UPS eFulfillment vs. Amazon FBA for Order Fulfillment

Interested in UPS’s new eFulfillment service? The service allows you to fulfill orders for 21 marketplaces, including major ones like Amazon, eBay, Etsy, Shopify, and Walmart!

Features and services are likely to change. Please check the UPS eFulfillment website for latest pricing and features, as figures used in this article may have changed.

Let’s take a look at the features of UPS eFulfillment and how the costs compare to Amazon FBA.

Benefits of UPS eFulfillment

  • Manage inventory and orders in one place
  • Same-day fulfillment up to 5pm on 1-day, 2-day, and 3-day service
  • Supports 21 marketplaces, including Amazon
  • Simple, bundled pricing

Costs

At the time of this article, UPS charges $0.93 per cubic foot per month for storage based on size and average inventory.

In addition to storage costs, rates are divided into three zones, A, B, and C, and fulfillment costs are based on weight. Take a look at the costs for UPS eFulfillment.

For example, the price for two-day shipping for a 1 pound item to zone A is $8.19 ($7.84 base rate + $0.35 per pound).

Shipping to Canada is also available.

UPS currently has a 60-day trial where the minimum monthly fee of $1,000 is waived. Once that trial period ends, users will pay whatever their shipping fees and storage costs are for the month OR $1,000, whichever is higher.

With our sample shipping cost of $8.19, you’d have to ship approximately 4-5 orders per day to go above the $1,000 monthly minimum.

Amazon FBA vs. UPS eFulfillment

Costs will vary based on what products you’re selling and how long they sit before they sell.

To start, Amazon’s storage fees begin at $0.69 per cubic foot and go to $2.40 per cubic foot during Q4 for standard-sized products. You’ll also have increased rates for long term storage (after 365 days).

UPS doesn’t have a long term storage fee, nor is there a higher storage fee for Q4. The rate of $0.93 per cubic foot per month is fixed.

To fulfill an order for an iPad Mini 4 case, FBA costs $2.41. Amazon shoppers generally expect fast delivery, and Prime members usually get 2-day shipping.

UPS eFulfillment would cost $8.19 for the same 2-day service.

The difference in cost is significant for smaller and lighter items. But heavier items shipped through UPS may be cheaper, depending on the location.

For instance, a 20-pound tire that measures 25 in x 25 in x 9 in would cost $15.10 to fulfill through FBA (small oversize rate of $8.26 + $0.38 per pound above the first 2 pounds).

UPS eFulfillment would cost $14.84 for 2-day shipping to Zone A.

Of course, there are other considerations. For instance, FBA handles all customer service, but some sellers may prefer handling customer service for more complex products.

Conclusion

There are other considerations when deciding on a fulfillment service like inbound shipping costs, removal fees, and other processes like damage and lost products at the warehouse.

Do the calculations to see if using UPS eFulfillment makes sense for your business.

Even if the fulfillment and shipping fees are slightly higher, sellers on multiple marketplaces may still save money overall by using one integrated service.

Don’t forget that you can still use Amazon to fulfill orders from other marketplaces through Amazon’s Multichannel Fulfillment service (MCF).

Streamlining your fulfillment to one service may actually save you money. Your employees won’t have to learn multiple processes. As a result, you’ll make fewer mistakes due to having one service provider instead of multiple ones.

Read these related articles on shipping and fulfillment:

Some Serious Reasons Why You Should Avoid FBA

Amazon FBA can be a boon for small businesses. It’ll reduce the need for you to handle picking, packing, and shipping. You’ll also be able to offload customer service like processing customer returns. Better yet, you won’t need to stack mountains of product around your house, creating a maze of dangerously tall towers. Nor will you need to rent out expensive warehouse space.

What’s the catch with FBA? The service may seem too good to be true–you’ll be able to automate your business to a certain degree, and you’ll save time and money on labor.

Nevertheless, there are some serious reasons why you should keep in mind when you’re thinking of taking the FBA plunge, and those who don’t do proper research may end up losing their investment.

Gated categories or category restrictions

Let’s say you’re selling a product in a category that isn’t gated or restricted by Amazon. You’ve tested the waters and know that the item sells a healthy number per month. You’re ready to take the plunge and order tens of thousands of dollars more from your supplier to sell through FBA. While Amazon processes your shipment, you wake up one morning to an email about the suspending listing. You may be required to provide invoices, prove a business relationship with the brand owner, or submit some forms for safety or some other reason. Or Amazon may have decided to prevent you from selling that item for whatever reason. Even if you’re PL, the product you’re selling may face new safety requirements such as UL, FDA or other conditions.

