Conquer Amazon Fulfilment: FBA vs FBM with the help of a 3PL

It's no secret anymore: Amazon is a goldmine for e-commerce. 

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In 2023, the world's leading marketplace accounted for a staggering $554.02 billion in sales! 

Dominating the UK market, Amazon took a massive $30 billion in revenue in 2022.

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Especially during peak sales like Prime Day or Black Friday Cyber Monday, Amazon is the the go-to destination for UK consumers. December 2023 saw 416.2 million visits to Amazon.co.uk!

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Order fulfilment and shipping your products can be a headache. However, Amazon's multichannel fulfilment helps DTC and omnichannel brands grow by simplifying the process.

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For today we're diving deep into the world of Amazon fulfilment, specifically the differences between Amazon Fulfilment by Amazon (FBA) and Amazon Fulfilment by Merchant (FBM). We'll unveil the hidden costs lurking within FBA fees and explore alternative strategies like FBM or partnering with a Third-Party Logistics (3PL) company to maximise your profits.

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1. First things first: What is Amazon FBA or Amazon FBM? 

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When it comes to selling on Amazon, you have two main options for order fulfilment.

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FBA stands for Fulfillment by Amazon. This is a service where FBA sellers send their products to Amazon warehouses. Amazon then stores them, picks and packs them when someone orders, and even handles shipping and customer service for those orders. It's like having Amazon act as your fulfilment centre.

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FBM is Fulfillment by Merchant. This means you handle everything yourself. You store your own inventory, package and ship orders, and deal with customer service inquiries. It's more hands-on, but it also gives you more control over the process! 

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You might also have heard of Amazon for Seller Fulfilled Prime (SFP).

It is a program that allows qualified Amazon sellers to sell products with Prime branding and offer fast, free shipping directly from their fulfilment centre (aka warehouses). As of today, it is only available in the US.

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There are about 200 million Amazon Prime members globally. Although nearly all British adults knew about Amazon Prime in the second quarter of 2023, only 69% of respondents actually appreciated its subscription services.

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This can help sellers reach more customers and potentially boost sales. However, there are strict requirements to qualify for SFP: 

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• Account & address: You need a professional Amazon seller account with a domestic US address set as your default shipping address.
• Past performance (90 days): Your account must meet these benchmarks:some text
  • Fulfil at least 100 packages yourself.
  • Cancellation rate below 2.5%.
  • Valid tracking rate exceeding 95%.
  • Late shipment rate under 4%.

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2. Is FBA right for my Amazon store? 

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FBA is undeniably convenient. You send your products to Amazon warehouses, and they handle everything – storage, picking, packing, shipping, and even some customer service. It's a dream for busy sellers, but there's a catch: fees. 

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FBA fees aren't always straightforward. Storage fees, pick and pack fees, and fulfilment fees can add up quickly, potentially eating into your profit margins.

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You also lose some control over packaging and branding. You can't use custom boxes or choose specific shipping carriers. And not all products qualify for FBA storage. Make sure yours comply to avoid any surprises.

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Amazon has a fee calculator when you estimate the fulfilment cost based on products that are already on the Amazon catalogue (search by SKU, title, ISBN…) by manually entering your product information (category, size, weight…) and estimating products in bulk. 

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Below, you can find an example of an estimation based on a product of 5x5x5 for a weight of 0.2kg! 

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2.1 FBA fees breakdown according to the Amazon UK Pricing:

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• Monthly inventory storage fees: These fees are based on the cubic foot size of your inventory stored in Amazon warehouses and fluctuate depending on the time of year (hello, peak season surcharges!). 
• Seller plan fees: Individual sellers pay £0.75 (excl. VAT) per item sold (if you sell less than 35 items a month), while Professional sellers have a £25 (excl. VAT) monthly subscription fee on top of additional selling fees.
• Referral fees: Amazon takes a cut of your sales, a percentage of the total price (including item price, shipping, and gift wrap) or a minimum fee, whichever is higher. This referral fee is on top of any monthly selling plan fees you pay. Amazon referral fees range from a minimum of £0.25 per item sold to as high as 45.9% of the total sales price depending on the product category. Most categories fall within a range of 6% to 15%.
• FBA fulfilment fees: This covers picking, packing, and shipping each order. Fees vary based on product size and weight, with additional subcategories adding complexity.
• Other hidden fees: Be prepared for potential aged inventory surcharges, long-term storage fees or overage fees, product return fees, and even unplanned service fees for not following Amazon's strict guidelines.

