Direct fulfillment is an option for vendors who want control over their supply chain.
Fulfillment is one of the most essential parts of ecommerce, yet it’s among the most challenging for new sellers.
There are countless fulfillment options, and knowing which is best for your company is difficult. As a result, many sellers on Amazon choose FBA. But what if you don’t want to sell products to the end consumer? Or would you rather have control over your supply chain?
Amazon direct fulfillment is an effective alternative. With direct to consumer fulfillment, sellers take the supply chain into their own hands. While it is a go-to option for many sellers, it’s also flexible enough to serve as a backup alternative to Amazon FBA.
What Is Amazon Direct Fulfillment?
Direct fulfillment is a program available to Amazon vendors. In this arrangement, the vendor is Amazon’s wholesaler.
Amazon purchases products from the vendor, lists the items under its brand, and markets them to consumers. However, it is the vendor who ships the orders to customers, not Amazon.
How Does the Program Work?
After a customer orders a product, Amazon forwards the order to the vendor. Then, it’s the vendor’s duty to handle fulfillment―picking, packing, and shipping the item.
Since they’re sending the item on Amazon’s behalf, the vendor will ship the product using Amazon’s logo and branded packaging.
Amazon Direct Fulfillment vs FBA (and Other Options)
It can be easy to confuse direct fulfillment with similar methods, such as dropshipping or Amazon FBA. Here are the differences between these fulfillment options to help you choose the best one:
Dropshipping
Direct fulfillment is a form of dropshipping on Amazon in which a third party ships orders to customers on behalf of the seller. For example, a content creator may have a merch store, but they work with a manufacturer to create, fulfill, and ship orders.
While direct fulfillment is a dropshipping method, both strategies differ. In direct fulfillment, the seller is a wholesaler, shipping Amazon products.
FBA
Fulfillment by Amazon (FBA) is one of the most popular supply chain and logistics programs for sellers primarily selling on the ecommerce giant’s platform.
Sellers on FBA send their inventory to Amazon warehouses. When a customer orders a product, the details are sent to Amazon, and their workers handle all fulfillment. Sellers are responsible for creating inventory, listing products, and marketing/advertising their business.
FBM
Fulfillment by merchant (FBM) is what it sounds like―the seller processes and fulfills orders to the end customer. Similar to direct fulfillment, the seller controls the storage, packing, and shipping. However, these strategies differ by end consumer.
This method allows sellers to work with a 3PL company to handle fulfillment. Sellers who are also vendors can use both FBM to ship to end consumers, and direct fulfillment to ship to Amazon.
Pros and Cons of Direct Fulfillment
Direct fulfillment offers some key advantages for vendors. However, this fulfillment method isn’t for everyone. Let’s weigh out the pros and cons:
Pros
- More control. Vendors use their own warehouses and manage order fulfillment, where they store, pack, and ship the items.
- No customer service. Even with direct fulfillment, Amazon provides its own customer service, streamlining the fulfillment process.
- List your entire inventory. Since sellers don’t need to ship their products to Amazon warehouses or worry about storage space, they can make their full inventory available for purchase.
- No stock-out risks. Since vendors manage their own warehouses, they can exercise better inventory management, reducing the chances of running out of stock.
Cons
- Lower visibility on Amazon. Since Amazon is branding your items, your products will be placed alongside other wholesalers. You’ll face more competition; this translates to lower visibility and fewer organic rankings.
- More work. While vendors have more control, this also means there’s more work involved.
How to Get Started
Creating a direct fulfillment strategy is easy. All you need to do is follow these steps:
- Check the “direct fulfillment” box when signing up for Amazon Vendor Central.
- Wait for the invitation for the dropship portal.
- Provide details, such as which shipping label you’ll use, warehouse address, hours of operation, and carrier pick-up times.
- Wait for Amazon to contact you, where you’ll upload your inventory and other essential information.
Direct Fulfillment Best Practices
While direct fulfillment may be the best option for certain sellers, it still requires the right approach.
Product Procurement
Sellers must procure the highest-quality products to start selling as an Amazon vendor. They can do this with direct sourcing, working with manufacturers, or even reverse sourcing. It’s important to consider all these options to find the best solution for your company.
Logistics
Vendors handle logistics, which means they are in charge of storage, warehouse management, inventory, picking, and packing.
While you can skip the middleman and do all these tasks yourself, some vendors work with fulfillment providers to handle some or all aspects of logistics.
Inventory Management
With direct fulfillment, vendors must manage their inventory. Here are a few tips to keep a stocked warehouse:
- Be prepared. Stay aware of any sales spikes and slow seasons. Keep more stock when demand is high, but reduce excess stock to decrease storage prices.
- Streamline. Use automation and other tools to avoid low stock levels before customers purchase products.
- Stay in touch with Amazon. Amazon is your partner. Contact Amazon if there are any issues or other important considerations.
Shipping
One of the perks of direct fulfillment is that vendors save money on shipping. Amazon covers all shipping costs, so vendors must pick up, pack, and ship the order on time. Even if you use your own shipping label, you can send Amazon a bill for it.
Track Analytics
Performance metrics and other data can offer the insight you need to run a successful business. Amazon offers various vendor metrics, and you can access them on Amazon Vendor Central. Here are a few key analytics to track:
- Order processing turnaround time
- Late shipments
- Cost per order
- Order accuracy
- Order defect rates
- Inventory accuracy
Final Thoughts
Direct fulfillment ensures Amazon vendors stay in control of their supply chain. But is this the best method for your business? Perhaps not for you, but you have other options. Dropshipping, FBA, and FBM offer different ways to store and ship inventory.
If you choose one of these other options, such as FBA, you’ll need more help. We can create a unique sales strategy for your business, including market research, product listing optimization, and advertising.
