Get the latest from
Eshopbox

Enter email to subscribe to our newsletter
Thank you for subscribing to Eshopbox newsletter
Oops! Something went wrong while submitting the form.
Is FBA profitable: Learn the whole truth and the best option for Amazon fulfilment
Order fulfilment

Is FBA profitable: Learn the whole truth and the best option for Amazon fulfilment

Versha Kamwal
June 29, 2022
7
mins read

Many business owners assume that selling on Amazon is always profitable. But the assumption of making millions overnight on Amazon is an unrealistic expectation. It’s true that selling on Amazon gives access to a customer base of crores. In fact, Amazon has more than 2.45 billion visits monthly with over 300 million active customer accounts.

A few years ago, the revenue potential was infinite when there was less competition on Amazon. But now, as the platform has become more saturated with sky-high fulfilment standards, being profitable has become a challenge for most Amazon sellers.

Moreover, when it comes to fulfilling Amazon orders, FBA (Fulfillment By Amazon) seems to be the go-to option for the sellers. The reason is that FBA takes the burden off their shoulders to provide lightning-fast shipping to their customers without entering the ecommerce logistics. That’s exactly where things get tricky! While providing nationwide fulfilment, FBA comes with high fulfilment costs that dramatically cut down Amazon sellers' profit margins.

In this blog, you will learn what is Amazon FBA, what are your options for Amazon fulfilment, the fulfilment dilemma faced by Amazon sellers and is FBA a profitable choice for Amazon sellers.

What is Amazon FBA?

Fulfillment by Amazon (FBA) is a fulfilment service offered by Amazon to its sellers. In FBA, the seller sends inventory to Amazon Fulfilment Centres and Amazon fulfils orders on behalf of the seller.

In this, Amazon stores your products in their ecommerce warehouses, and when an order is received, Amazon picks, packs, ships and delivers the product to the customer’s doorstep. Moreover, when sellers use FBA to fulfil Amazon orders, the products are listed with a prime badge and are usually delivered in 1-2 days to eligible customer locations. Apart from this, Amazon also handles any returns or customer support for the Amazon sellers.

What are your options for Amazon fulfilment?

Amazon gives three order fulfilment options to its seller

  1. Fulfilment by Amazon (FBA)
    It is a storage and shipping service that Amazon offers its sellers. Amazon itself carries out the order fulfilment process—picks, packs, and ships orders to the customer. However, FBA also levies various high selling fees with a complex fee structure.
  2. Easy Ship (ES) ‍
    Easy Ship is an end-to-end delivery service that Amazon offers its sellers. Here, the Amazon sellers store the product in their own ecommerce warehouse. Once an order is received, the seller picks and packs the order. Then, an associate from Amazon Logistics Delivery service delivers the order to the customer.
  3. Fulfillment by Merchant (FBM) or Self-Ship ‍
    Amazon sellers have three options in the self-ship method of fulfilment. First, sellers can carry out Amazon fulfilment in-house, i.e. on their own. Second, Amazon sellers can outsource order fulfilment to a 3PL (third-party logistics) provider. Third, Amazon sellers can store, pick and pack their products using a 3PL provider but ship their orders using their own delivery partners.

Now, let’s find out why Amazon sellers have difficulty in choosing the ideal e-commerce order fulfilment option.

Fulfilment dilemma faced by Amazon sellers

The three options Amazon offers its sellers for fulfilment have distinctive pros and cons. So finding an option that provides the most flexibility, efficiency, and cost savings is crucial. However, Amazon sellers have a hard time deciding the one that best suits them. Let's dive into each one of them.

Fulfilment by Amazon (FBA)

Pros

FBA offers various benefits to a seller, like access to Amazon's network of fulfilment centres across the country, giving Prime badges on listed products, and handling the entire returns management.

Cons

FBA has several drawbacks, including high storage and fulfilment fees, complex fee structure, lack of inventory control and more. It means that FBA adds complexity to pricing and minimises your profits significantly.

Easy Ship (ES)

Pros

Amazon takes care of shipping your Amazon orders from your warehouse to the customer.

Cons

Apart from shipping, you still have to find and store your inventory in an ecommerce warehouse, pick and pack your orders according to Amazon’s strict guidelines. Moreover, if you fail to adhere to Amazon’s stringent packaging and labelling guidelines, Amazon imposes penalties on you.

FBM or self-ship

As stated above, Amazon sellers have three options in the self-ship. Here are the pros and cons of all of them.

Pros

  1. Self-fulfilment is ideal for small businesses starting out with low daily order volume. Moreover, highly specialised businesses with niche products consider a more hands-on approach when it comes to fulfilment.
  2. Outsourcing Amazon fulfilment to a 3PL (third-party logistics) provider can enable you to maintain a seamless fulfilment process. It is the most efficient and cost-effective way of fulfilling Amazon orders as they bring extensive expertise and knowledge to the table with multiple benefits. You don’t have to worry about meeting the strict SLAs (Service Level Agreements), policies and guidelines of Amazon, as tech-enabled 3PL providers are compliant with all of them. Hence, you can focus on your core business, and the rest is taken care of by the 3PL provider.
  3. While the 3PL manages your warehousing, inventory, and order processing, you can maintain total control over the shipping and order delivery by choosing the appropriate courier service that suits your budget.

