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MERCHANT FULFILLED NETWORKA Viable Alternat ive to Fulf i l lment by Amazon

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Amazon Marketplace is growing exponentially

– even outselling Amazon itself. Marketplace

sellers are expected to account for $130 billion

of Amazon’s total gross merchandise value

by 2022.

With significant growth potential on the horizon,

it is critical for third-party sellers to optimize

order fulfillment operations.

The Rapid Rise of Marketplace Sellers

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Fulfillment by Amazon (FBA)

The seller sends merchandise directly to Amazon.

Then, Amazon takes ownership of the entire

process – storing, selling, fulfilling, packaging and

shipping products to the end consumer.

Merchant Fulfilled Network (MFN)

Also referred to as Fulfillment by Merchant (FBM).

The seller receives consumer orders from Amazon

and then executes the pick-pack-ship process

themselves – or enlists a third-party logistics provider

(3PL) to handle these functions on their behalf.

You can also use a combination of the two. In fact,

29 percent of sellers use both MFN and FBA.

Read on to find the best option for your business.

As a Marketplace seller, you have two primary

options for fulfillment and distribution:

What Fulfillment Options Do I Have?

2.1MACTIVE

MARKETPLACE SELLERS

2-3X FASTER SALES GROWTH THAN

AMAZON

86%OF SELLERS ARE PROFITABLE

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Both FBA and MFN have advantages. The right choice depends on your needs and priorities. Following is a comparison of each

fulfillment option in light of 5 key factors.

FBA or MFN? 5 Factors for Comparison

Cost to Fulfill Orders

FBA

With FBA, you pay a per-unit fee for each item sold

that covers picking and packing orders, shipping and

handling, customer service and product returns. Current

fees range from $1.97 to $5.42 for each standard size,

non-apparel item and $2.92 to $5.95 for apparel items,

with additional charges for oversized or heavier items.*

You also will pay storage fees based on the daily

average inventory volume that your merchandise

occupies in Amazon’s fulfillment center. These fees

can quickly erode narrow margins.

* As of June 2020

MFN

Since you’re handling your own fulfillment and

distribution, you can eliminate the cost of shipping

products to Amazon’s fulfillment center as well as FBA

storage and per-unit fees. As a professional seller, you

can set your own shipping rates (except for books,

music, videos and DVDs) and receive that amount as

a shipping credit.

With MFN, you also have the ability to create

efficiencies and reduce supply chain costs.

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Order Volume

Convenience

FBA

If you have a low monthly order volume, FBA could

be an effective option since you’re unlikely to achieve

the economies of scale required for efficient and cost-

effective fulfillment and distribution. As your volume

grows, however, FBA fees can add up.

In addition, if specific items start to move rapidly,

Amazon often purchases quick-moving SKU’s

and resells them themselves.

FBA

One of the key selling points for FBA is convenient,

turnkey service. This is especially valuable if you are just

getting started and lack the expertise and resources to

handle fulfillment and distribution themselves.

MFN

If you have experience in fulfillment and distribution,

you may prefer to retain control of those processes.

Another option is to enlist the help of a third-party

fulfillment provider. A 3PL will have the facilities,

staff and technology necessary to manage these

operations for you.

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FBA or MFN? 5 Factors for Comparison

MFN

By selling high-moving items directly to consumers,

rather than wholesale to Amazon, sellers are able to

retain higher margins. As business grows, order volume

is likely to reach a tipping point – typically around 10,000

orders per month – where it makes more sense to shift

to a MFN.

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Fast, Free Shipping

FBA

Free, two-day (and now one-day) shipping are a

popular feature of Amazon Prime, and using FBA makes

sellers eligible for Prime shipping. However, during the

coronavirus pandemic, Amazon suspended delivery

guarantees for Prime shipping.

FBA SERVICE INTERRUPTIONS

During the coronavirus outbreak, FBA began prioritizing essential items over non-essential items. Shipping times

suddenly extended from as few as 24 hours to weeks or more. This posed a hardship for sellers who are not paid for

the merchandise until items ship. In addition, with long lead times significantly impacting sales volume, many sellers

scrambled to find alternative means of fulfillment and distribution on short notice.

