separate 3PL is most beneficial in this case.
3PL Costs are lower than Amazon FBA
When an e-tailer does as much business as Amazon, there is an enormous amount of infrastructure and people involved to make it successful. Amazon FBA incurs huge costs and increase in costs every year.
Amazon offsets their maintenance costs by regularly increasing the pricing for their fulfillment and inventory storage fees and they have done this a few times over in the last decade. With the tremendous overhead and the massive number of packages are shipped each year, Amazon is actively looking for new ways to reduce the operating and shipping costs.
Being a seller you are likely paying for these shipping losses and future investments through Amazon’s FBA rate. fulfillment fees by Amazon in 2021 have increased as much as 20% in the last 18 months. On the other hand, independent logistics companies don’t charge extra fees for busy periods and maintain more consistent overall storage pricing.
In this case going with a 3PL service provider makes sense as you will save on additional payout and this adds up to your revenue.
Amazon FBA prep support benefits
Unlike in Amazon most 3PLs have dedicated account managers to help you manage sales growth and quickly resolve any issues, should they arise. They have a large group of experts working to move your product which includes everything from distribution infrastructure, picking and packing, shipping and handling. Your products will be in the hands of professionals safely.
If you are serious about selling your products on Amazon, ensure your strategies are top-notch. The best way to ensure you remain flexible and get the best out of Amazon is to use a separate 3PL partner. If you need help finding that perfect strategy, connect to a trusted Amazon advertising partner to help you achieve your full potential on the platform.