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3. FBA alternatives for your Amazon store: Choosing FBM by partnering with a 3PL

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Partner with a 3PL provider who offers similar services to FBA, often with more flexibility, potentially lower fees, and advanced inventory management features.

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3PL, like Bigblue, offers a compelling alternative to FBA, providing fulfilment solutions tailored to your specific needs. 

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3PLs handle the fulfilment heavy lifting:

• Inventory management: 3PLs boast extensive networks of warehouses, advanced automation, and data analysis to optimise your supply chain and avoid stockout.
• Save on shipping: They leverage partnerships with major carriers to offer you cost-effective shipping options, leading to faster and more affordable deliveries for your customers.
• Benefit from their expertise: 3PLs go beyond basic fulfilment. They advise on packaging solutions, eco-friendly practices, and efficient order management, ultimately boosting your customer satisfaction and sales.

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The benefits for Amazon sellers are clear:

• Scale smoothly: Flexible solutions adapt as your business grows.
• Faster deliveries: Nationwide warehouses can speed up shipping.
• Focus on selling: Free up your time to grow your business.

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At Bigblue, we understand the critical role of optimal inventory levels in e-commerce success. To help you avoid stockouts and customer disappointment, we offer a comprehensive inventory management solution. Our real-time tracking provides precise data on product availability. Everything is conveniently managed through our user-friendly dashboard! 

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We go beyond inventory management to streamline your entire fulfilment process. Our solution includes features like personalised tracking emails with your branding, real-time estimated arrival times displayed on product pages, and a user-friendly returns portal. The portal even offers a printerless option for added convenience! 

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Furthermore, we leverage our partnerships with over 20 leading European carriers like Colissimo, Royal Mail, and Correos to negotiate competitive shipping rates. Our intelligent carrier selection system automatically chooses the most cost-effective and high-quality delivery option for each shipment, ensuring efficient and affordable fulfilment for your customers. 

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3.1 Partnering with Bigblue: How to connect your Amazon store? 

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Starting working with us is the easiest thing! You can connect Amazon to Bigblue easily with these steps for smooth logistics operations! 

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1. In the Bigblue Shop Integration tab, click Connect a Shop

2. Select the Amazon platform 

3. Enter your shop's marketplace 

4. Grant Bigblue access to Amazon Seller Central and input your Seller ID and MWS Auth Token 

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Your shop is now connected and you're only one step away from shipping with Bigblue!

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4. The final verdict: It depends on your e-commerce business and your products listed

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The best fulfilment strategy depends on your specific needs and resources. Here's a quick cheat sheet to get you started:

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A high-volume seller with tight margins? Consider FBM or a 3PL provider for potentially lower costs.

Selling mostly on Amazon and prioritising convenience? FBA might be your best bet.

Need more control and unique packaging requirements? FBM or a 3PL provider could be a good fit.

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Remember, there's no one-size-fits-all solution. Experiment and adjust your fulfilment strategy as your business grows and evolves. You can always use two different types of solutions like FBA and a 3PL for your B2C/B2B orders outside of Amazon! 

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Ultimately, the best choice depends on your specific business. Analyse your product mix, fulfilment needs, and desired profit margin. Compare costs across FBA, FBM, and 3PL providers for your products to make an informed decision. As your brand grows, you can adapt your fulfilment strategy to optimise shipping costs and maximise profits.

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Considering alternatives to FBA? Explore 3PL fulfilment for potentially lower costs and a wider range of services. Get a free quote from Bigblue today!

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