When e-commerce companies compare FBA vs 3PL fulfillment options, there are many clear paths for Amazon to claim victory. After all, you have the backing of the biggest name in e-commerce, not to mention its 197 million monthly visitors.
Tons of companies we work with use only FBA as their fulfillment partner. True, there’s a lot of positive buzz about using Fulfilled by Amazon services. But let’s not let it drown out the potential that an independent 3PL can bring to your business.
When it comes to choosing between FBA vs 3PL, we believe one isn’t inherently better than the other. “Better” is highly subjective, so let’s zoom in on some specifics.
Here’s a rapid-fire, no-holding-back comparison of FBA vs 3PL and how they impact your e-commerce fulfillment.
What is 3PL?
Third-party logistics, or 3PL, is an outsourced fulfillment service. These are independent companies that manage your inventory, order processing, shipping, and returns on your behalf.
Many e-commerce retailers use 3PL services to scale their operations. 3PLs can usually store your inventory for cheaper than you could do yourself, plus they can usually fulfill and distribute orders faster than you could in-house.
What is FBA?
Fulfilled by Amazon, or simply FBA, allows e-tailers to ship their products directly to Amazon for distribution. You sell your products through Amazon, then Amazon handles all the shipping and fulfillment for you.
For clarity’s sake, FBA is one type of 3PL service. Because FBA is such a huge 3PL service, it’s developed its own category among e-commerce stores.
Many sellers love working with Amazon because items ship quickly, which takes a lot of pressure off the business. They handle all returns and customer complaints and take the guesswork out of shipping internationally. And while their fees are on the higher end of e-commerce fulfillment, they’re also transparent so you always know what you’re paying.
FBA vs 3PL: Key Differences that Affect Your Bottom Line
Fulfillment is an essential part of your business, one that relies on speed, accuracy, and quality. As you’re exploring your options, consider these key factors that can vary greatly between FBA and independent 3PLs:
Ease of Setup
Many e-commerce retailers are attracted to Amazon’s plug-and-play fulfillment model. Setting up is relatively straightforward and doesn’t require a lot of guesswork on your end.
This is also one of the top reasons why companies are hesitant to explore other 3PL options. They fear that setup is too complicated. And sometimes, there are initial startup fees involved to integrate your business with their warehouse and system.
One thing to consider here isn’t the upfront hurdles, but rather the long-term value. True, it might take some extra work and costs to start a new 3PL relationship. But if that relationship can lead to a healthier bottom line over time and help you stay competitive, then it’s probably worth it.
Amazon certainly isn’t the cheapest fulfillment partner. In fact, their higher fees are one of their biggest downsides. These fees have also been known to increase during peak times, like the holidays.
Fulfillment fees with an independent 3PL can be significantly lower, which gives you a couple of unique advantages. Lower fees could mean higher profits per item. Or, in some cases, you might reduce your prices to capture more sales on highly competitive items.
There’s some chatter about Amazon FBA’s intake procedures that have made some sellers unhappy. When inventory is lost, sellers will get credited the cost of each lost unit minus FBA fees – if Amazon owns the mistake.
Granted, no fulfillment service is perfect. Lost inventory could happen to anyone at any time. But it’s important to consider how your fulfillment partner handles these situations. If inventory is lost and your 3PL can’t or won’t accept responsibility, it could cause severe financial strain for your business.
3PLs that use platforms like Zenventory to provide real-time visibility to your stock can help you better manage your inventory remotely so that missing items don’t fly under the radar.
One of the main perks of using FBA is the mostly hands-off process that comes with it. Of course, this benefit can also be considered a disadvantage of sorts. Not having much stake in how things are fulfilled means less control over quality.
There have been some reports that with non-private label products, Amazon will fulfill orders based on the nearest warehouse location. This means that your customer may or may not receive the same product you shipped to Amazon.
It’s a lower cost for Amazon and improves shipping speed for your customer. But it also means that quality is a bit of a mystery. Also, Amazon only ships in Amazon-branded boxes and packages them in their own way, which could take away from your own brand.
Using an independent 3PL service gives you more quality control. For example, you may have the option to use your own boxes and packing materials and only your products will be shipped to your customers.
Control Over Sales Data
A recent WSJ article revealed a startling insight about how Amazon uses its sales data. Using FBA means Amazon employees have access to your sales data, which they can then use to learn more about your top selling products and ultimately compete with you.
Though Amazon has policies that prohibit these actions, it hasn’t stopped employees from leveraging that data to their own advantage. This data can be used to help Amazon competitive price products, launch new products, and enter certain segments based on performance history.
3PL service providers aren’t in the business of selling products. Any interest they have in your sales data, such as insights obtained through Zenventory, is purely out of cooperation to help you.
Amazon and 3PL: The Benefits of Branching Out
Is there a perfect solution between FBA vs 3PL? It really depends on your plans for your e-commerce business.
Amazon gives you lots of growth potential, especially now that more people are turning to the platform. Their simplicity and scope have made them a top contender in the 3PL arena.
But there are many very capable independent 3PL providers that are also easy to work with. Their lower fees give you more bang for your buck. They’re not competing with your business. And you’re able to deliver on your customers’ high expectations of fast shipping and easy returns.
Many e-commerce merchants find that using both FBA and an independent 3PL is the best path forward. You’ll get all the benefits of Amazon’s extensive network and technology. You can also avoid putting all your eggs in one basket.
The lower fees of non-FBA sales can help your bottom line. Plus, you’ll have more flexibility and control over your operations and customer experience. These are important things to consider when growing your brand, your reputation, and your business’s overall future.
If your 3PL uses Zenventory, you’ll benefit from a user-friendly web portal that gives you real-time visibility into your stock levels, order status, and sales data. When vetting 3PL providers, be sure to ask them if they use Zenventory!