Amazon is one of the largest eCommerce companies in the world. It is no surprise that most eCommerce retailers seek to sell on Amazon to increase the visibility of their products and enhance their customer reach. Amazon India currently has more than 100 million registered users on its platform. A number that the company is aiming to increase to 500 million in the near future. eCommerce is one of the fastest growing industries.
Especially in India, with a potential customer base in the hundreds of millions. Retailers that sell on Amazon can choose from a variety of methods to fulfill orders to customers – Seller Fulfilled Prime, Fulfillment by Merchant, and Fulfillment by Amazon. In this article, we will touch on the major differences between each of these fulfillment methods. You will get a better understanding of which would be suitable for your business. Learn all about seller fulfilled prime, direct fulfillment or fulfillment by merchant, and direct fulfillment in this article here.
What is Seller Fulfilled Prime?
Seller Fulfilled Prime is a fulfillment method offered by Amazon that gives retailers the option of fulfilling orders on Amazon, from their own warehouses and using their own fulfillment methods. Additionally, the Prime badge is displayed on all products that are eligible for SFP, giving customers more trust in the fact that they will receive their orders in a timely manner. Returns are fulfilled directly by your own company in the same procedure as when orders are delivered to customers.
What is Direct Fulfillment?
Direct fulfillment is a form of eCommerce fulfillment. I means a retailer fulfills orders either directly their own means or through a 3PL company of their choosing. Direct fulfillment does not utilise the fulfillment services provided by the eCommerce marketplace that retailers are selling on such as Amazon or Flipkart. In the case of Amazon, direct fulfillment is offered through its Fulfillment by Merchant program. This allows sellers to fulfill orders directly or through a 3PL company. You or your 3PL company will need to handle returns. Most 3PL companies have a comprehensive reverse logistics infrastructure that can limit the damage caused by returns.
What is Fulfillment by Amazon?
Fulfillment by Amazon is Amazon’s first-party fulfillment offering that takes care of all requirements to successfully fulfill an order such as storage, picking, packaging, shipping and last-mile delivery. Sellers simply have to pay a fee and can make use of a multitude of services that is encapsulated under the FBA program. FBA has an exceptional reputation when it comes to customer satisfaction. There are also many rules and guidelines that retailers have to follow to ensure their products are ready, which is known as FBA prep. Returns are handled directly by Amazon and the products are returned to the Amazon warehouse it was initially shipped from.
Top 5 Differences Between Amazon Fulfillment vs Direct Fulfillment vs Fulfillment by Amazon
Fulfillment Method ➡️
Seller Fulfilled Prime (SFP)
Direct Fulfillment (FBM or Fulfillment by Merchant)
Fulfillment by Amazon (FBA)
Order Fulfillment Process
|With SFP, retailers store their inventory in their own warehouses. Then they fulfill orders on their own, without any direct assistance from Amazon. However, the Prime badge is displayed so customers will be unaware that their parcel isn’t being directly shipped through Amazon.
|Through FBM, retailers will have to perform the entire suite of fulfillment processes themselves or through a 3PL fulfillment company. Each 3PL company will have different delivery speeds and shipping company partnerships so it is important to choose an option that is right for you.
|With FBA, the entire fulfillment process is taken care of by Amazon. Retailers only need to pay a pre-determined fee and ensure that their products meet the criteria needed to be eligible for FBA.
Charges or fees
|There are no charges to opt for SFP because retailers tackle all fulfillment tasks on their own. However, there are certain requirements to be eligible for SFP. This involves having fulfilled more than 300 orders, having a 99% on-time shipping track record and more.
|FBM charges would generally be at the discretion of the 3PL company or shipping aggregator you have partnered with. Most 3PL companies are generally cheaper than FBA and some even offer solutions where you can pay only for the services you use.
|While FBA is one of the most trustworthy fulfillment options in the industry, it is also one of the most expensive. Additionally, retailers have to follow specific guidelines to ensure their products are successfully prepped since Amazon doesn’t want to tarnish their reputation by shipping poorly-packaged products.
Product Storage at warehouses
|Retailers are required to store their inventory at their own warehouses and take care of picking, packing and shipping.
|Like SFP, FBM entails the storing of inventory in a retailer’s own warehouses or in fulfillment centers of the 3PL they have partnered with. Many 3PLs offer nationwide network of fulfillment centers so you can opt for the amount of storage space you need.
|Inventory storage in FBA is taken care off directly by Amazon. Products are stored in Amazon’s own warehouses and are picked, packed and shipped directly from there whenever an order is confirmed.
|With SFP, you need to manage your inventory directly. Reason is that it is being stored in your own warehouses as opposed to Amazon’s.
|Similarly to SFP, you have complete responsibility over inventory management. However. 3PL companies generally have state-of-the-art inventory management software. This helps in monitoring and update your inventory levels across fulfillment centers and selling platforms.
|Amazon uses it own inventory management software to take care of inventory management. However, it is quite inflexible. For instance. if demand has been underestimated and you need more storage space for new products. You will have to remove some of your existing inventory instead of being able to simply purchase more space.
Returns Management or Reverse Logistics
|Returns are fulfilled directly by your own company in the same procedure as when orders are delivered to customers.
|You or your 3PL company will need to handle returns. Most 3PL companies have a comprehensive reverse logistics infrastructure that can limit the damage caused by returns.
|Returns are handled directly by Amazon and the products are returned to the Amazon warehouse it was initially shipped from.
The fulfillment method you choose can have a significant impact on your overall business success and customer satisfaction. While choosing an option, it is important to understand the short-term and long-term goals of your business and the available resources you have at your disposal.
Which Option is Right for You?
If you need the Prime badge displayed on your products but prefer to fulfill orders on your own rather than through Amazon’s ecosystem. You should opt for Seller Fulfilled Prime. If you have the finances available and you prefer to deliver orders through a household name, Fulfillment by Amazon could be the right choice for you. And if you do not want to get tied down by the restrictions imposed on you by Amazon, do not want to pay the additional fees associated with FBA, and want some unique facilities that are only provided by certain 3PL companies, direct fulfillment through a company like WareIQ or Red Stag Fulfillment could be a good Amazon FBA alternative for you.