OGOship

Amazon - How does it work?

How to choose your fulfillment model, and what are the differences.

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What is Amazon and how does it work? 

Amazon is the world's largest e-commerce community. Intending to be "the everything store", Amazon wants to take the position of a global online supermarket, mall, and hardware store all in one.


As we might still be used to go to individual stores to get our goods, Amazon wants to remove that obstacle and head for the ultimate customer journey, making online shopping easy and accessible.


With over 350 million products and grossing 248 billion dollars in 2018, you can say that they truly are "the everything store".

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When Amazon enters Sweden

When Amazon opens up for Sweden as a native market, that means that the Scandinavian e-commerce will change for the future.

In the USA almost half of all the e-commerce passes through the Amazon eco-system with over 350 million products sold by either Amazon or connected merchants.

Opening Amazon.se gives both the more experienced, but also the smaller companies a new channel to sell and promote their products.

Even though the channels have been reachable through UK, Germany and France, this is a huge step for Nordic merchants.

To make sure you make the best of the opportunity, have a great partner by your side to handle your logistics so you can focus on sales.  

Different ways to sell on Amazon

Fact is that Amazon has more than 2.5 million third-party vendors on their platform. Approximately 200.000 of these gross more than €100.000 per year.

The biggest portion of vendors on Amazon are a small e-commerce businesses that sell just a few products online. 

There are a couple of different ways to sell on Amazon. We will clear out the main two ways of selling in this article. 

  • FBA (Fulfilled by Amazon)
  • FBM (Fulfilled by Merchant)

 

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What is multi-warehousing?
What is FBA?
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Fulfilled by amazon

What is FBA and how does it work?

FBA is short for Fulfilled by Amazon. What that means is that Amazon takes care of all the logistics and orders from their platform until they are delivered to the customer's doorstep. 

FBA steps:

  1. The merchant ships their good to the Amazon fulfillment center.
  2. Customer's place their orders on the Amazon website. Amazon will deliver the product to the consumer within the next couple of days. Amazon handles all the orders, logistics, freight, and returns. 
  3. The merchant will get paid by Amazon, minus their fees. 
Pros and Cons:

Pros:
  • With FBA the customer service and returns will be handled by Amazon. Both can be a hassle for a small business owner, but with having Amazon handling that you also might lose some of your customer relations. 
  • With FBA you also have Amazon Prime as an option. With Amazon Prime, the customer can have free shipping and other benefits in their accounts.
Cons:  
  • With FBA you have little to no order customization. Sellers must comply with the existing Amazon order flow.
  • Items are shipped in Amazon boxes instead of your own branded boxes.
  • The warehouse costs are often higher compared to other 3PL companies and usually even higher during holidays.
  • Customer complaints and solutions are based on standard processes which may pose only a small opportunity for dialogue with the consumer upon a faulty product or order.
  • When fulfilled by Amazon, you will not receive any customer information. This means that cross marketing, retargeting and additional sales will not be possible. 

 

Fulfilled by merchant

What is FBM and how does it work?

If you already have your logistics in order, or if you have an Amazon ready 3PL partner, FBM probably is the best choice for you.

FBM is short for Fulfilled by Merchant. To succeed with FMB, the best way is if you already have your logistics in order or a 3PL partner that handles it for you. Amazon will send you the order information and then it is up to you to complete all the steps of the order to the consumer.

If you are a merchant with an attractive brand or product, or have a system and a partner that can help you fulfill your orders easily, you should probably go with FBM as this is the best way to have full control of your brand, product, and costs.

 

FBM steps:

  1. Customers order on the Amazon website and Amazon will sends you the order details. 
  2. The merchant fulfills the order using their own logistics or by a 3PL partner and their logistic solution. 
The Pros and Cons:
 
Pros:
  • With FBM you can use your boxes, branding, and customization of your package. Processes are adapted to your business’ operation and specification.
  • The logistics and shipping fees are often more cost efficient when using a 3PL partner. The price might vary depending on the number of SKU in stock as well as the number of orders per month.
  • Faster handling and processing of your orders.
  • Full inventory control, and with a great 3PL company you have a good stock synchronization to your e-commerce platform.
  • Often you have a variety of shipping options that gives you a greater cost margin when shipping different sizes and to different countries.
  • Easy to sell via multi-channel for the same logistics costs.
  • You have full control over your customer service and are able to find good resolutions if needed.
  • Customer information makes it possible to follow up to get reviews, additional sales and marketing possibilites.
Cons:  
  • It might take time to find a 3PL partner that has the experience, warehouse locations, and trust to work with. 
  • You need to apply to be able to sell via Amazon Prime to meet Amazons requirements. The best way to meet these requirements is to have a great 3PL partner.

 

What is multi-warehousing?
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What kind of warehouse do you need?
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FULFILLED by ogoship

OGOship as your Amazon partner

With over a decade of experience within e-commerce logistics and our unique network of warehouses, OGOship is ready to be your Amazon FBM partner.

Using OGOship as your fulfillment partner for Amazon has many benefits. It gives you the ability to handle all your logistics from one system – whether you are selling through your own e-commerce store, Amazon, or both.  

Find out how we can become your Amazon 3PL partner

Ready to learn more about FBM and how we can help you? Our experts will answer any questions you may have on how to get started and how to expand your business with Amazon FBM!

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