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Advantages and Disadvantages Of Using Fulfillment By Amazon

Posted On February 6, 2015 by Charles Hsieh

Using a third party fulfillment service works great if you have a business that is growing and no longer have the space or time to fill orders for your customers. Amazon has aggressively moved into the fulfillment space with over 2 million third party sellers worldwide that generate approximately 40% of Amazon’s total sales. Is their service right for everyone though? There are definitely pros and cons to using Amazon versus other fulfillment providers that are worth considering.

Amazon offers fulfillment under their Amazon brand name but also offers fulfillment services for many other fulfillment companies. All of these services provide real-time order fulfillment, inventory and tracking and will fulfill or drop ship your items for you eliminating the need to print out shipping labels. However, Amazon requires a third party app integration to ship orders internationally and only offers Standard, Expedited and Priority shipping options.

One of the distinct advantages of using a large fulfillment provider like Amazon is that you have the option of shipping from multiple warehouse locations at their 58 distribution centers, reducing the amount of shipping costs due to the locations of your customers being closer in proximity to the warehouse. However, there are certain restrictions you must adhere to while going through the process of setting up your fulfillment with them. You will need to manually set up your accounts and enter weight, product and SKU numbers for your entire inventory that could take up much of your time. They do offer an option to export files to their system from an internal company spreadsheet that may prove helpful in this regard as long as your software is compatible.

Many companies have chosen not to use Amazon simply because they would not allow you to place your company brand on the outside of the shipping box, only the Amazon brand. This has recently become more flexible with some Amazon distribution center offerings but for an additional fee. They also don’t allow stocking of products without barcodes so if you carry items from small companies that don’t use barcodes this is problematic. If you barcode the items yourself, they have to ship to you first then you have to ship to Amazon which wastes valuable time and resources.

Smaller regional fulfillment companies are more likely to tailor to your specific business needs since larger providers like Amazon have strict business processes they adhere to in order to cater to a large volume of clients. Most smaller providers are set up to ship internationally and will assign a specific fulfillment manager to ensure all your company needs are met through the entire distribution supply chain operating more like a partner. With Amazon taking such a large portion of the fulfillment market, many independent fulfillment houses are becoming even more competitive on pricing with no minimum requirements.

If you’re selling products outside of Amazon, it would cost you more to ship your products through Amazon because Amazon has no eCommerce integrations making them less desirable for some companies with high volume sales. Most small fulfillment providers have the ability to integrate into numerous shopping cart platforms including Shopify, eBay, Amazon, PayPal.com, 3DCart among others.

Many times the quality of fulfillment services you provide largely depends on if the fulfillment service you choose has experience within your industry. For example, if you are a retailer who deals in a large volume of products with a high return rate, then you want to choose a fulfillment provider that is versed in handling these needs. Likewise, if you have a product that needs special care and handling like refrigeration and has faster expiration times, you want to choose a service that has the resources and expertise to handle these special needs and works expeditiously perhaps on a more personal level with you and your customers. In these cases, a smaller provider may be your best solution but If you have a very standardized low maintenance product, Amazon may be a suitable choice.