Selling through Amazon gives retailers access to the world’s biggest marketplace. The success of Amazon is in no small part due to its Prime subscription service. Launched in 2007, Prime offers pre-paid unlimited Next Day Delivery, turning Amazon customers into some of the most loyal when they are considering a new purchase. Amazon is innovative when offering customers convenience, with subscription services and easy to navigate promotions. Add to this the sheer range of products that can be purchased through a single platform and its no wonder they have come to dominate the online retail market.
Many retailers, from multinationals to small independents, successfully use Amazon to get their products into the hands of customers. In this guide, we will be looking at the different ways of working with the Marketplace giant, through their fulfilment and delivery options.
Seller Central vs Vendor Central
As an Amazon retailer, you will fall into one of two categories, “Vendor” or “Seller”. Anyone can become an Amazon seller for a £25 monthly fee but becoming a vendor is by invitation only, usually when Amazon sees your products selling well within a category.
Features – Amazon buys products from you “wholesale” (B2B) and then sells them directly to consumers.
Benefits – This is a very straight forward business model – selling to just one customer as opposed to thousands. As a vendor, you will have enhanced Amazon Marketing Services to help promote your products and drive sales and loyalty.
Challenges – You will lose some brand control, as products will be listed as sold & fulfilled by Amazon. Vendors also lose price control which means Amazon can decide to sell your products at a much lower margin, basically undercutting the market. Also, you cannot build a database of customers as vendors do not get this information or the rights to contact them outside of the Amazon portal.
As a Vendor Central Business, you will still need a warehouse that can manage bulk storage and stock delivery into the Amazon Fulfilment Centers. Amazon has exceptionally rigid fulfilment and delivery requirements, so getting these wrong can be costly with chargebacks eating into profit margins. Engaging a fulfilment partner, like PHL, that already successfully works with Amazon can help save a lot of time and money.
Features – Selling direct to consumers (B2C) via the Amazon platform in exchange for fixed selling fees.
Benefits – As a seller central business, you can choose how to fulfil sales orders depending on the needs of your business model, giving you better control over your brand building and marketing. At the same time, you will still be able to access many of Amazons key benefits such as consumer data analytics and Prime delivery.
Challenges – Seller central is a more complicated business model as you are selling directly to hundreds or even thousands of individual customers. You may also have less marketing support, so you will need to factor in time and money to drive sales on the platform
As an Amazon Seller Central business, you can choose to manage your fulfilment from your warehouse or to use one of the Amazon Fulfilment Centers dotted across the UK. Below is a breakdown of the different options available to seller central business with the reasons why you may or may not find this option right for you.
Which Amazon Seller Central Fulfilment solution is right for your business?
Fulfilment by Amazon (FBA)
Features – With this option, Amazon will handle almost all elements of the fulfilment process to include storage, pick and pack, shipping, returns handling and customer service. They will still expect goods to be pre-packed to a particular requirement, so it is not an end-to-end solution.
Benefits – FBA makes your products eligible for Prime, which, as previously discussed, one of the main reasons that Amazon has come to dominate the market to such a degree. It is no exaggeration to say that this is a massive advantage to your business. FBA also allows you to take advantage of Amazona cross-border selling through international shipping (see additional note) and eligibility to compete for the Buy Box, all of which help boost sales of your products on Amazon
Challenges – It’s no secret that FBA has some pretty hefty fulfilment fees, which may not be suitable for some business models. Additionally, you lose control over marketing opportunities as your products are delivered with Amazon packaging and inserts.
Note: Currently, as of the 1st of January 2021, FBA users will no longer have access to Amazons European Fulfilment Network (EFN). Pan-European FBA inventory transfers will stop between the UK and the EU. This announcement is due to the current threat of a no-deal Brexit. However, it may be subject to change based on the ongoing talks. Amazon advises Sellers to split stock between the UK and Europe to avoid high international shipping costs. Read more https://sellercentral.amazon.co.uk/gp/help/external/
Seller Fulfilled Prime (SFP)
Features – Allows sellers to fulfil orders directly from their warehouse while still qualifying for benefits like Prime delivery, the Buy Box, Lightning Deals, and Amazon’s free customer service.
Benefits – Seller Fulfilled Prime is the closest you can get to having the best of both worlds; Access to Amazons customers and brilliant marketing services with the added benefits of choosing your own fulfilment provider. By choosing SFP, you will retain control over your packaging, marketing, and customer data. This is especially important in building brand loyalty and growing your business as it allows for marketing strategies such as personalisation, branded packaging, discount codes, free products, gifts, and loyalty schemes. For more on this topic read our recent article on Fulfilment and Branding
Additionally, you should be able to save on fulfilment and storage costs as Third-Party Logistics tend to be a more cost-effective solution, offering lower prices, reduced overheads but more flexible services. For example, during the recent COVID-19 crisis, many Amazon retailers were hit by the disruptions to supply chain and delivery.
Challenges – You will have to commit to a high service level and offer next day delivery via Amazon’s approved courier and postal providers. If you sell via multiple ecommerce platforms, you will also need powerful order processing and stock control software to streamline sales and inventory to ensure you effectively manage availability.
Regardless of which fulfilment options are chosen, most businesses require additional 3PL warehousing to store and manage their inventory before delivery into Amazon. The real choice comes down to whether you engage an expert third-party provider or undertake to manage your warehouse internally. At PHL, we promote the advantages of outsourcing as saving time and money. However, with our expertise in this area, you will also gain the know-how and services required for a streamlined end-to-end fulfilment solution.
If you would like a commitment-free discussion on how PHL can help maximise the benefits of selling via Amazon, then get in contact with Laura Palmer on 01938 551919 or Laurap@promotionalhandling.co.uk.