Pros and Cons of FBA and MFN on Amazon
When customers click on the buy button and make the confirmed purchases on Amazon store, sellers come into play to ship and deliver the purchased products to buyers. Then the turbulent waves of FBA and MFN come in the minds of Amazon sellers for shipping items to their customers. The sellers can deliver these items either using FBA (Fulfillment By Amazon) or MFN (Merchant Fulfillment network) or both. The sellers choose shipping method as per their convenience, business scale, and above all for proper satisfaction of customers. Being a seller, you should be accustomed to both the shipping options and also have the knowledge to pick the best suited option for you.
What is FBA?
FBA stands for Fulfillment By Amazon. Amazon provides its services for shipping items to buyers on seller’s behalf. For accessing FBA, you as a seller only need to store your items and products in the warehouse of Amazon and chill out! Rest will be taken care by Amazon. Amazon will do all on behalf of you. It picks items from its warehouse, packs them properly to dispatch and finally ships to buyers. You just need to pay fees to Amazon for leveraging its services. In essence, FBA is an Amazon service through which Amazon takes responsibility to ship the items to the ultimate destination(its buyers) by incurring charges on sellers. It is also known as AFN (Amazon Fulfilled Network).
FBA has its bright and dark sides. Let us :
Pros of FBA:
Customer Support service by Amazon: As soon as you are leveraged with FBA services for your products on sale, Amazon automatically provides customer services too on those products.
Prime Product Tag: After accessing FBA, the corresponding product becomes eligible for prime delivery. This is the perk you can offer to your customers. Customers always look for quick and fast delivery. FBA does its best through its Prime 2-day shipping service.
Boost Sales: FBA products add more customers than non-FBA listed products. As per Amazon, 50% sale occurs for FBA listed products. The customers who already have a clear vision and know what they want and need to buy always seek for FBA with prime service products.
Buy Box: Being Amazon FBA seller, you have the opportunity to win the Buy Box as Amazon gives priority to FBA listing products sellers in its algorithm. The purchase through FBA listed products takes you at the Amazon top search.
Hassle-free Management: Use FBA and relax on your resting chair. Amazon will take care of pick, pack, ship, handle, return, and refund for you. FBA furnishes you with hassle-free selling. So, just chill with FBA.
Cons of FBA
Multiple Costing: The major con of FBA is its cost. This cost comprises of many charges that are being deducted from seller’s account. These are FBA service charge, monthly inventory charge, and handling charge.
Let's have a glance on it:
i. For utilizing the FBA services, you need to pay a certain charge to Amazon. This is just the starting of paying for FBA. Further, there are many charges Amazon imposes on you for utilizing FBA services.
ii. There is an inventory charge levied by Amazon for using the inventory space for FBA service and it is decided as per the weight and size ( required space per cubic foot) of the items. The charges are different for different quantities and categories.
Iii. Then comes the monthly charges for storing your products in Amazon’s inventory. Each month Amazon deducts an amount from seller’s account for keeping their products in Amazon's fulfillment centers. This amount is calculated on the basis of quantity, weight, and size of stored products.
iv. Next, Amazon charges as per the time period in which products are stored in the Amazon inventory. It incurs a fee called LTSF i.e. Long-Term Storage Fees post six months of storage, for the products that are not being sold more often and inactive and are being stayed in its warehouses for 6 months or more. It has its strategy to mop-up the inventory product charges twice in a year particularly on 15th February and 15th August. For products that have been occupying space in Amazon’s warehouse for 6-12 months, are charged at the rate of $11.25 per cubic foot and those products that have been in warehouses for a year or more are charged at the rate of $22.50 per cubic foot as FBA Long-Term Storage Fees.
v. With all the above-mentioned charges, Amazon also deducts handling charges to keep, maintain and provide FBA service for returns and refunds too.
1. Trouble with Fungible items: Fungible items can cause trouble to Amazon sellers because while picking products from Amazon inventory, Amazon fulfillment centres can deliver similar ordered items from different sellers to wrong buyers. This can be troubling while receiving payments from Amazon as ordered id and delivered product id would not match and Amazon would suspect payment of sellers. It would be complicated and seller needs to resolve this issue with Amazon.
