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Fulfillment by Amazon (FBA) is one of the newer services offered by Amazon Web Services. The Amazon Web Services (AWS) are a collection of remote computing services offered over the Internet by Amazon.com. FBA allows for participating Merchants to utilize Amazon’s pick, pack and ship system worldwide. Orders fulfilled in this manner usually are not fulfilled faster than if the Merchant does it themselves, but since Amazon has a network of warehousing locations, the actual ship time is often reduced. The fulfillment centers located in North America include:

  • Arizona, USA: Phoenix
  • Delaware, USA: New Castle
  • Indiana, USA: Whitestown, Munster
  • Kansas, USA: Coffeyville
  • Kentucky, USA: Campbellsville, Hebron (near CVG), Lexington, and Louisville
  • Nevada, USA: Fernley and Red Rock (near 4SD)
  • Pennsylvania, USA: Carlisle, Chambersburg, Hazleton, and Lewisberry
  • Texas, USA: Dallas/Fort Worth
  • Ontario, Canada: Mississauga (a Canada Post facility)

The way it works is this: The Merchant ships goods to Amazon and Amazon warehouses those goods for him. When an order comes in, it is automatically routed to the appropriate warehousing facility, processed and shipped. The Merchant in affect has to do nothing. Warehousing, processing and shipping fees are assessed at the time the order is placed.fba flow Fulfillment By Amazon: Is It Worth It?

The advantages to participating in this program are:

  • The Merchant no longer has to warehouse items at their own location.
  • The items submitted are now part of the Free Super Saver Shipping and Prime programs.
  • Items that are part of the program qualify for Return and Customer Service handled by Amazon, thus reducing further overhead for the Merchant.
  • Amazon has claimed that items in the FBA program have enjoyed a sales growth of 35% on average.

The disadvantages are:

  • Merchant loses direct control over the inventory submitted.
  • Amazon takes a larger cut from each sale to compensate for warehousing and facilities.
  • Merchants can be forced to increase the price of an item for sale to maintain their profitability.

According to Amazon, not all items are a good fit for the program. The suggested minimum criteria for submitting items for the program are:

  • Fast-Moving on Amazon (10+ units/month).
  • Sell for more than $20.00/unit.
  • Not extremely dense to ship.

There are further, less direct issues to be considered when a Merchant is making a decision to participate with the program. Since only a limited number of items should even be submitted to the program, there is very little cost savings when it comes to warehousing or pick, packing and shipping. Merchants will still have to maintain these facilities for the majority of their items since most will only have 1 to 5% of their items ‘qualifying’ for the program.

There is also another nuisance with FBA: What if your direct competitors choose to participate in the program? Competition will be offering free Super Saver Shipping and Amazon Prime, while the Merchant will have to choose to either put together a similar shipping program or reconcile themselves to the thought that they will lose a ceratin percentage of orders on the disparity of the shipping offer alone.

There is one other thing more nefarious that should be considered. Amazon MAY BE using this as an inexpensive way to research what products they are going to offer themselves. It is no secret that Amazon is a platform to sell your items, but Amazon is also your competition. Amazon has been quietly trying to ‘cherry-pick’ the better selling items from various categories and offer them directly to the Customer themselves. Currently, they have had limited success in this area. The fickleness of the consumers ever changing tastes have been difficult for Amazon to keep up with. In the past, as items sales begin to slow because something better has come along or tastes have changed, Merchants have had to bare the brunt of these market changes. Now with Amazon’s growing participation in these categories, they find themselves having to deal with the same business paradigms.

All this being said, is it worth it? In the end it doesn’t seem that that is the real question. The real question is, when will you begin to participate?

One Response to “Fulfillment By Amazon: Is It Worth It?”

  1. Bala Paranj Says:
    January 21st, 2009 at 7:22 pm

    Will I be able to see my customer details such as their address, email etc?

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