Cons

  1. Many hidden costs in self-fulfilment significantly increase your overall e-commerce order fulfilment cost.
  2. It’s hard to find the right 3PL provider. However, you can still pose the a few questions that can help you evaluate a 3PL provider.
  3. Handling shipping and last-mile delivery on your own instead of outsourcing it to a 3PL can increase your overall costs.

Is FBA a good choice for Amazon sellers and what can be the best option for Amazon fulfilment?

Selling on Amazon indeed has its perks. However, fulfilment is the most challenging part. So it's essential for Amazon sellers to look for a 3PL provider that allows them to retain their profits while adhering to Amazon's strict guidelines. Here's how Eshopox can help Amazon sellers:

1. Affordable and clear pricing

Eshopbox provides simple pricing for Amazon fulfilment that includes two components:

  • Fulfilment fee - It is an all-inclusive fee that covers everything from receiving inventory to delivering orders to the customers.
  • Storage fee - The monthly storage fee is calculated based on item weight and dimensions. However, inventory rates increase with inventory ageing, but luckily not as drastically as FBA.
FBA vs Eshopbox

2. Fast shipping speed with 1-day and 2-day delivery

‍‍

Delivery speed matters the most to Amazon, and it expects all its sellers to meet this fundamental requirement with 2-day shipping. However, providing 2-day delivery to your Amazon customers can take a massive toll on your margins. Fortunately, Eshopbox has a distributed network of fulfilment centres spread across India. It allows you to split your inventory and store it closer to your customers—enabling you to reduce shipping costs so that you can offer 2-day shipping at affordable rates.

3. Prime-enabled inventory

According to Amazon, sellers with Prime Badge have up to 3X higher sales. Moreover, products with Prime Badge are visited more by customers. Usually, FBA products have Prime badging. Fortunately, Eshopbox is fully optimised for Prime.

Eshopbox meets Amazon's strict requirements so that your listings are Prime enabled, including 2-day delivery and adherence to various guidelines (late dispatch rate, cancellation rate, out-of-stock rate, and more). This means you can offer lightning-fast shipping speeds to your customers across India affordably. Not only will the prime badge boost your product's discoverability, but it will also help you win the Amazon buy box more often.

4. Multichannel opportunities while maintaining the Prime badge

Eshopbox enables Amazon sellers to centralise their inventory, i.e. you can use the same inventory pool on Amazon and other sales channels without committing inventory to Amazon alone. Moreover, you can still maintain the Prime badge on your product listings. Thus, Eshopbox allows you to leverage multichannel ecommerce and boost your ecommerce sales.

5. Opportunity to become an Amazon premium seller

Eshopbox helps you fulfil your Amazon orders and enables you to become an Amazon premium seller. This means you can meet the inspection criteria standardised by Amazon by improving your performance. Let's see how:

  • You can meet every SLA to avoid late dispatch and order cancellations initiated by Amazon itself
  • You can prevent out-of-stock (overselling) and cancellation with Eshopbox's accurate inventory relay on sales channels— as you only receive orders for the inventory you have
  • You can offer product kits and increase your net sales
  • You can ensure seamless fulfilment during flash sales and other promotional events
  • You can maintain incredible order accuracy to avoid seller-controllable returns
  • You can distribute your inventory to improve your regional in stock and prime listing customer views

Bottom line

Amazon is a lucrative platform for business owners who want to cater to a large customer base. However, Amazon can only help you tap into a customer base of crores while selling online—fulfilling your Amazon orders is a whole another story. If you are still fulfilling your Amazon orders with FBA or planning for it, you should reconsider your options and look for an better partner. As when it comes to order fulfilment, you must leave it to an expert—a tech-enabled 3PL provider like Eshopbox. A 3PL can help you maximise your profit margins and deliver your Amazon orders efficiently to your customers across India. Thus, it will enable you to remain profitable on Amazon with superior Amazon fulfilment.

Connect with our fulfilment expert today.

Talk to sales

Related Articles

Order fulfilment

Eshopbox Plus: The ultimate way to increase online sales and attain ecommerce growth in India

Learn how ecommerce brands can put their ecommerce operations on autopilot and unlock exponential growth by boosting sales and delighting customers.
Versha Kamwal, Eshopbox
November 29, 2022
Order fulfilment

What is first-mile delivery and how to optimise it

Learn what is meant by first-mile delivery and how ecommerce brands can enhance the delivery experience at a more early stage of the supply chain.
Versha Kamwal, Eshopbox
November 24, 2022
Order fulfilment

The most common F&B fulfilment challenges and how to overcome them like a pro

Learn what is meant by Food and Beverage fulfilment and how F&B brands can rise above the challenges they face to ensure complaint, timely and safe F&B fulfilment.
Yukta Anand, Eshopbox
November 15, 2022

Get the latest from Eshopbox

Enter email to subscribe to our newsletter
Thank you for subscribing to Eshopbox newsletter
Oops! Something went wrong while submitting the form.
Eshopbox