You may think that there’s no way this will happen to you, but hundreds, perhaps thousands of sellers woke up to such a situation throughout 2016 and 2017 due to Amazon’s restrictions on music, DVD, book, and other categories. In some cases, sellers were unable to sell as Used – Like New, while in other cases, the entire category was restricted to brand owners and their authorized resellers, forcing smaller sellers to create removal orders and list on other platforms. Sellers of lights and items including batteries found new UL and battery restrictions.

Now you have thousands of dollars worth of inventory sitting in a warehouse that you can no longer sell on Amazon, and you’ll have to pay for storage and removal fees. Your inventory is now in limbo until Amazon ships it back to you.

Without FBA, you could simply sell your product on another venue without waiting while you appealed the suspension or product listing. Or you can get UL certification while avoiding those storage fees.

One last reason to consider is that Amazon will not take specific products in their fulfillment centers. These products may include hazardous materials like lithium batteries. You’ll receive a message when you list your items for FBA if this is the case.

Commingled inventory

If you use this option for FBA because you believe that it’ll be faster since you won’t need labels (you’ll use the manufacturer barcode instead), you may be in for some big surprises. Commingling inventory means that the stock closest to the buyer will ship regardless of who the product belongs to, so if your commingled item is on the west coast and an east coast buyer orders it, the same commingled item from the east coast warehouse will ship.

The benefit of commingled inventory for buyers is that all items arrive at the buyer’s location quicker, a critical factor for many buyers who expect 2-day shipping. You’ll also avoid having to cover up the manufacturer UPCs with your own FNSKU labels. Commingling saves a little bit of labor and materials.

Where people get into trouble is that the commingling of inventory means that sellers who commingle their counterfeit items may affect you as well. If a seller commingles inventory and uses fakes, then your customers may potentially receive those counterfeit items. When buyers ultimately open an Amazon complaint, then Amazon suspends you for selling counterfeit items. A false claim can be a massive headache, as your selling privileges and settlements are frozen until you can prove that your products are authentic.

Commingled electronics are often easily faked, and many scam sellers will do just this. They’ll print authentic UPCs on their fakes and send them to Amazon as commingled. Then when Amazon fulfills orders, anyone with the same item will suffer the consequences of counterfeit inventory.

Amazon picking, packing, and fees

Amazon FBA is excellent in that it handles the picking, packing, shipping, and customer service, but that means that all of these aspects are out of your control. You can quickly check how much Amazon charges for FBA so that you can compare how much it’d cost you. Here’s their current pricing as of February 2017 for January-September, and there’s no guarantee that Amazon won’t change its pricing again next year (or next month).

The one drawback is that you’ll lose control over the whole process. When you handle picking and packing, you can ensure that customers will receive their items in new condition, and because you’ll know your product, you’ll be aware of any issues when you get the item for packaging. Amazon warehouse workers may not necessarily be knowledgeable, nor may they care, about your item if they notice that some damage has taken place somewhere along the process. For example, warehouse workers shipped apparently damaged items in some cases.

Similarly, you’ll lose control over the packaging. While Amazon does a decent job overall, the workers do make mistakes. If your item is an expensive electronic, then workers may throw it into a bigger box. The result is that you’ll get more returns and complaints, resulting in hits to your seller metrics.

All the fees may eat into your already razor-thin margins, and you may discover that hiring a worker or doing some of the packing and shipping yourself may be a cheaper alternative. At the very least, you can control the quality of the product going out, and you can avoid scams from other sellers.

Returns

While Amazon FBA handles all refunds, they don’t often check the condition of the item. In some cases, sellers have reported that customers have returned used or damaged items, and FBA has resold it as new. FBA then ships the used or damaged item to another customer. The result is a complaint and a hit on the seller’s metrics. If you have a lot of sales, then these kinds of problems can build up quickly, resulting in a suspension of your account.

When you use FBA, you essentially give up control of that product. Amazon may decide to refund buyers for items outside of the return period, or they may have issued a refund for any other reason. Because they handle customer service, you don’t have much choice in the matter. Whether or not you’re on the hook for these returns is unclear, though most sellers have received reimbursements for such cases. If you fulfill your orders, then it’s clear that a return request from 3 months ago should be denied unless you have some warranty or generous return policy.

Lost, misplaced, or damaged inventory

There are so many processes that go on when using FBA. You’ll have to deal with a shipping carrier, multiple warehouses, and different workers processing your inventory. At any time during this process, your products may be lost, misplaced, or damaged. Many sellers report that the number of items they send in sometimes doesn’t match what Amazon receives. While sellers can file a claim for reimbursement, Amazon doesn’t always pay for the cost of the inventory–they may replace the product instead (in some instances damaged, customer returns, or no longer saleable).

