Selling on Amazon? Know The Pros and Cons of Using FBA

Many Amazon sellers jump to take advantage of Fulfillment by Amazon (FBA), Amazon’s program for sellers that offers storage, packing, labeling and shipping services. The program, after all, makes sellers more visible to Prime members and handles costly supply chain operations.

While FBA is a great way for smaller sellers without significant supply chain infrastructure to reach more customers and drive more sales, the program doesn’t come without its drawbacks.

To participate in FBA, sellers need to ship their products to Amazon and pay for storage, which can get costly — particularly if the products are large or do not sell quickly. So it’s important for sellers to weigh their options given the types of products they sell. For some, Seller Fulfilled Prime (SFP) might be a better option.

Pros of FBA

The pros of FBA are obvious. Sellers using FBA have access to Prime member customers along with a number of cost-saving offerings.

  • Access to Amazon Prime members: Unless a seller can meet Amazon’s strict Seller Fulfilled Prime requirements, which we discuss below, to qualify for Amazon Prime, a product must be fulfilled by Amazon. And Prime members tend to gravitate towards Prime-eligible products. So as a seller, your products will be significantly more visible to Prime members if you use FBA. This is a coveted position to be in as a seller — Prime members spend almost twice as much as non-Prime members annually.
  • Leverage Amazon’s infrastructure: Amazon owns one of the most sophisticated supply chain infrastructures in the world, enabling Amazon to ship products quickly and at comparatively low costs. Very few retailers or Amazon sellers can compete on this level — and to do so is costly. But by using FBA, sellers can take advantage of Amazon’s vast resources.
  • Amazon customer service: Amazon also takes care of customer service for sellers that use FBA, handling customer inquiries about products, shipping, returns and more.

 Cons of FBA

While perhaps less obvious, the cons of using FBA should also be considered. The costs associated with the program can be high for certain sellers. In some cases, these costs might outweigh the benefits.

  • High costs: Amazon charges users for services like order handling, packing and storage. On top of this, sellers must ship all of their products to an Amazon warehouse. If the products are large, it can be costly to both ship and store.
  • Slow moving products: Additionally, for slow moving products, the storage costs can add up rapidly. It simply doesn’t make sense to pay to ship and store a product that may not sell quickly.

Seller Fulfilled Prime may be a better fit for some sellers

With Seller Fulfilled Prime, sellers ship their products directly to the end customer, cutting down on the cost per order associated with FBA and increasing profit margins, while still maintaining Prime eligibility. This option is particularly beneficial for sellers that sell large or slow moving products.

But to use SFP, sellers must prove to Amazon that they can meet the site’s strict performance standards for high seller ratings. As a result, SFP tends to work best for sellers who have the infrastructure and capabilities to pack and ship products quickly. For sellers without their own warehouses, or warehouses that may not meet Amazon’s strict standards, partnering with third-party logistics (3PL) providers is another way to get into the SFP program.

CommerceHub’s brand solutions can help sellers partner with high-volume 3PL providers and identify which SKUs might be a good fit for FBA or which might be better for SFP. Learn more about our marketplace offerings today.