The Benefits and Limitations of Amazon FBA

Fulfilment by Amazon (FBA) is one of the most well-known fulfilment networks available to eCommerce sellers. Amazon proposes that businesses using FBA ‘benefit from Amazon’s unparalleled fulfilment expertise’, and the logistical benefits are clear from the offset. If you’re looking to integrate BA into your multichannel operations and reap the benefits of automation, however, there is often an element of compromise when it comes to integration coverage by your system provider.

This post will explore the pros and cons of using Amazon FBA.

The benefits of using Amazon FBA

As an eCommerce brand, becoming an Amazon FBA seller has some remarkable benefits. Modern consumers want convenience and Amazon FBA provides a level of immediacy and convenience that very few brands would be able to replicate without Amazon’s resources. The business needs that Amazon can meet extend across several facets of an eCommerce business:

• Warehouse management
  Amazon FBA integrates your processes by effectively taking over your logistics. eCommerce sellers send products to Amazon’s fulfilment centres where they are stored prior to the shipping process. Proficient warehousing contributes significantly to business efficiency and customer experience. Therefore, handing over the warehousing operations can relieve internal pressures. 
• Amazon Prime
  Amazon FBA’s shipping capabilities are arguably their most attractive feature to sellers and buyers alike. Becoming an Amazon FBA seller means you are eligible for Amazon Prime, a next-day delivery function widely considered one of the most convenient consumer shipping experiences. Amazon notes that the average time from picking up a customer’s item to positioning the package on the outbound dock is 11 minutes in same-day facilities.
• Supports a multichannel sales strategy
  Amazon FBA is not exclusive to selling on Amazon. If brands enable multichannel fulfilment they can use Amazon FBA to list products across multiple sales channels. This includes other marketplaces such as eBay, as well as listing on your own website.
• Brand/product reach
  Considering Amazon’s scale, it’s not surprising that using Amazon FBA might be beneficial as part of a brand awareness campaign. Certain customers will only shop for brands that have Prime features and your products are more likely to be found if this is available.

The limitations of using Amazon FBA

If you’re integrating FBA into your system to streamline your operations, it’s important to anticipate the challenges of doing this fully, so that you only have one ‘place’ to run your processes. Furthermore, you need to be alive to the downsides of using FBA.

• Loss in control
  As Amazon FBA sellers hand over many of their processes to Amazon, they lose a considerable amount of control. This may be particularly prevalent for customer service, as your customer interactions are largely controlled by Amazon. This requires a great deal of trust and will likely result in fewer personal customer interactions, especially for SMEs who will be used to all forms of brand communication being controlled internally.
• Dependency
  Due to Amazon FBA’s control over your logistics, there is a tendency for sellers to become overly dependent on the service. Any change in circumstances either to your business or Amazon’s usage policies could be detrimental to the business.
• Lack of brand voice
  Amazon FBA is always going to prioritise one voice over all others, their own. Sellers using Amazon FBA run the risk of becoming a small faceless cog in a much larger Amazon machine.
• Fees
  As is to be expected, convenience comes at a cost. The storage, fulfilment, and referral fees can stack up for Amazon FBA sellers. Sellers can expect to pay anything from 6%-30% of a product’s selling price.
• Impinges organic scaling
  As a scaling brand, it is possible that Amazon FBA could prevent scaling rather than promote it. Your brand voice and personality may be absorbed into the overarching Amazon branding – impinging brand awareness and not delivering the desired rate of growth.

When deciding on Amazon FBA, and whether you can integrate it into your own business systems, it’s important to understand up front what your business is willing to compromise and what your options are.

Get in touch if you’d like to find out more about scaling, integration and automation.