These are the major reasons why many sellers don’t take the path of FBA listing while being on the journey of their sell on Amazon and go for MFN. When you store products and items in your own warehouse and inventory, you don’t need to pay any charge (no monthly, neither short-term storage nor long-term storage) to anyone. With MFN shipping service you can save all these extra storage fees. Also when merchants ship their ordered items themselves without the involvement of Amazon, there will be no chance to misdelivery of any fungible item.
Ways to utilize the fees you are paying as Amazon fulfillment Charges
Amazon FBA sellers are paying handsome charges to Amazon. No doubt, Amazon gives its best and superfast services for shipping but the thing is that these charges can swallow your profit margins. But yet you need FBA to serve your customers in the best way. Thus you should utilize the sum you are paying to reap maximum benefits. Here are a few ways you can adopt:
1. Be a friend with the Inventory Health Report. This report comprises of all the information about the items you have stored in the Amazon inventory. It gives an idea about which items you need to restock or the items which are inactive for a long period. Thus you can know which inactive item you need to remove from Amazon shelves and you are needlessly paying Amazon for storing such items in its inventory warehouse. This would save charges which you can spend on storing other needful and active products in Amazon's inventory.
2. Amble with FBA Revenue Calculator to calculate the revenue profit margin and weighing, handling and PPS (Picking, Packing, Shipping) charges you are paying.
3. Once pay for Inventory Placement Service so that sellers can ship from multiple FBA Fulfillment centers else they need to pay for individual centers.
4. At last, more importantly, Amazon sellers must withstand Amazon's shipping standards for shipping every product.
What is MFN?
MFN stands for Merchant Fulfillment Network. The Merchant Fulfillment Network service includes only sellers to ship their items to buyers. The merchants and sellers have their own warehouses to store products that are being sold. These merchants themselves are responsible for picking up items from these warehouses, packing them properly and at last dispatch it to the customers. Amazon does not get indulged in shipping items from sellers to buyers. This service is also known as FBM (Fulfilled By Merchant).
More to Know…
Pros of MFN:
1. No shipping cost for sellers: The merchants themselves pick, pack and ship their ordered products, so they don’t need to pay any amount to anyone, in fact, sellers incur shipping charges to buyers. This adds profitability to sellers.
2. No monthly and inventory Charges: Sellers won’t charge themselves for keeping products in own warehouses;). You can keep all your products of any size and even in large quantity in your warehouse and you won’t need to pay a single penny as you require to pay for FBA Amazon warehouse storage.
3. Lesser Damage & Returns: The perfect packaging of products which results in fewer damages and returns.
4. Can be Creative for Customers: MFN sellers can be more creative in their packaging side. They can also creatively customize the receipts and can add gratitude notes too. This would surely help them to attract customers with their creativity.
5. Increases your Reputation: With the MFN you earn the repo for your brand. No other person can take credit for your product and services as in FBA, Amazon handles the shipping and takes credit for your product.
Cons Side of MFN:
1. When sellers ship through MFN, they are totally responsible for handling, weighing, picking, packing shipping and hash returns and refunds too. This can be complicated and deliver loads to the seller.
2. While shipping through MFN you should take care of the mentioned delivery time and actual delivery time. Because if a customer would not get the products by time, they would not come again to you. Your business might be on risk.
3. If MFN sellers lack in delivering proper services to customers, then customers are more likely to repel from their stores. It can badly affect sales and revenue.
4. Its neither an easy task to sell and ship through Amazon nor that much difficult. Every seller suffers through the combat on how to sell on Amazon. Then again the next dilemma is how to ship products: FBA or MFN? Though every coin has two faces yet it can be concluded that FBA has a brighter side than MFN. With some amount of an FBA fee, you can experience hassle-free selling with fast and quick prime delivery. Moreover, FBA businesses and stores get high priority by Amazon. Just the key point is to be acquainted with Amazon shipping policies (whether FBA or MFN) and location-based shipping laws.