Amazon FBA vs 3PL
Amazon is one of the largest e-commerce businesses across the globe, even though it barely even existed twenty years ago. And yet now, Amazon is a household name, one that can help you with your daily shopping, your last-minute needs, and even your business.
It may seem strange that Amazon, a company in its own right, offers help to other businesses, but that is indeed the case. Because of how many options there are for businesses to be aided with Amazon’s help, however, it can be hard to know which of their many services might best benefit you.
That’s why, in this article, we’re going to discuss the difference between two types of services: Amazon FBA vs 3PL.
In this guide, we’ll explore:
- What are FBA and 3PL?
- What Is Fulfillment by Amazon
- Advantages of Amazon FBA services
- Disadvantages of Amazon FBA services
- What is 3PL?
- Advantages of 3pl services
- Disadvantages of 3pl services
- FBA vs. 3PL
- Which Is the Better Choice?
What are FBA and 3PL?
Acronyms can be scary! It’s true and there’s no shame in that. But when it comes to these particular acronyms, they stand for: “Fulfillment by Amazon” and “Third-Party Logistics.”
Now you’re wondering what the differences between the two are, aren’t you? Read on to find out more information.
What Is Fulfillment by Amazon
When it comes to Amazon, one of the ways it helps you with your business is to help you sell your things. Whether that’s custom products or just old games and movies that you have lying around, Amazon offers sellers the ability to sell their wares on their platform.
They take a fee, of course, but at the end of the day, working with Amazon is an easy way to turn a small profit.
Because Amazon gains money when you gain money, they’re always trying to get you to keep working with them. That’s where Amazon’s Fulfillment by Amazon comes into play.
Amazon FBA is a service they provide that is meant to help businesses grow. The way they grow these businesses is by providing access to Amazon’s logistics network.
How that works is that businesses send products to Amazon’s fulfillment centers, and then, when a customer buys that particular product, Amazon handles the rest of it. That means that once a customer makes a purchase, Amazon handles the receiving, packing, shipping, customer service, and returns for those orders.
This allows for quick and efficient shipping, which also means that fewer customers are going to come after you for shipping delays and issues. As the product manager, you can send Amazon your item and then sit back and wait for the money to roll in.
You may also like: These are the main benefits of the Amazon Buy Shipping label service.
Advantages of Amazon FBA services
One of the biggest advantages of working with Amazon is the ease of reaching millions of customers. The largest marketplace you can use to deliver your products to your potential customers is right in front of you. It is possible to reach incredible sales figures, especially on Prime days.
Since the management of after-sales processes (including customer service) is done by Amazon, you do not need to spend any extra effort. Track sales, schedule production, send to Amazon warehouse and Amazon takes care of the rest.
How much you will pay to take advantage of Amazon’s seemingly endless services may leave you with fear and a question mark. There’s no need for that. Because the amazon fee system is very transparent and you can be sure that you will not encounter any surprises.
Disadvantages of Amazon FBA services
Unfortunately, it is not possible to use special tools (such as parcels or personalized packaging options) for your company while using Amazon’s FBA service. Amazon does not allow you to make any personalized changes to your orders, as it ships using its own packages.
The Amazon FBA service is unfortunately a bit more expensive than the other option. Yes, it is a fact that it has a transparent pricing policy, but it is also a fact that there are more suitable options.
Selling products on Amazon not only allows you to reach many customers, but also allows too many potential sellers to see your product and compete with you. In some cases, you can even compete with Amazon itself.
Trying to get help when you need it can become overwhelming. Since Amazon cannot assign special customer representatives to sellers, you will have to solve the problem with the call center if there is a problem.
Transform your warehouse to a DTC fulfillment center
What is 3PL?
Although Amazon FBA might seem similar to a 3PL, they are somewhat different. Again, 3PL stands for third-party logistics.
A third-party logistics provider (3PL) is an outsourced provider that handles many aspects of a company’s supply chain: inventory management and storage, fulfillment services, shipping and return logistics, plus many more.
Because a 3PL provides the same services to many companies at once, it can be an efficient option to manage big changes in sales or rapid growth due to introducing a new product.
Sounds familiar, right?
It is very similar to Amazon FBA, but only on the surface. In truth, the two are quite different, but only when you look into the pair of them.
An established 3PL will have adequate warehouse space for your inventory storage in their fulfillment centers. They will also have technology tools to help you manage your inventory daily.
Although you will have to pay for storage space within their sites, you might have the opportunity to distribute your inventory to multiple warehouses in the country, which will cut down on shipping fees.
Make sure that whoever you’re working with has a good reputation and will be able to work well for your needs.
Advantages of 3pl services
The biggest problem of the companies that reach a certain sales volume is that they need a larger warehouse in order to obtain the warehouse space they need during the growth phase. If you use a 3pl warehouse, you always know that there is enough space and you have cleared an important issue for growth. In addition, warehouse management software used by 3pl companies will allow you to manage your order processes and inventory in the best way.
