How to Adjust Your Fulfillment Solution and Process as You Grow
Fulfillment by Amazon (FBA) is a powerful program that lets businesses of all sizes easily build an ecommerce presence on the Amazon platform. However, as you grow and scale, having FBA as your only fulfillment solution can have its drawbacks.
We’ll discuss how the program greatly benefits growing Amazon-only sellers, yet proves troublesome for those who solely rely on it when their business starts to flourish. And, to address these growing pains, we’ll also share some tips to help you reshape your fulfillment model.
FBA is a super-service for Amazon sellers
FBA provides a number of advantages for brands and merchants that sell exclusively on Amazon.
No large upfront investment required
Amazon’s fulfillment program only requires sellers to pay fees for using the company’s facilities and logistical capabilities.
This is ideal for smaller businesses or those just starting out in ecommerce because they don’t have to put money into:
- Setting up their own warehouses or distribution centers
- Purchasing vehicles for transport
- Developing and streamlining processes
Save time and money
FBA not only takes care of handling, packing, and shipping your products, but also item returns and customer service.
With Amazon managing these responsibilities, you can focus your resources on other priorities, like growing your revenue or scaling your business up.
Expand your reach and storage capacity
Amazon has a huge network of distribution centers that covers many locations, enabling you to reach more customers. With FBA, your business can access more than 100 countries.
Also, Amazon leases warehouses and then subdivides them into smaller spaces for FBA fulfillment, which allows sellers to store lots of inventory with ease.
Sticking with a single fulfillment partner isn’t sustainable
FBA is an amazing service that gives merchants of all sizes access to the most sophisticated fulfillment network on the planet.
However, for thriving multi-channel businesses, having a single fulfillment partner can cause unexpected problems.
Here are key reasons why relying on a single fulfillment service becomes challenging as you scale.
You have less control
When you opt in to FBA, the customer experience revolves around Amazon rather than your brand. Even if your business prospers, your customers will mostly remember interacting with Amazon, rather than your brand.
Your limited branding capabilities won’t leave any lasting recognition and leads to lack of brand loyalty, lower customer lifetime value, and less customer retention.
Storage fees can pile up
Any business succeeding on Amazon will, of course, need more storage. However, FBA’s fees are charged based on product size, weight, and how much space it occupies. Additionally, there are three other fees you have to take into account:
- Monthly inventory storage fees that increase as you store and sell more units
- Long-term storage fees that Amazon charges (in addition to your monthly fees) if you have inventory sitting in the company’s fulfillment centers for too long
- FBA inventory storage overage fees, which you incur if you exceed Amazon’s storage limits — also on top of your monthly expenditures
Growing and scaling your business means you’ll incur more of the above fees that will then cut into your profit margins.
You are less prepared for supply chain disruptions
Having only one fulfillment partner means if something goes wrong, you don’t have anywhere else to turn to.
For example, if you sell out in FBA and don’t have an alternative fulfillment method to fulfill via FBM, you lose out on sales. Once an item goes out of stock, you lose ranking, reputation, and loyal customers.
Something could jeopardize your contract with any one fulfillment partner, they could get acquired and no longer support your category, or any number of other unexpected challenges can arise. When you have all your eggs in one basket, you are less prepared to face disruption.
How your fulfillment solution can evolve as you grow
When you start to scale, every aspect of your business will have to adapt, including your logistics. Here are some ways to transform your fulfillment operations and address the previously mentioned challenges.
Consider a multi-channel approach
Having different sales channels allows you to sell your products strategically. For instance, you can offer high-margin, fast-selling items on Amazon, and sell the low-margin or slower-moving items on your own direct-to-consumer website. This allows you to serve your shoppers with a full, robust catalog while saving money on long-term storage fees in FBA.
Multi-channel selling is also great for your bottom line. Shopify reported that businesses with multiple sales channels generate 190% more revenue than those that only use one. That massive increase can go toward growing your business even further.
Diversify your fulfillment options
You can nurture greater brand awareness by incorporating fulfillment solutions that offer more control over the customer experience:
- In-house: This option is ideal for businesses that already possess a fulfillment or logistics infrastructure. But, if you can afford the heavy investment, you can set it up yourself.
- Outsourced: Third-party logistics providers (3PLs) are more cost-efficient for businesses without any fulfillment or logistics capabilities. It’s also a great choice for growing Amazon sellers who plan to diversify their sales channels.
The above options let you handle and pack your items. This means you can freely use branded materials like custom packaging, inserts, etc., which leaves a lasting impression on your buyers. Also, these options offer the opportunity to provide consistent support and timely product deliveries, which foster customer loyalty.
Incorporate digital integration and automation
Diversifying your sales channels and fulfillment options means you’ll have more processes to take into account, and that may lead to a fragmented supply chain and lost data.
Using tech-enabled distributed order management makes optimizing and overseeing your processes across sales channels much easier.
With the right tool, you’ll be able to:
- Strategically locate your fulfillment hubs
- Streamline your distribution and delivery system
- Optimize any inefficient processes and automate manual ones
- Properly monitor your supply chain with end-to-end visibility and traceability
- Maximize your fleet capacity
Wrapping up — Growth requires adaptation
FBA is a superb program that allows any seller to start and grow on Amazon.com. However, it’s not the definitive solution for your fulfillment needs. As your ecommerce business expands, complications will arise, and relying solely on FBA will become impractical.
Properly navigating through those issues will require you to rethink and adjust your fulfillment operations. Thankfully, there are multiple ways to adapt to these changes. If executed correctly, your business’s further growth will become seamless.
MyFBAPrep is the leading ecommerce warehouse network for Amazon aggregators, enterprise-level brands and top Amazon sellers. It has a global network of over 50 warehouses and six-million-square-feet of operating warehouse space. MyFBAPrep offers a full suite of services including Amazon 3P, direct-to-consumer (DTC) fulfillment, and B2B retail services.
To stay updated on the latest articles, webinars, podcasts and feature releases, subscribe today!