Even once restrictions eased, Amazon limited the quantities that some sellers could ship with FBA. As of May 2020, the

company still could not predict when operations will return to normal for sellers, according to CNBC.

Sellers using MFN during this time could ship on their own timetable and be better able to ensure continuity and control.

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FBA or MFN? 5 Factors for Comparison

MFN

With a MFN, you have the option to participate in the

Prime program using Seller Fulfilled Prime (SFP). You

(or a 3PL on your behalf) simply pick, pack and ship your

own Prime orders and meet the specified one- or two-

day delivery requirements. Alternatively, you can bypass

Prime and opt to offer free or low-cost shipping on

your own.

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Control of Customer Relationship

FBA

In giving ownership of your fulfillment operation

to Amazon, you also must give the company full

access to your consumer data. In doing so, you lose

the opportunity to build a relationship with your

end customers.

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FBA or MFN? 5 Factors for Comparison

MFN

With MFN, you have complete control over your product

and the fulfillment process. You’ll also maintain your

own customer data, which can help to ensure data

security. This additional level of control allows you to

communicate directly with consumers and work to

develop a loyal customer base.

MORE DISTINCTIONS BETWEEN FBA AND MFN

In a recent study of more than 1,000 Amazon sellers, Jungle Scout identified a number of key differences between

those who use a MFN and those who use FBA, including:

› MFN merchants spent less money to launch their Amazon businesses than FBA sellers

› MFN merchants launched their businesses faster than FBA sellers

› MFN merchants reported higher profit margins and greater lifetime profits

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After weighing the options, you may determine that a MFN is the best option for your business. That doesn’t necessarily mean

you’re forced to go it alone. A third-party fulfillment provider can be a valuable resource. They can be particularly useful in

helping to address several critical challenges.

How Can a 3PL Support Your MFN?

Fast, Free Shipping

Free shipping is a virtual necessity when selling on Amazon

Marketplace. In fact, if it weren’t for free shipping, studies

show, nearly two-thirds of Amazon customers would shop

elsewhere.

Of course, shipping isn’t free for sellers, but a 3PL can help

keep your shipping costs to a minimum.

A 3PL is likely to have an established distribution network

with strategic locations that can help to reduce transit time

and cost. With the right DC locations, it is possible to reach

90 percent of U.S. consumers in just two days using more

economical ground service.

An experienced 3PL also will have a keen understanding

of pricing considerations, including surcharges and rate

increases. They can evaluate your shipping sales patterns

using parcel analytics software and determine the optimal

distribution network to meet your needs. Rate-shopping

software and economies of scale will enable them to

negotiate the best possible rates.

Thanks to their established carrier network, a 3PL can

give you a variety of delivery options. This flexibility

can be helpful, especially in a situation such as the

coronavirus pandemic.

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How Can a 3PL Support Your MFN?

Responsive Service

A 3PL with a shared-space environment can provide scalable

space and labor to handle fluctuating order volume and future

growth. This gives you access to the resources you need

without making a major overhead investment. You also will

have the benefit of best practices and proven processes that

have worked for other companies like yours.

A 3PL also will offer top-tier technology such as an order

management system (OMS) to help route and process orders

quickly and efficiently. In addition, fulfillment automation and

material handling systems can help to speed order processing.

Retain Control of Customer Relationship

Unlike FBA with hundreds of thousands of sellers to support,

your 3PL has a vested interest in protecting your brand and

treating your customers like their own. From handling inquiries

to packing items with care, they’re more likely to uphold your

brand promise at every touchpoint with your customers.

Many 3PLs utilize a quality methodology such as Lean Six

Sigma to maintain consistency and accuracy and ensure a

positive customer experience.

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Ready to Enlist the Help of a 3PL?

At Saddle Creek Logistics

Services, we have the resources

and expertise you need to make

the most of your Merchant Fulfilled

Network. We look forward to

helping you achieve success

selling on Amazon.

Contact us today.

sales@sclogistics.com sclogistics.com

3010 Saddle Creek Road Lakeland, FL 33801

863-665-0966 Corporate866-668-0966 Toll Free