Why 3PL might be a better option than FBA Fulfillment

Everyone who shops and sells online is familiar with Amazon, and that’s no surprise. In 2020 alone they grew their annual revenue by 38% to $386 billion with the help of their 150 million current Amazon prime subscribers. According to Feedvisor, customers trust Amazon and are 89% more likely to buy from them over other eCommerce sites. With numbers like these, it’s clear that there is a huge market available for you to sell. Amazon encourages new sellers and even offers a third party logistics service called Fulfillment by Amazon (FBA) where they handle the eCommerce fulfillment for you. You simply send your inventory to Amazon, advertise your products through the Seller Central and they take care of the rest. Not only do they pick, pack, and ship your orders, they also handle customer service. If you are a small-to-mid sized business looking to start or are currently selling on Amazon, FBA may seem like a great option. However, there are few reasons FBA might not be the best option for you and here’s why.


High/Rising FBA Costs

With 185 fulfillment centers and 15 sort centers worldwide, Amazon and their FBA program have a large infrastructure and need for employees to receive, sort, and ship everything coming in. Building and maintaining a network this large is expensive, and Amazon has shown that by periodically increasing fulfillment and inventory storage fees

Because of their overhead and amount of packages shipped each year, Amazon is constantly looking for ways to reduce their operating costs. Last year, their shipping costs were $61.1 billion, a lot of which included huge shipping loses to keep customers happy. To overcome this and rising transportation costs, Amazon is investing heavily in their own freight, air, and local delivery options. That’s where the rising Amazon FBA costs come in.

For example, the latest fee increases that went into effect on February 18, 2021, were implemented to help cover the rising costs to maintain their infrastructure including shipping and transportation.  This mainly saw increases in small standard, large standard, and medium oversized products, along with monthly storage fees increased by $0.06 per cubic square foot. This can put sellers in a tough place. Forcing them to either overstock and risk higher storage fees for idle inventory or understock and potentially miss out on sales.

On the other hand, a 3PL provider doesn’t charge extra fees for peak seasons and maintains more consistent storage and fulfillment fee schedules. These providers also have their own warehouse and infrastructure in place that is scalable with your business. While Amazon may see you as another cog in the machine, a 3PL provider has a vested interest in your success and is usually willing to make investments and adjustments to support your growth.


Lack of Personalization Options

Selling your product is more than pricing low. Customers want to know your product is great, shipped quickly and reliably, and provides a better value than similar products. Outsourcing your shipping & fulfillment can help provide that competitive edge, but FBA might not be the right choice.

Amazon’s highly efficient fulfillment model and streamlined processes allow them to ship out thousands of orders every day, but that may work against you. They pick, pack, and ship each order the same way. This prevents you from differentiating your brand from others and providing a unique customer experience, such as branded packaging or including thank you cards.

On the other hand, 3PL providers offer white label solutions and value-added services that allow you to customize your fulfillment process. Everything from branded shipping boxes to custom inserts and specific packaging supplies. 3PL provides the flexibility to customize how your orders are packaged and shipped making sure you are showcasing your brand and providing that unique customer experience.


Less Control Over Inventory in FBA

Another big issue with Amazon FBA is the loss of control you have over your inventory once it’s sent to their warehouse. Many businesses are required to send a majority of their inventory to Amazon, making it hard to make adjustments on the fly. Shopping trends can change quickly and if you aren’t able to adapt and quickly allocate inventory between your channels, you’ll have a huge disadvantage over your competitors.

Having inventory in FBA makes Amazon responsible for prioritizing your products. However, things do always go according to plan, as with the COVID-19 pandemic that hit in March 2020. Amazon prioritized it’s essential products in the marketplace causing significant fulfillment and shipping delays for everything else. Amazon also froze all inbound shipments for non-essential products preventing many from restocking their best selling items. It was a difficult time for all and understandable how Amazon reacted, but this shows how it can be dangerous to have less control over your inventory and a shipping partner who can’t adapt quickly to your business needs.

Also, with the increase in eCommerce popularity, Amazon is not the only player in the game. Having more control over your inventory allows use to utilize other eCommerce channels like Big Box, online retailers, and marketplaces allowing you to be flexible to the demands of your buyers.

While similar to FBA, 3PL providers offer access to your inventory and the flexibility to make adjustments as the needs arise. Need to update your product or packaging? A 3PL can easily accommodate allowing you to get your product back on the market without losing out on sales. Now the FBA “Prime” badge holds a lot of power for consumers, and there is a way you can keep your prime treatment while utilizing a 3PL provider. Through this Amazon Seller Fulfilled Prime Program, your products will still be able to display the “Prime” badge but will now be fulfilled by your 3PL provider. There are a few requirements for the program, but your 3PL will most likely be able to qualify.


Choosing a 3PL Instead

Fulfillment by Amazon(FBA) is a popular and attractive program that allows Amazon to manage your eCommerce fulfillment on their channel. While it may seem like a great choice for those starting out or already selling on Amazon, FBA is not the only option. With less control over your inventory, coupled with a lack of product customization, and rising FBA fees; Amazon FBA may not be right for your business.

On the other hand, using a 3PL provider along with the Amazon Seller Fulfilled Prime Program provides the flexibility to grow your business, reduce costs, and improve your customer’s experience.

Whichever solution you choose for your business, C2W Distribution can help. We offer both 3PL & 4PL solutions to meet your fulfilment, eCommerce, dropshipping, & storage requirements. By leveraging our state-of-the-art equipment and technology, we’re able to fulfill your business needs while making your supply chain more efficient, reducing costs, and improving customer satisfaction. Leave the logistics to us, while you focus on your core competencies.

Interested in learning more? Contact us today to see what we can do for your supply chain.