Selecting the Right Amazon Fulfillment Option [+Infographic]

This article provides an overview of Amazon’s fulfillment options: Fulfillment by Amazon (FBA), Seller Fulfilled Prime (SFP), and Merchant Fulfilled Network (MFN). We’ll cover the pros and cons of each to help you decide which option is the best for your business.

According to a recent report, Amazon was responsible for 40.5% of U.S. e-commerce sales and 4% of all US retail sales in 2021. Amazon is one of the largest, if not the largest, sales channel for US sellers. It’s imperative that sellers maximize their exposure on Amazon while optimizing their fulfillment strategy to ensure they can get products in buyers’ hands quickly and cost effectively.  

One factor that sellers have to weigh when evaluating their fulfillment options is reaching Amazon’s most coveted customers, Amazon Prime Members. According to a recent study, prime members spend $1,968 annually on Amazon compared to non-members who spend $500 annually on Amazon. Memberships continue to grow, recently surpassing 100 million members.

Fulfillment by Amazon (FBA)

FBA is a service where Amazon manages your inventory at their fulfillment centers and will pick, pack, and ship orders to your customers. The seller is responsible for the associated fees, including storage and fulfillment fees.

Pros

By using FBA, sellers leverage Amazon’s world class operation and large fulfillment center network. The seller doesn’t have to worry about managing their own warehouse and fulfilling their own orders, allowing them to focus on running other facets of their business.

FBA gives sellers the option to offer free, one or two-day shipping to Prime Members. This is a huge draw to sellers as it gives them the best chance of winning the buy box with prime members.

Cons

While having massive scale and operational expertise is one of Amazon’s biggest advantages, it can also be one of their biggest weaknesses in terms of flexibility and cost for sellers.

According to Amazon, the company now operates 75 fulfillment centers and employs 125,000 full-time employees in the US. They are spending billions of dollars a year to run these fulfillment centers and these costs are passed down to the sellers. Amazon’s ever-changing fulfillment and storage fees for FBA sellers is well documented and can be pain point for sellers as these costs eat into their profits.

Like most businesses these days, sellers have to be nimble in order to keep up with customer demands and industry trends. Once your product is shipped to Amazon to be stored and fulfilled, your flexibility becomes a lot more limited. Sellers’ products are tied up at Amazon centers making it challenging to sell via other channels. In addition, sellers can no longer make changes to the packaging, add new inserts, or do any other custom kitting. This can be a deal breaker for a lot of sellers, especially high growth brands.