For online sellers, Amazon.com is a major double edged sword.
On the plus side, the marketplace gives sellers direct access to 250 million buyers. According to Forbes, 4 of every 10 dollars spent online goes to Amazon. Sellers can’t afford not to list their goods there, and Amazon knows it – which brings us to the other side of that very sharp sword.
About half of Amazon sellers use the services of Amazon’s logistics arm, Fulfillment By Amazon (FBA) to store and ship out goods. Amazon leverages its power to set fulfillment pricing and FBA shipping policies that are not always supplier friendly. Despite this, many suppliers view FBA as a necessary evil. With over 100 fulfillment centers in the U.S alone (and growing rapidly), Amazon/FBA can easily execute Amazon requirements for free, two-day shipping under the Amazon Prime program. Suppliers want access to Prime buyers (they spend twice as much as non-Prime buyers on Amazon), so they tolerate rigid FBA shipping and inventory policies to automatically qualify for Prime.
If you are an online seller, third-party logistics providers (3PLs) can help meet Amazon’s shipping and routing requirements, and can even be an attractive alternative to FBA shipping. Let’s examine some of the ways 3PLs can help.
Shipping to Amazon
Amazon has strict routing requirements for inbound shipments to Amazon warehouses. If you want to see these requirements, here they are. They dictate the size and weight of the box, paperwork requirements, how products are packed in the box, and the contents and position of box labels. If inbound shipments do not meet the spec, the entire shipment can be returned – at your expense!
Requirements for EDI data transmissions and label creation are equally detailed and well documented.
Our experience is that very large shippers have little problem with Amazon’s requirements, but small and mid-sized companies without dedicated fulfillment and IT staff can struggle. 3PLs like Weber Logistics can assist by ensuring compliance with all of Amazon’s inbound routing requirements.
For many Weber customers, Weber picks up containers at the port and handles fulfillment directly for a large portion of the inventory. For the inventory destined for Amazon, Weber uses its knowledge of Amazon’s routing guide and EDI protocols to prepare and ship out Amazon-compliant loads. This step reduces client administrative time and avoids the cost and time delays associated with Amazon refusal of non-compliant shipments.
Shipping Out Amazon Orders
Amazon is one of the world’s largest logistics companies, and they store and ship goods very efficiently. A big reason: rigid policies. Let’s look at some restrictions of FBA and how 3PLs provide a viable fulfillment option outside of Amazon.
Challenges of FBA shipping include:
- High storage costs that rise during the holiday season. FBA storage rates for standard products can be 3-4 times what a 3PL might charge. And during the holidays, Amazon’s $0.64 per cubic foot storage charge spirals up to $2.35 per cubic foot for the same space. When you partner with a 3PL, you negotiate set warehousing rates that are fixed and transparent throughout the relationship.
- Penalties for slow moving inventory. Once product is in the FBA warehouse, Amazon expects it to move. If one or more of your SKUs doesn’t sell as planned, you pay. According to Amazon, “Units that have been in an Amazon fulfillment center for 6 to 12 months as of the Inventory Cleanup date are charged $11.25 per cubic foot. Units that have been in an Amazon fulfillment center for 12 months or more as of the Inventory Cleanup date are charged $22.50 per cubic foot.” These charges are incremental to the standard storage charge. Frankly, 3PLs also prefer fast-moving inventory, but will work with you to identify the slow movers and the best way to handle them.
- No branding. When your product ships from an FBA warehouse, it arrives at your customer’s door in an Amazon box, diminishing the overall experience with your brand. Not so with a 3PL, who will use your company-branded boxes, and can even work with you to have these boxes made.
- No customization. Let’s say, for orders of a certain shampoo, you want to include a flyer promoting a special offer for a hair conditioner. Sorry. No go. To maintain maximum efficiency in the FBA warehouse, Amazon wants to simply pick and ship. There are limited options to customize. 3PLs, on the other hand, will customize processes to your precise fulfillment requirements with a variety of value-added warehousing services.
3PLs as an alternative to FBA shipping
There is a convenience factor in just handing over fulfillment of Amazon orders to FBA. And, actually, Amazon will fulfill orders from any of your sales channels through its multi-channel fulfillment program. But few shippers choose to accept the limitations cited above for all their orders. That’s another reason a 3PL can be an attractive fulfillment alternative to FBA: 3PLs can be a single-source fulfillment partner for all online sales channels and for larger, retail orders. When orders for multiple channels are fulfilled from the same inventory pool in the same warehouse, it means less inventory and overhead.
Fulfilling both direct-to-consumer and retail orders requires some dual expertise.
For online orders, 3PLs can integrate with your eCommerce platform (Shopify, BigCommerce, etc), accept and fulfill orders efficiently from a pick and pack warehouse, manage parcel shipping, and provide you and your customers visibility to order and shipment status.
For retail orders, a 3PL like Weber is very familiar with the routing requirements of retailers. This retail compliance expertise is critical to avoiding chargeback penalties due to late or inaccurate orders, or faulty EDI feeds.
Weber has the added advantage of being located in California, with many of its 10 distribution centers located near either the Port of Oakland or the Ports of LA and Long Beach, where nearly 40% of all ocean imports to the U.S. arrive. For West Coast fulfillment, this proximity speeds the import supply chain and allows your product to be available for sale faster, shortening your cash cycle.
Online sellers love the ability to tap into Amazon’s national and global warehouse footprint, but shipping with FBA comes with baggage. More and more online sellers are recognizing that, through 3PLs, viable options exist that satisfy the demands of online shoppers but provide a more affordable and far more flexible fulfillment alternative.