These other potential issues with FBA aren’t necessarily widespread, but they do occur with some regularity. We’ve listed them below because they don’t warrant a more thorough discussion.

  • FBA picking, packing, and shipping the wrong item(s)
  • Hit on seller performance metrics when it’s FBA’s fault (incorrect shipping, long ship times, etc.)
  • Delays and other issues when shipping to Amazon warehouse and processing products
  • Inadequate or non-existent reimbursement for damage or mistakes caused by Amazon
  • Fulfillment centers fudging numbers in the hopes of avoiding liability for damage

For many of these issues, it’s difficult to tell whether the fault lies with the seller or with Amazon. For instance, processing delays could be a result of inappropriate or incorrect labels placed on products. These are issues any business would have to deal with, but the problem is that you’re at the whim of the fulfillment centers when using FBA. Responses to emails may take days or weeks, and resolutions can take months to resolve if you’re lucky.

Regardless of these drawbacks, there are numerous benefits to using FBA. This article only focuses on the issues sellers have experienced using FBA. As always, you should do your research before you decide on a course of action. FBA has automated a lot of the processes for small sellers. Not having to pick, pack, ship, and deal with customer service frees businesses to increase their sales volume and reduce labor costs. If you price your products properly, then these losses aren’t as damaging. Unfortunately, the customer has to pay a higher price because of Amazon’s errors.

6 Reasons Why You Should Use FBA

If you’re thinking about using FBA, then here are six reasons why you should start now. There are many disadvantages to using Amazon’s Fulfilled by Amazon (FBA) service, as we’ve covered in a previous article. But if you want to expand your business, then you’ll need to automate your processes. FBA lets scale your business in a way that no other business can with traditional business processes. The amount of time you’ll free up will allow you to look for other ways to increase your revenue, whether by adding new inventory or venturing into other opportunities.

Here are six reasons why you should consider using FBA.

Remove the need to provide customer service

Once you use FBA, you’ll no longer have to deal with customer service and returns. Amazon will handle all customer issues, including refunds. Amazon will inspect returned inventory, issue refunds, and relist items. Better yet, any damage or loss to your stock will be reimbursed by Amazon.

You won’t have to hire customer service representatives, and you won’t be stuck on the computer for hours answering questions and processing returns. That means you can sleep without having to worry about customer questions going unanswered.

Remove the need to pick, pack, and ship

When you participate in FBA, you no longer have to pack and ship your products. You won’t even have to hire people to do the same, reducing your labor costs and time to manage people. You’ll still need to inspect, label, pack, and send in your products to Amazon fulfillment centers (FC), but third-party services will also do this for a small price. Even Amazon will label your items for $0.20 each label.

If you have good relationships with your suppliers, then you may even be able to ship directly to Amazon FCs, removing the need to box and label your products. This approach is ideal, but it still has some drawbacks, like product quality concerns.

One significant benefit is that FBA products get the Prime and 2-day shipping label. Prime appeals to the potentially millions of Prime members who expect fast shipping.

Save space

You won’t need to stack your products around your house or garage. Nor will you need to rent out expensive warehouse space to stack your products. Having hundreds or thousands of products can quickly become a big disorganized mess if you don’t have some system in place, and it’s worse if you’re using your home to store these items.

Get the Buy Box

FBA products have a much higher chance of winning the Buy Box. Because FBA has fast shipping, sellers with FBA are more likely to win the Buy Box when other criteria like inventory and seller history are equal. The majority of Amazon customers click on the Buy Box, so being featured in the Buy Box will dramatically increase your sales.

Multi-channel fulfillment

You can use FBA to fulfill your orders from other sales channels, like eBay or your website on Shopify or 3dcart. Having one inventory system to manage your different sales channels will streamline your business. Additionally, those other channels will benefit from the quick shipping that FBA offers.

Increase sales volume

You can only pick, pack, and ship so many items in a day. And if you hire people to do it, they can handle so many orders in a day. Your ability to increase sales is limited to how quickly and how often you can pick, pack, and ship your products. By using FBA, you can reduce the need for warehouse workers and automate the entire process. You’ll increase your sales volume without having to find a way to fulfill those orders on time.

While FBA fees may appear a bit high at first, the benefits provided by the service far outweigh the expenses. By automating your business, you can free up time that you can use to source more products and expand your business. Having to manage people, schedules, and pay for good labor can be an unnecessary obstacle to your growth and your business potential. For these reasons alone, you should switch to FBA. But there are some good reasons why you should avoid FBA too.