What is Fulfillment in E-commerce and Marketplaces?
When a seller decides to market their products on a marketplace like Amazon, one of the biggest challenges they face is logistics: How to efficiently manage storage, packaging, and shipping? To address this, each platform offers different fulfillment models designed to suit various business needs.
In this article, we will explore the main fulfillment models, specifically those offered by Amazon, analyzing their advantages, disadvantages, economic risks, and which might be the best option for your business.
Types of Fulfillment Models on Amazon
Fulfillment by Amazon (FBA): The All-in-One Option
The Fulfillment by Amazon (FBA) program is one of the most popular solutions among sellers. With FBA, Amazon takes care of storing your products in its logistics centers, handling customer shipments, and managing post-sale services, including returns. In other words, it is a model designed for those who want to fully outsource logistics and focus on sales.
Why Choose FBA?
There are several advantages to this model. By using FBA, your products become eligible for Amazon Prime, significantly improving visibility and conversion rates. Additionally, Amazon manages customer service and fast shipping, removing a major operational burden from sellers. Delegating logistics to Amazon also helps maintain the performance KPIs required by the platform, increasing the chances of winning the Buy Box due to simplified scoring.
However, this convenience comes at a cost. Storage and fulfillment fees can be high, especially for large or slow-moving products. Additionally, by handing over logistics control to Amazon, sellers lose some ability to directly manage the customer experience.
Economic Risks of FBA
- High storage costs: Amazon charges fees for both short-term and long-term storage. If your products don’t sell quickly, these costs can become significant.
- Return fees: While Amazon handles returns, the associated costs can eat into your profit margins.
- Lack of stock control: Amazon can move your products between warehouses, potentially causing unexpected delays.
Fulfillment by Merchant (FBM): Full Control for Sellers
For those who prefer to retain control over their logistics, Fulfillment by Merchant (FBM) is the ideal option. In this model, the seller is responsible for the entire process: storage, packaging, and shipping. Amazon still acts as the marketplace, but logistics are entirely handled by the merchant.
This model is particularly beneficial for sellers who manage customized, fragile, or high-margin products that cannot afford FBA fees. It is also suitable for those who want to maintain a closer relationship with their customers and handle returns or complaints directly.
However, opting for FBM means taking on the full logistics responsibility, which can be challenging for high-volume sellers. Additionally, FBM products tend to have lower visibility in the Buy Box and lack the appeal of Prime delivery, which may impact sales in highly competitive markets.
Economic Risks of FBM
- Own logistics costs: You need to invest in storage, packaging, and shipping services, which can be expensive without an established infrastructure.
- Less competitiveness on Amazon: Without the Prime badge, you may lose sales opportunities to other sellers.
- Higher operational burden: Without an efficient logistics system, it can be difficult to maintain fast shipping times and quality customer service.
Seller Fulfilled Prime (SFP): The Best of Both Worlds
For sellers who want the benefits of Prime without fully outsourcing logistics to Amazon, Seller Fulfilled Prime (SFP) is an excellent alternative. This program allows sellers to ship products directly from their own warehouse while still offering Prime shipping.
SFP provides greater control over inventory and customer service while maintaining the appeal of fast delivery. However, joining the program requires meeting strict performance standards and using Amazon-approved carriers, which demands a well-optimized logistics infrastructure and the ability to comply with the platform’s delivery deadlines.
Economic Risks of SFP
- Investment in logistics: Meeting Prime delivery requirements can be costly without an optimized supply chain.
- Carrier dependency: You must work with Amazon-certified shipping companies, limiting your options and increasing costs.
- Risk of suspension: Failure to meet delivery standards may result in Amazon removing you from the program.
How to Choose the Best Fulfillment Model for Your Business?
There is no one-size-fits-all answer, as the best option depends on various factors such as product type, profit margins, and operational capacity. Consider the following:
- If you want to scale quickly without worrying about logistics, FBA is the best alternative, although it comes with higher costs.
- If you prefer full control over operations and lower storage fees, FBM may be the right choice.
- If you want to offer Prime shipping while maintaining control over logistics, SFP allows you to keep visibility without outsourcing to Amazon.
Conclusion
Fulfillment is a key element in the success of any Amazon seller. Whether you choose to outsource everything with FBA, handle logistics yourself with FBM, or combine both strategies with SFP, each model has its own advantages, risks, and challenges.
It is also important to consider costs and their impact on cash flow. Since each model involves different fees and payouts, optimizing your liquidity is essential. With Wannme, you can receive daily payments for your net sales, improving cash flow. If you use FBM or SFP, you can increase your daily advances due to lower marketplace fees.
If you need fast access to funds to grow steadily and sustainably, contact us and find out how we can help you scale without capital restrictions.
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