The Problem(s) with Fulfillment By Amazon

Posted by lensdotcom on June 26, 2014

We talk to ecommerce retailers of all shapes and sizes – from multi-million dollar divisions of the world’s best-known brands, to mid-size online niche businesses, to start-up companies shipping packages out of their garages. Despite their differences, many of the questions they ask us when considering an outsourced fulfillment partnership are the same. One we always hear? “What do you know about FBA (Fulfillment By Amazon)? How are you different? Should I use them?”

There are a lot of benefits to this program: selling on the largest online marketplace, access to great shipping rates and distribution channels, and ‘outsourcing to an expert’, to name a few. However, when we take a closer look into how FBA actually works, we see a whole lot of issues that we think should be deal-breakers for retailers who are looking for long-term ecommerce success.

1)      You’ll offer free shipping in many cases – whether you like it or not. While this might not bother some retailers, others who want to maintain full control of their fulfillment operations will likely not enjoy having their decisions made for them. Consider this: nearly all products on Amazon are eligible for ‘Super Saver Shipping’ or Amazon Prime shipping, meaning that the customer doesn’t pay any delivery charges. However, you better believe that you’ll be paying Amazon to ship your product to your customer! If you don’t have decent margins to compensate for ‘forced’ free shipping, FBA is probably not a good idea.

2)      You don’t get to brand. ANYTHING. Custom packaging? No. Package inserts? Absolutely not. In fact, Amazon’s seller agreement states that any unapproved ‘contact’ with their customer (yes, that’s right, these awesome people buying your products and loving your stuff are considered AMAZON’S customers, not yours!) can cause you to be removed from the site as a seller. You’ll get a plain brown box, standard plastic packing materials, and a generic packing slip for every order – and nothing else.

3)     Personalization of any kind? Yeah, right. Chances are if you’re selling on Amazon, you don’t care about offering embroidery, engraving, or any other type of product personalization. However, the fact that you can’t get any of these things through the FBA program is a big deterrent for anyone who does. And, as we said above, you don’t get any value-add opportunities with FBA – so no gift-wrapping, handwritten notes, or other “warm and fuzzy” purchase attributes.

4)     Customer service is out of your control. Since the entire model is centered around the “Amazon’s customer, not yours” mantra, you don’t get the opportunity to provide customer support after the sale. Using FBA means that buyers will be instructed to contact Amazon, where you have no ability to brand the interaction, control the quality of the conversation or the information being relayed, or do anything else. Amazon customer care representatives aren’t experts on your products – and their hands-off approach means you’ll never get the opportunity to train them.

5)     You play by Amazon’s rules. Let’s be honest: Amazon is an ecommerce giant, and you’ll more than likely be a small fish in their very, very large pond. Your orders may be combined with other sellers’ orders to reduce shipping costs, and there’s nothing you can do about it. If you have issues with fees, service levels, or order accuracy and appearance, you’ll stand in line behind hundreds of other sellers to rectify the issue. You might go into an FBA agreement feeling like a rock star.. but chances are you’ll come out of it feeling like a groupie.

Have an FBA horror story to share? A positive experience for us to learn from? Let us know in the comments.

  • Dana Bostick

    You paint a somewhat dismal and slanted (I might even say sensationalized) picture.

    You are able to create your own “private label brands” for sale on Amazon. If you want to further brand your item, you just create packaging to enclose your product and make that package the shippable item. Creating a product is more than just the product itself. If you create an awesome product and then ship it in a poly bag, what does that say about your product or what you think of it?

    To some extent what you say about customer service is correct in the strictest sense. The other side of the coin is “do you really want to spend hours of your day dealing with stupid / dishonest / and just plain ripoff customers? In many cases, that is exactly the people that Amazon is handling for you. There are far too many customers that know how to game the system. They may just simply have buyers remorse and decide to return a product for a refund. To some extent that is legitimate. On the other hand, there are many that will game the system by buying the exact same product they already own but that is broken, exchanging it with your product and sending it back claiming that it was damaged when they received it. That is just straight up ripoff but it’s a fact of life when doing business. Any smart businessman knows that this happens and allows for it in their business model.

    Yes, you must play by Amazon’s rules. That’s pretty much the way it is in life in general. You can choose to follow the rules and get along or you can bang heads with life and suffer the consequences. It’s your choice.

    For myself as an FBA seller, make it a priority to learn and understand the rules and policies and figure out how to use the system to my best advantage. I do not spend my time trying to figure out how to get around the rules. While I don’t always agree with all of Amazon’s rules and policies, they are what they are, get over it! You can always choose to not get in the game and try to create your own “online empire” but I think you might be a little late and ill qualified to do so.

    I am able to make a very nice income, working less than half the time that I would doing something else. I’m also doing something I love to do. There is a special thrill one gets when one finds an awesome deal or arbitrage opportunity that will make you a crap ton of money for very little effort. The simple fact that I have the freedom to do what I want when I want and not trade hours for dollars and be beholden to some asshole of a boss to tell me when I can go take a leak, eat a meal or take time off for something that is important to me is huge. As they say “Life is like a shit sandwich… The more bread you have, the less shit you have to eat.”

  • Hi Dana,

    Just saw your comment – thanks for adding your opinion. However, everything in your response only further proves my point – you don’t have to do any of the things you mentioned (ask to take a leak, deal with crappy customers, etc) if you use a fulfillment provider other than Amazon. Perhaps this wasn’t clear, but this blog post doesn’t encourage retailers to run their operations in-house – it simply cautions them to understand what their business really needs in the long-run when making the decision to outsource. FBA isn’t for everyone, particularly for those retailers who want a branded experience and some level of control over their operations and customer service efforts.

    I also believe there’s a difference between ‘sellers’ and ‘retailers’, which I don’t feel I need to explain. For ‘sellers’, FBA is probably great. For retailers who have a brand, a certain niche, and a particular experience that they want each customer to have (which hopefully builds loyalty along the way), FBA is not the best fit.

  • Britt

    I don’t own a business where I sell a customized product, but I have been an FBA seller for over a year selling consumer goods. I lost track of how many times I’ve had to get into it with their seller support service center. This article is very right. You are a tiny fish in their big pond and they don’t give a crap about sellers. Their fees are absurd and they play dirty when it comes to you trying to sell any products that amazon directly sells themselves. They’re good at making sure they have no competition.

  • James Blanchard

    FBA is really a scam. I recently sold a 9.99 item was was charged 8.07 in fees. I make 1.92 off this purchase and I paid roughly $2.00. Loss of $0.08 not including other costs. FBA is a joke and I am going to be pulling my business out of it myself. I recommend that if you do not have items over $50.00+ value, just sell it yourself. Even at $50.00 FBA will charge you $15-20 in fees. They really gouge the fees to the point where its ridiculous not to mention impossible to stay in business.

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