You’ve got a lot of options when it comes to getting your products from Point A to Point B. And whether you’re a brand-new, single-product drop-shipping firm or an established, multi-product e-commerce shop, you’ll want to make the right choice.
We begin this week by taking a look at how independent third-party logistics companies stack up against the 800-pound gorilla in the room: Fulfillment by Amazon. Continue reading below to see our take on some of the primary benefits and drawbacks of both 3PL and FBA and which one may be the better choice for your company.
What Is 3PL?
3PL, short for third-party logistics, refers to the outsourcing of a firm’s shipping and order fulfillment practices to an external company. Extremely common in the e-commerce marketplace, 3PL is said to provide greater scalability, cost-efficiency, and higher rates of customer satisfaction than in-house fulfillment. These gains are realized by the increased expertise and economies of scale enjoyed by third-party logistics companies.
In other words, because they ship more products more efficiently, firms that outsource to 3PL companies tend to pay less for their shipping, satisfy more customers, and scale faster.
Full disclosure: Fulfyld is an example of a 3PL company. (A really good one, we might add!) We handle the shipping and fulfillment of e-commerce companies that sell products in the US and around the world.
What is FBA?
FBA, short for Fulfillment by Amazon, can be thought of as a particular type of 3PL. With Fulfillment by Amazon, a company outsources all or part of its shipping and fulfillment services to Amazon. Also common in e-commerce, FBA is used both by companies who sell exclusively on Amazon and those with multiple sales channels.
As we’ll discuss below, FBA requires businesses to conform to the way that Amazon does business. It also requires that companies use Amazon-branded (or generic) packaging rather than packaging with their own logos and trademarks.
3PL v. FBA: Which Is Superior?
You may be wondering whether 3PL is superior to FBA or vice versa. While we’re certainly biased in favor of independent 3PL companies, continue reading below to get a fair analysis of the benefits and drawbacks of each.
Benefits of 3PL
There’s a lot to like about 3PL companies that are independent of Amazon:
- It’s easy to use multiple sales channels
When you use an independent 3PL company (like Fulfyld), it’s easy to rely on multiple sales channels. For example, you can sell your product on your own website, on Etsy, and on Amazon, and still have everything shipped by a single 3PL company.
- Business-branded packaging
Standing out in a crowded marketplace is no easy task. One of the keys to doing it successfully, however, is to package your products appropriately. Generic or Amazon-branded packaging just won’t do the trick if you want to make your customer remember that it was your company who was responsible for that awesome new widget you sent to them.
One of the best things about many of the 3PL companies that are independent of Amazon is that they’ll usually allow you to retain your own branded packaging for the items you ship to your customers. We do this at Fulfyld. We even go as far as helping you design memorable and attractive packaging.
- Customizable processes
You may have heard that Amazon is rather…large. It’s a behemoth, you might say. And because of the scale at which they operate it is extremely difficult, if not impossible, to get them to make custom alterations to their processes.
3PL companies, on the other hand, are often willing to work with you if you require special accommodations during the shipping and fulfillment process.
- Inexpensive Fulfillment
As a general rule, if you’re shipping a reasonable amount of product your bottom-line will be better served by going with an independent 3PL firm. Amazon charges quite a bit for their FBA service, and warehousing and shipping fees can add up quickly, especially if you’re a smaller e-commerce company.
- Fast Fulfillment
Good 3PL companies are fast. At Fulfyld, we offer same-day fulfillment and guaranteed 2-day shipping to your US-based customers. Yes, Amazon Prime is also quick. But 3PL is no slouch in the speed department.
Downsides of 3PL
There are a few drawbacks to the 3PL experience, most notably in the acclimation and setup phase.
- Finding a Good 3PL Partner Can Take Time
It can take some time to find a good 3PL partner if you’re new to the market. While we like to think that here at Fulfyld we make it easy to choose a 3PL partner (after all, you can just go with us), some companies spend quite a bit of time agonizing over the decision of who to trust with their products and customers.
- Risk of an Unsuitable Fulfillment Partner
The choice of a 3PL partner can also involve some risk, particularly if you choose one without a history of good client service. Again, at Fulfyld we’ve eliminated this risk by providing our clients with personal account managers to ensure a good fit. But other firms don’t necessarily go to those lengths and some companies have been burned by choosing an inadequate 3PL partner.
- Initial Setup Fees/Acclimation Process
There are always costs associated with setting up shop with a new partner. The onboarding process is never free and there are inevitably going to be some kinks to be worked out. Of course, that’s true with Amazon as well.
Benefits of FBA
The benefits of Fulfillment By Amazon can be pretty significant, especially for very small companies.
- Customer-Service and Returns Are Handled for You
With FBA, Amazon handles all of your returns and customer-service tasks for you. This is not an insignificant benefit, particularly if you’re a very small company and your ability to respond to requests for returns is limited. You may not have time during the day to handle returns, or you may not have the manpower to see that it gets done.
- Amazon Prime
Everyone’s heard of Amazon Prime. It’s a super-fast and convenient way to get your stuff shipped to you almost anywhere in the modern world. Companies who rely on FBA to handle their logistics needs can usually apply for their products to be eligible for Amazon Prime. It can create a significant boost to sales in the right market and product.
Downsides of FBA
Of course, along with its upsides, Fulfillment by Amazon carries a number of negatives as well.
- Amazon-Branded Packaging
One of the major drawbacks to Fulfillment by Amazon is that all of the packaging your item is sent in is Amazon-branded. This can significantly detract from your attempts to brand your product, improve customer loyalty, and increase repeat purchases. The customer simply doesn’t associate your brand with the product when all they see is the Amazon logo plastered all over everything.
While you can choose to pay an additional cost to ship your item with generic boxes, that’s not a much better option. After all, generic packing is pretty…generic. It doesn’t scream personalized service, does it?
- More Expensive than 3PL and More Expensive During The Holidays
On the convenience-cost continuum, FBA tends to fall substantially on the convenience side of the spectrum. You pay a hefty premium for the benefit of Amazon doing all the heavy lifting on the fulfillment side of your business. This is especially true during the holidays when warehousing and shipping costs can increase significantly.
The truth is that, as much as we’d like to say 3PL is always the better solution, there are situations in which FBA is a more appropriate choice. That’s particularly true where the shipper isn’t moving a lot of product or the total amount they ship each month is extremely volatile. For example, if you tend to ship a lot of products in one month and almost nothing the next, FBA may be a good choice for you.
However, generally speaking, for those who ship a fair amount of product on a regular basis and want to grow their business, the personal branding opportunities, one-to-one customer service, and the cost savings of a good 3PL outweigh the benefits you’re going to see with Fulfillment by Amazon.
At Fulfyld, we hope to be your e-commerce 3PL solution. We focus exclusively on third-party logistics for e-commerce businesses in order to provide premium service at a low price that makes us an attractive choice for anyone who’s trying to get their products from Point A to Point B with a minimum of fuss and cost.
With FBA, you’ll be one of a (very) long list of clients expected to conform to the Amazon way of doing business. At Fulfyld, you’ll get your very own fulfillment account manager and save money on shipping. In fact, even if you’d like to go with Fulfillment by Amazon, we offer FBA prep services that dramatically increase the convenience of that particular service.
Contact us to learn how to obtain the Fulfyld advantage.