Selling on Amazon: What fulfillment to choose?
Lets first list the fulfillment options that a seller may have when selling on Amazon and then go through the details one by one. The fulfillment options that we would pay attention to would be: own/self-fulfillment, third party fulfillment, Amazon fulfillment (FBA).
Choosing this fulfillment method means that the seller packs and sends the ordered goods him/herself. Yes, it is time-consuming and does not apply for big sales volumes, but on the other hand, it is a perfect choice for beginners due to multiple reasons.
The first reason is the price. There are no storage or referral fees, so own fulfillment is much cheaper, going directly from the seller to the buyer. This feels most when trying to find your niche and when the seller is uncertain if the product will sell out or not.
The second and, maybe, the most significant reason is the experience. Sending out the items, one gets to know the fulfillment basics on practice. The package types and dimensions, overweight and oversize items, prices per package and return procedures – all these become crystal clear when doing this on your own. Knowing these basics will be of great use when it’s time to delegate your fulfillment further, due to increased sales volumes.
Third party fulfillment services
One should consider going into third-party fulfillment when sales volumes are big enough to require most of your working time. This would be average of more than 20-50 items a day. In this case, switching to the third party fulfillment will free up a considerable amount of time, previously spent on packaging activities, and devote it to other seller activities, thus increasing your profit.
Some sellers turn to third-party fulfillment from the beginning of their seller activities. This way they do not need to dig deep into fulfillment details, but I would not say that this is an advantage. This way they save time but lose useful experience and money. You need to understand that people there can also make mistakes. In case you send packages yourself and make mistakes, you learn from them, in case mistakes are made by the fulfillment company, they learn from them. In both cases, you may lose money.
Also, many fulfillment services do not handle returns themselves. So you will still need to work with those.
Fulfillment by Amazon (FBA)
FBA fulfillment is, maybe, the most expensive out of these three fulfillment options, but in return, it is the most convenient and reliable for both – a buyer and a seller.
Doing fulfillment by Amazon, you completely forget about deliveries and returns – Amazon handles them all. Another win is that Amazon sellers, who use FBA, have an advantage in winning BuyBox over all other sellers. It may be a good idea to use FBA as a means to go up the list for the BuyBox.
Another thing that many FBA sellers do not often pay attention to is that Amazon can do multi-channel fulfillment. This means that if your items are in Amazon stock, they can handle fulfillment not only for buyers from Amazon but also for those who buy your products on other platforms, like eBay, your online shop, etc.
With that, we would advise to be very careful and use FBA only for those products that are selling, otherwise, you will not fit your profit margins.
If you are not 100% certain what your profit margin is, check out our Imperative Gizmo tool for your product break-even point.