5 Disadvantages Of Amazon Fulfillment And How You Can Work Around It

July 1, 2022
Written by Nicasio Co III
A smartphone showing the web page of Fulfillment by Amazon placed on top of an Amazon Prime branded delivery box

Have you been looking for a convenient way to fulfill your orders to your customers? Whether you are a new Amazon marketplace seller or not, you might need help fulfilling your orders, especially if they continue to increase. After all, Amazon has billions of monthly site visitors, many of which can become your customers.

Fortunately, Amazon has launched the Fulfillment by Amazon (FBA) services that would help streamline your operations and fulfill orders for your customers without exerting much work. But while this service has many advantages, it also has some disadvantages that you should be aware of to address possible issues immediately.

This blog post will outline five of the biggest downsides of using Amazon FBA and provide tips on working around them.

What Is Amazon FBA and What Services Does It Cover?

Fulfillment by Amazon (FBA) is a program that allows third-party sellers to store their items in Amazon fulfillment centers and let them handle the shipping and customer service. It can be used for all products, including books, electronics, apparel, and home goods. But of course, Amazon prohibits some items from being sold through FBA.

Many sellers would find this fulfillment option convenient because Amazon picks, packs, and ships all their products to their customers. As a result, they do not have to worry about packing their orders individually and shipping the items themselves. This allows them to free up their time and allocate it for more significant tasks or aspects of their business. Also, there is no need to hire employees who will pack your orders because Amazon already has a lot of warehouse workers for it.

Furthermore, because Amazon stores the items in their spacious fulfillment centers, FBA sellers can free up storage space in their homes. Or, they do not have to rent a storage unit or warehouse space anymore, which can also save them money.

Lastly, customers can enjoy Prime shipping services when purchasing from brands using FBA. With fast shipping services, you can attract numerous customers, especially loyal Amazon Prime subscribers, which can help boost your sales.

The Disadvantages of Amazon FBA and How to Resolve Them

As mentioned above, Amazon FBA is a great way to grow your business because of the numerous perks it provides to third-party sellers like you. However, you must consider its drawbacks first to help you make an informed decision and find ways to overcome them. Below are some of the disadvantages of using this service and tips on how to resolve them:

1. Inventory tracking

While inventory tracking may seem like a no-brainer for experienced online sellers, it can be a disadvantage for new Amazon FBA sellers. This is especially true for businesses or owners who are accustomed to physically counting their products to manage their inventory.

Once they use Amazon’s inventory management system, they might be overwhelmed with its features and confused about how to utilize them properly. But if they stick to traditional methods instead of using automated systems to track their inventory, they would suffer from paying hefty fees on excess stocks. Moreover, they would lose several potential repeat customers for delivering incorrect variations of items to their customers due to inventory errors.

Solutions:

Because automated inventory management systems are effective and efficient for running an ecommerce business, you must learn how to utilize the one built-in on Seller Central. You can read articles or watch demonstrations on using available systems.

However, it would be best to seek help from professional account managers who are well-versed in the Seller Central dashboard and its amazing features. This way, you can already skip the learning curve and proceed with doing more important tasks in your business.

woman talking over the phone complaining about her order

2. Increased returns

Once you use FBA to fulfill your orders, expect higher return rates because customers can return their orders directly to Amazon, not to you, even without your approval. In addition, with Amazon’s 30-day return window, customers can choose to return the products, and Amazon will take care of the return shipping, especially if it’s fulfilled through FBA.

Unfortunately, this situation would be additional costs for sellers and higher rates of damaged and lost inventory that they cannot resell anymore. Moreover, FBA sellers cannot modify their return policies and must comply with Amazon’s since they must provide the same experience and guarantees to all customers.

Solutions:

Even though returns are inevitable in ecommerce, you must not let them hinder you from scaling your business. So to avoid returns, whether fraud or not, you must optimize your product listings by providing accurate sizing guides, detailed descriptions, and clear images and videos. This way, your customers can already visualize the products and get the variation they need.

