As most e-commerce businesses grow, so do the logistics headaches of managing larger inventories and order volumes, often at a scale that can be difficult to handle from your local warehouse. The vital question quickly rises: should we be doing our own storage and fulfillment, or consider a 3PL warehouse option such as Amazon FBA?
While we’ve previously discussed what decisions go into choosing a 3PL warehouse, now we want to focus on the Amazon FBA opportunity due to a few key differences.
The biggest upside to choosing Amazon FBA for your fulfillment is having your items listed on Amazon as eligible for Prime shipping. While Amazon does not release its count of Prime subscribers and the estimates vary, the consensus is over 60 million active subscribers who represent Amazon’s most repeat and loyal buyers.
Getting your item front and center for that audience is a valuable proposition, and Amazon sweetens the deal by promising to deal with all of the customer service and returns for items stored at FBA.
However, if you sell items that have a higher probability of returns, it makes sense to evaluate the details of the FBA customer service offering more closely, as it may not be as profitable for you as it seems at first glance.
- You give up control of refunds/adjustments to Amazon reps. You can no longer deny a return, exchange or a partial refund. You can’t negotiate with the buyers to offer a gift card for future purchase or a partial re-reimbursement contingent on some action. Be especially cautious here if you sell expensive items. Here is an example of a specific story from an FBA merchant….
A customer bought specific item from me, thru FBA and then returned it. Amazon FBA refunded the customer’s money in full and marked the item as not in resellable condition. I create a removal order to examine the returned product. The item was clearly used and could not be re-sold. I followed up with Amazon seller support…
After conducting my research, I found that the unit was returned to the fulfillment center in the disposition of customer damaged. In accordance to our FBA Lost and Damaged Inventory Reimbursement Policy, which states that we cannot reimburse for defective products or items lost or damaged by customers, distributors or sellers and as such seeing that the item was returned in the disposition as customer damaged then the option to reimburse you is currently unavailable at this time.
- Amazon does not always tell you why they issued a refund to the customer. On your dashboard you see the financial refund, but not always the reason. You will not see the return reason for up to 45 days after you know there is a refund. This is because…
- Amazon issues refunds immediately upon the request for a return, before the item is returned to its warehouse. The customer has 45 days to return the item. If the customer doesn’t send it back within the 45 days, Amazon will return the money it deducted from your account. A savvy seller diligently tracks FBA returns to ensure proper credit is received.
- When the item is returned to the Amazon warehouse, it’s inspected by Amazon staff. After the inspection, its either returned to inventory for sale or marked as “unfulfillable”. Note, if a customer returns an item, and says it was damaged, you are out the money for the sale and the item. However, very often what is marked as damaged by the customer may in fact be fine, so requesting these items be removed from your FBA inventory and shipped back to you for inspection is a good idea. Evaluating returns also offers a valuable feedback mechanism to determine why a product’s quality was called into question.
- Extended holiday return period. All FBA merchants are forced into the Amazon Holiday Return Policy, where typically any items shipped by Amazon between November 1st and December 31st may be returned by customers until January 31st for a full refund, no questions asked.
Amazon FBA is a terrific 3PL option and may be the right fit for you. This is just one part of the equation you need to determine the right approach for your business. Remember, even with the above caveats, you’re saving money by not having to store and fulfill your own inventory, hire warehouse staff or hire your own customer service team. We’ve been longtime supporters of Amazon FBA, having built the most robust FBA replenishment tool as part of our Monsoon Marketplace platform, but we want to offer the complete view into pros and cons of using a specific platform to allow merchants to make the best decision for their specific business. If you’re interested in building out a complete cost model for using Amazon FBA versus your current fulfillment method, you can use the Amazon FBA cost calculator.
To learn how Monsoon Marketplace has made an impact for our customers, check out our success stories from a Half Price Books and Polart Video. To learn how your eCommerce business could benefit from a marketplace management system, check out some of our feature highlights or contact us anytime.