amazon ecommerce owner

Amazon FBA & MFN: What Does This Mean For Your Ecommerce Business Technology 2022

Introduction

Choosing a fulfillment process for your business is a big decision. 

You have two options to choose from:

  • Fulfillment by Amazon (FBA)
  • Merchant Fulfilled Network

You can even choose both if you like! 

We understand that you have strong opinions on each of these fulfillment options. But, we believe that you must dive deep into each of its strengths and weakness before choosing the method that fits you best. 

Our team at Clearinity wants to make sure you have all the understanding you need to build the best process for your business operation. What fulfillment method do you think wins? What method do you think works best? Use this resource to find out.

FBA vs MFN: What Is The Difference Between Both These Fulfillment Methods?

Your goal as an ecommerce business owner is to familiarize and understand the details of these two fulfillment methods before moving forward to the fulfillment process that suits you best.

Let’s deep dive into how FBA is different from MFN, its pros and con, and the benefits it can potentially bring to your ecommerce business.

FBA

FBA or Fulfilled By Amazon is a process that uses Amazon’s services. This fulfillment method allows business owners to send products directly to customers.

Here is how it works: 

  • Customer places their order.
  • Amazon receives the order information from the customer
  • Amazon picks the stock from warehouse shelves and prepares the item for shipping
  • Amazon ships the products to customers

Overall, Amazon aims to do everything for you in this fulfillment process. They become the entity responsible for packing and shipping your products, as well as handling customer support for you.

All of these are covered by Amazon’s FBA fulfillment fees.

FBA Advantages

  • Amazon Prime: When you obtain your FBA, your items are certified for prime delivery. This gets your products faster to customers.
  • Better Conversion Rate And Easy Returns: Customers who are clear of what they want to purchase, go straight to FBA and Prime Services. This gives your business advantage for higher sales conversion.
  • Buy Box: Outrank your competitors and win Buy Box with Amazon’s Prime Transport.
  • Support: Amazon provides support both to your customers and your business. Amazon takes responsibility for warehousing, packing, and shipping which gives you more time to build your business from the ground up.

FBA Disadvantage: High Cost

While Amazon FBA can save your business time and effort, it tends to have a high-cost monthly storage and fulfillment fee structure depending on how long your inventory stays in the warehouse.

Because of this reason, this fulfillment method can be difficult for new business owners who are still trying to learn ways within Amazon and the ecommerce industry.

If you are new to the ecommerce selling game, we recommend reading about 3PL fulfillment.

MFN

Amazon MFN or Merchant Fulfillment Network is a fulfillment method where customers and business owners are responsible to send their items to customers. Amazon will not involve itself in your fulfillment process.

As a business owner, you will control your:

  • Inventory and warehouse management
  • Packing and Shipping your items
  • Payment transactions

MFN Advantages

  • No Delivery Payments: You will be assigned to select, package and ship your goods. Thus, there will be no need to pay any third-party entity.
  • No Monthy Stock Fees: Since you are assigned to store all your goods in your warehouse, there’s no need to worry about stock fees that are dependent on your team’s volume or dimension.
  • Decreased Chances Of Returns And Damages: In this fulfillment method, you will be responsible to pack your items. As a business owner, it is expected that you will handle your products with care which leads to fewer damaged and return products. 
  • Increased Creativity: The sky is the limit when it comes to how you present your packaging. Feel free to add customized care notes or even gratitude messages.
  • Freedom: You are not bound to any rules, restrictions, or fees when you opt for the MFN Fulfillment Method. You are free to make the badge of your brand. No one can take charge of your business but you. You can skip the needing to adapt to Amazon’s changing policies on fulfillment.

MFN Disadvantages

  • More Work For Business Owners: In this fulfillment process, you are entirely accountable for the picking, packing, shipping, returns, and refunds of your products. It’s safe to say that this could mean quite a lot of work for your ecommerce business as all of these steps may be complex parts of your business.
  • Shipping Issues: When you send your items to customers for this fulfillment period, you must make sure to stay on top of your cited delivery and a real shipping period. You do not want to set the wrong expectations for your clients in terms of delivery punctuality.
  • Problems On Customer Support: When your business fails to provide solutions to your clients, there is a high possibility that your customers repel away from your shops and might risk your business from sales and earnings.

What Method Of Fulfillment Wins?

The fulfillment method you choose for your business will always depend on what works for you. You must be quick to judge your operation size, and how your operation affects your fees.

The FBA Fulfillment Method would be a better option if you:

  • Require more time and effort to fulfill products for your customers
  • You have large product margins and high profit, making it easy for you to afford Amazon seller fees as much as 15% to 18%.
  • You aim to target a larger audience and prime buyers as FBA allows you to be Prime-eligible

On the other hand, MFN would be a better option for your business if you:

  • Find the need to have more control over your business and brand in terms of packing and shipping products
  • Do not have the luxury to spend for extra seller fees
  • Sell in smaller scale and you have the ability to fulfill orders on your own

The Bottomline

At the end of the day, there is no clear winner to which is better than the other. Your decision as an ecommerce business owner will always depend on your distribution perspective, brand priorities, and the price you’re willing to pay to grow your business.

While running an Amazon business can be overwhelming, always take the time and opportunity to rethink your cost and customization. With a clear understanding of the ins and outs of these fulfillment methods, you can without improving your operations. 

Through this resource, we hope we have brought you more clarity in choosing your ecommerce fulfillment. Our team Clearinity wants to ensure that we help you succeed and scale your business.