t is no surprise to those in theeCommerce world that Amazon dominates the sale and distribution of online retail. In fact, recent reports within the past 2-3 years have Amazon accounting for over half of all eCommerce sales, exceeding $400 Billion in2020.
What is most impressive is the efficiency in which Amazon can deliver goods sold on their marketplaces, offering same and2-day shipping on millions of items via their “Fulfilled by Amazon” (FBA)program that operates with nearly 200 warehouses and 115,000 drivers.
Until recently, this program was limited to orders placed on Amazon, but the launch of Amazon Multi-Channel Fulfillment has taken everything up a notch. Amazon Multi-Channel Fulfillment (MCF) gives selected sellers access to Amazon’s world-class fulfillment network, providing direct fulfillment in unbranded packaging for non-Amazon-generated orders with the same competitive shipping rates and delivery speeds. Sellers participating in the MCF program can store part or all their inventory in an Amazon warehouse.When a product is purchased on a non-Amazon sales channel, Amazon will process and ship the item directly to your customer.
So how does this program work? What are some of the pros and cons, especially for sellers in the automotive parts and accessories industry?
In this article, we will lay out the details of this program so you can determine whether or not Amazon MCF is the right next step for your business.
How does the program work?
Similar to fulfillment through third-party logistics (3PL), Multi-Channel Fulfillment allows you to storegoods in Amazon warehouses to be overseen for fulfillment. The way the system works can be explained and divided into three stages:
Who qualifies to participate?
Right now, Amazon is actively recruiting new sellers into the MCF program. Those already using FBA but selling on other platforms can take advantage of Multi-Channel Fulfillment quickly, assuming you have inventory in Amazon’s warehouses. In this case, their team is happy to accept the responsibility of fulfilling orders through any of the other channels you sell.
You can still use Multi-ChannelFulfillment even if you don’t sell directly through Amazon. While that is possible, you do need an Amazon seller account to start and your product has to be listed on Amazon, but you can select a “start selling” date that’s farther in future date that way Amazon won’t list the products on its marketplace anytime soon.
Multi-ChannelFulfillment by Amazon pricing
Like FBA, fees for Multi-Channel Fulfillment depend on several factors, including weight, number of units per shipment, and delivery speed. The cost associated with MCF orders are as follows
● A charge per order, which depends on the package’s size and weight.
● A charge for storage estimated every month in cubic meters.
● A charge (with various options)for optional items, including handling refunds, marking, and wrapping.
As expected, calculating fulfillment fees rely on reviewing the product size/dimensions weight and shipping speeds.Storage feeds are based on a cubic foot of space occupied in a warehouse (with charges increasing significantly in October - December).
The trick to getting a healthy ROI on MCF relies heavily on a balance of volume, margins, and product dimensions. For companies specializing in small accessories (< 5 lbs), with this program, it’s easy to scale up direct fulfillment, especially for sellers who historically relied exclusively on dropshipping. Through the FBA/MCF programs, you can purchase pallets of your hottest selling parts directly from manufactures/distributors and ship them to an Amazon warehouse(s) for fulfillment. This is a great way to reduce your margins while limiting your operational overhead.
The balance comes in when reviewing your ability to move products based on the fees incurred. While you might find sending some hot-moving Bilstein shocks through MCF helpful in increasing your profits, you may find out that your monthly order for an S-10 truck bed liner actually causes fair loss.
Better inventory management?
The main advantage of multi-channel fulfillment is convenience and total inventory control, especially for brands already on Amazon’s FBA program. Since everything is shipped and managed from the same warehouse, it is easy to always keep stock numbers up to date across all of your sales channels. In turn, this helps to avoid overselling and maintain high-quality customer service.
However, most sellers in the automotive market use MCF as an addition, not a replacement, to existing distribution channels. For those that heavily leverage dropshipping, MCF can be a great way to buy up your top products at a bulk discount while allowing your slower-moving items to remain with major WDs like Turn14, Premier, Holley, Keystone, and Meyer.
When pushing inventory updates and routing orders, you will typically want to use MCF as your priority distribution center as it will potentially provide the best margins for your company. But adding multiple suppliers and dynamically updating price and inventory can be difficult, even for some major integration companies. You will still need to ensure inventory is updated onto your site/eBay/Walmart with accurate shipping estimates and prices. This process can get quite overwhelming when done manually, though updating this detail with tools like FeedStation’s Virtual Warehouse can make this entire process seamless.
MCF is releasing several improvements
When the program first started, it had a number of limitations. However, in June 2021, MCF released some applaudable updates/improvements. These include :
● Block orders for certain channels - For a 5%surcharge, you can prevent MCF from handling orders from channels that expressly forbid Amazon logistics, like Walmart and eBay. This helps you to stay in the good graces of channels, while still being able to leverage MCF fora vast majority of other sales.
● New small standard size - MCF now supports items that weigh 2 ounces or less.
● Improved on-time shipping - Amazon is removing expedited shipping on large oversized items but is, in exchange, making two-day shipping available for all MCF inventory. This is considered standard shipping speed, while the next day is considered priority shipping. (Prior to this change, ship times tended to vary at random but will no longer be the case withAmazon’s renewed commitment to fast, consistent shipping.
● Inventory Performance Index (IPI) changes - Amazon now factors in your MCF order volume to determine IPI, which can help you to qualify for unlimited storage.You can view your IPI in Seller Central within your inventory performance dashboard.
● Unbranded boxes (beta) - Amazon is slowly rolling out the option to send orders in blank boxes. If you opt into this service, your blank box inventory will be kept separate from your FBA inventory, though it can always be used to fulfill regular FBA orders too.
● International shipping (beta) - MCF currently only supports domestic shipments but may soon support international shipments.
So, is MCF suitable for your company?
It depends on several factors. If you are already using FBA, MCF is almost certainly a good program for your company to consider, especially ifAmazon is your primary sales channel.