Working with professional photographers and videographers would be the most suitable to provide high-quality media for your listing. Also, you can avail yourself of copywriting or listing optimization services for best results.

Lastly, you can try to resell your returned items to other marketplaces, look for bulk resellers, or send them to liquidation centers. By doing these, you can still get something out of the items returned by your customers.

3. No opportunity for branding

Most people are familiar with the Amazon logo and associate it with a trusted online shopping experience. When customers see Amazon-fulfilled products, they know that these items will be shipped quickly and arrive in good condition.

However, many shoppers don’t notice that Amazon FBA sellers do not have the opportunity to include their branding on the packaging or promotional materials. This can be a disadvantage for sellers trying to build strong brand identity because customers may not be completely aware of which brand sold the items they bought.

Solutions:

To work around this issue, you can incorporate your brand logo into your products. For example, you can put tags for apparel and accessories or print the logo directly on the items, like electronic devices and beauty products.

In addition, you can include marketing materials inside the box with your product. Or, you can create product inserts that will direct your customers to your website or social media pages after making a purchase. 

4. High costs

As an Amazon FBA seller, one of the biggest disadvantages you will face is high costs. So, before you start using this service, you must know all the associated costs, such as referral fees, storage fees, and fulfillment fees. These are on top of the fee you pay for your selling plan.

First, the referral fees can range from 6% to 20% of the total sale price, depending on the product category. Then, the storage fees vary depending on the time of year and the size and type of products you are storing in their Amazon warehouse, but they can add up to several hundred dollars per month. And if you fail to manage your inventory well, you might spend too much on storage fees alone. Lastly, the fulfillment fees can range from $2 to $5 per unit, depending on the size and weight of your products.

Solutions:

To avoid spending too much using FBA, you must carefully calculate your costs and ensure you are charging enough to cover them. It’s also a great idea to keep a close eye on your inventory levels and only order what you need to minimize your storage costs, which could eventually lead to sunken costs.

Moreover, you can carefully choose which products to sell under FBA. For example, if your products are small or light, they would be perfect for the Amazon fulfillment service. But if you sell heavy furniture or big appliances, it would be best for you to fulfill your customers’ orders on your own.

5. No direct customer relationship

Once your products are already stored in an Amazon warehouse, they will become responsible for everything from packing to dealing with customer service. Therefore, this setup leaves no door for third-party sellers to interact with their customers directly. But, at some point, this is beneficial because it takes off the pressure on you to provide excellent customer service and handle any customer issues or returns.

However, it can also be a disadvantage because you have no direct way to build rapport and brand loyalty with your customers, which can lead to repeat purchases. Also, you cannot ask for feedback and suggestions besides the reviews they leave on your listing, which could help improve your products or services. Lastly, you will not be able to upsell or cross-sell your products since Amazon handles all transactions on your behalf.

Solutions:

Instead of treating this as a major disadvantage, you can look at this circumstance positively because you do not have to stress yourself out with customer issues and product returns. With this, you can focus on more important parts of your business that can improve customer satisfaction.

However, using other platforms to gather information is a way around this inability to communicate with your customers directly. For example, if you have social media platforms, you can conduct short polls or surveys to know your followers’ and customers’ preferences. You can also use these platforms to communicate with them by engaging with their comments and content.

Take the Next Step

In running an Amazon marketplace business, there is no one perfect solution to all situations, especially on order fulfillment. Despite all the benefits that Amazon’s fulfillment services can provide, they still come with various disadvantages that sellers must consider beforehand, especially the new ones.

These drawbacks include unfamiliar inventory tracking methods, increased returns, and no control over return policies. In addition, sellers would have to deal with high operation costs, no opportunity for branding, and no direct customer relationship. However, you can still solve these problems by carefully planning and strategizing your actions, optimizing your product listings, using social media platforms, and hiring reliable account managers.

If you need assistance managing your Amazon FBA business, it would be best to work with an individual or agency providing account management services, like Seller Interactive. With their experienced and hardworking team members, they can help you overcome these FBA disadvantages and scale your business to greater heights.

To book an appointment, email [email protected] or call 1-800-820-3746.

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