Warehouse processes (such as order fulfillment, product picking, packaging and shipping) are carried out by expert teams in 3pl warehouses. In this way, you will not have an extra employee expense and you will work with experts in their work.
Since 3pl warehouses are integrated with today’s important sales channels such as amazon, ebay, shopify and most cargo companies, you will not waste time on these processes. Thanks to ready integrations, it will become very advantageous especially in your cargo costs.
If you want to use special options to promote your brand to your customers, it is very easy to do this with 3pl. In your order submissions, you can ensure that special packages, customizable notes, and most importantly, the product to be sent passes through quality control without any problems.
Another good thing about 3pl repositories is that you have an account manager that you can reach in any negative situation. You cannot imagine the value of having someone to support you in some crisis situations.
Disadvantages of 3pl services
If you are a young company that has just started selling and you do not have an established sales volume, using a 3pl warehouse may be costly for you. The biggest reason for this is that the plan you will get without foreseeing the number of sales may cost you more than you get from the sale.
Another negative situation you will encounter is that you are not in control. At the end of the day, you delegate all your logistics processes to a company. Even if you are working with a partner who can meet your needs today, your vision may not be in line with your partner’s business competencies in the future.
It is known that most companies have problems with 3pl warehouses during e-commerce return management. Here, especially the dependency on the other party can cause problems in your business.
Amazon FBA vs. 3PL
Both services (FBA and 3PL) count as e-commerce fulfillment services. Both allow for you to send your inventory off and make sure that you have an expert who will handle your inventory and your orders!
This will allow you to focus on other more important things, such as making sure that you’re coming up with the best product possible. You can also spend this additional time focusing on branding and marketing for a lower overall cost.
When deciding who will help you fulfill your customer’s orders, choosing between FBA and a 3PL is difficult. You might want to choose FBA if you have products that sell quickly! This way, you’re able to utilize Amazon’s aspect of their multi-channel sales approach.
On the other hand, if you need more flexibility and control, as well as a higher level of customer service, you are likely to be better off with a 3PL. The 3PL tends to do slightly more than Amazon FBA does and as such, automating all the processes you might require for your business will free up your time.
It’s also important to consider the costs of both options. Amazon FBA and 3PL have a variety of costs depending on the fulfillment services you choose. Some will only require a one-time payment while others will require monthly payments that you’ll be stuck with for as long as you have wares in their warehouses.
Make sure that you have a good idea of what the costs of both are before you bite the bullet for either one. At the end of the day, you want to ensure that whichever solution you choose is the most cost-effective option for your organization.
Bonus: If you want to have detailed knowledge regarding Fulfillment Centers vs. Warehouses, please look at our blog post about the topic.
Which Is the Better Choice?
As it stands, there’s no particular right or wrong answer when it comes to deciding. You can only choose what’s best for you and for what you’re trying to accomplish.
There are pros and cons to each service, but nothing that should be completely written off as an option for you. When it comes to Amazon FBA, realize that, for example, you’re going to have to deal with the fact that you can’t brand your items.
Amazon will throw your wares into their Amazon-branded boxes and send them off. If you’re trying to use your sales to garner more interest for your products (by adding in business cards or other marketing items), you will find yourself pretty sad about Amazon FBA.
However, even though you will lose branding and marketing potential with Amazon FBA, you will gain access to Amazon’s wide range of accessibility. People all over the world will be able to find your business through Amazon’s site.
If you’re trying to increase the amount of traction you’re getting to your website, Amazon FBA can help in that area.
Having said all of that, the opposite is true for 3PLs. You’ll be able to increase your marketing and branding whenever you sell a product, but you won’t have access to Amazon’s reach.
There are other pros and cons between the pair, so make sure to weigh them before you make your decision.
Is Amazon FBA a 3PL?
No. They are two different services. Although there is some overlap (re: Amazon FBA automating your shipping processes), 3PLs offer more services for a greater cost.
Can I use Amazon FBA and a 3PL?
Nothing is stopping you from doubling up on both processes, but since they overlap in their functions, it seems a bit unnecessary to have both. Having said that, if you’re making great business strides and you need to outsource to an extreme extent, using both Amazon FBA and 3PL can go a long way towards freeing up your time.
Is FBA on Amazon worth it?
While there are different options to consider, they all have their own positive and negative aspects. Yes, Amazon costs may seem high, but you should also evaluate and decide on the positive effects such as the number of customers your products will reach, the sales potential, and the fact that the processes after sales are managed by Amazon.
Why do companies use 3PL?
If you are utilizing a 3PL warehouse service, you can scale space, labor and shipping to suit your needs. This becomes a great advantage especially for companies serving in more than one country and companies that want to transfer their high sales volume to different warehouses and reach faster cargo shipments.