Amazon Fulfillment: Which Model is Worth It? UPDATE

Anyone who is active as a merchant on Amazon is regularly recruited by Amazon for different shipping programs. We want to take a closer look at which programs are available with Fulfillment by Amazon and which program is worth it when.

FBM & FBA

First, we need to clarify the terminology: FBM refers to shipping by the merchant (Fulfillment by Merchant or also called Merchant Fulfillment Network, MFN for short). Here you ship ordered goods yourself to the end customer.

FBA refers to shipping by Amazon (Fulfillment by Amazon or also called Amazon Fulfillment Network, AFN for short). You deliver your goods to an Amazon shipping warehouse and Amazon then ships the item on your behalf to the end customer. If you use FBA, you must decide which of the shipping and storage models offered by Amazon you want to use. Different costs arise for the different Amazon marketplaces for the various storage models.

Five Europe-wide Amazon Marketplaces

In Europe, there are currently five marketplaces where you can offer goods as a merchant:

• Germany (amazon.de)
• United Kingdom (amazon.co.uk)
• France (amazon.fr)
• Italy (amazon.it)
• Spain (amazon.es)

Customers can purchase goods on these marketplaces as they wish. It is possible that customers order goods from different marketplaces to other countries, e.g., from amazon.de to Italy, or order goods to third countries without their own marketplace, such as from amazon.fr to Belgium.

European Shipping Network

Through the European Shipping Network (EFN), you can store goods in a local logistics center at Amazon as a merchant, but offer them on all European marketplaces. When an order is placed, Amazon ships the goods from the primary local Amazon warehouse. Prerequisites are appropriate shipping and export settings.

Cross-border Delivery and Export

Amazon distinguishes between storing goods in different countries as well as cross-border shipping and worldwide export.

You can set up separately for each marketplace at Amazon where goods should be stored and to which countries they should be exported. The export settings, for which no additional costs arise besides the existing shipping costs, are structured as follows:

For the German marketplace, there are three options:

1. Disable shipping and export abroad
2. EU 26: 26 EU countries without Croatia (for newer accounts, this function may no longer be available)
3. Worldwide: Export to over 80 countries

In addition, any shipping restriction, valid for all offers on the respective marketplace, can be set at the country and region level. Countries/regions disabled here will then not be supplied.

Additionally, exports can also be excluded at the product level (but only for non-media products). If a product is not suitable for all countries, for example, you can exclude certain countries for this ASIN.

For the UK marketplace, there are two options:

1. Disable shipping and export abroad
2. Worldwide: Export to over 80 countries (for all items)

Restrictions can be made as in DE.

For the remaining marketplaces (FR, IT, ES), there are three options:

1. Disable shipping and export abroad
2. EU 26: 26 EU countries without Croatia
3. EU 26 and media worldwide: 26 EU countries without Croatia (for all items) as well as worldwide export of media items

Restrictions can be made as in DE.

Merchants should pay attention to which countries they allow export for when granting export permission. Questions regarding product liability outside the EU should not be underestimated depending on the offered category.

The settings can be made separately for each marketplace in Seller Central under Settings > Fulfillment by Amazon > Shipping Programs and Export Settings.

Which Storage and Shipping Models are Available on Amazon?

Amazon distinguishes three main storage and shipping models:

1. Local shipping (domestic Fulfillment by Amazon optionally DE, UK, FR, IT, or ES)
2. Central Europe Program (CEE) (DE, PL, CZ)
3. Pan-European Shipping Network, PAN-EU for short (DE, UK, FR, IT, ES, PL, CZ)

The first, simplest, and probably most widespread model among smaller merchants is local shipping from Germany. Here, goods are stored exclusively in Germany. The merchant only delivers to Amazon shipping warehouses located in Germany. Amazon charges a penalty fee of 0.25 EUR per sold item here (previously 0.50 €), as Amazon prefers international storage models. Depending on export settings, various countries are supplied from Germany.

Example shipping costs for a standard package with dimensions 35 x 25 x 20 cm and a weight of 800 grams:

Now you can also store goods in another marketplace country, e.g., because you have particularly many sales in France but not in other marketplaces. Amazon also calls this program Inventory in Marketplace Country (English: Multi-Country Inventory, MCI). The advantage for the customer is that the shipping time is significantly shortened since the goods are already in the target country. This in turn also increases the chance of winning the Buy Box. To supply a new country, select the corresponding country under Send/Replenish Inventory under "Activate Storage and Shipping in the Following Country" and send products to the corresponding warehouse.

For the costs of our example package with 800 grams weight, this means in this model:

In the second program "Central Europe", you store goods in Germany, Poland, or the Czech Republic. You continue to deliver goods only to a shipping center in Germany. Amazon then distributes your goods between Germany, Poland, and the Czech Republic as the algorithm recommends. Your inventory is considered "one German inventory" and is stored in any Amazon warehouses in the three countries and shipped to customers. The 0.25 EUR penalty fee then no longer applies for both domestic and international shipping. For our example product, this means:

In the third, pan-European shipping model, you deliver goods to a German logistics center. Amazon then distributes these goods according to its own specifications across logistics centers in Germany, the United Kingdom, France, Italy, Spain, Poland, and the Czech Republic. Amazon then considers your inventory in a European inventory pool. You then have no influence whatsoever on which warehouse or country the inventory is shipped to customers from. The 0.25 EUR penalty fee, like in the Central Europe program, no longer applies for domestic and international shipping for our example. Additionally, in the PAN-EU program, only the local shipping fees of the respective marketplace are always charged for an order on all five marketplaces, regardless of where the item is shipped from. For our example product, this means:

It is important to mention at this point that any storage abroad has tax law consequences. Keywords here are: VAT registration, distance selling thresholds, and Intrastat declarations. Be sure to consult a tax advisor before activating cross-border storage and export settings regarding the resulting requirements and costs. Switching to the PAN-EU program can already be done in Seller Central with just a few clicks. However, you must take care of settling all tax consequences yourself, Amazon only supports partially at this point.

Overview of the different shipping costs of the different shipping and storage models with FBA:

As you can see, the shipping costs are composed quite differently. In direct comparison, it shows that in the local model, there are great savings potential through shifting inventory to another marketplace country or by switching to the PAN-EU model.

Small and Light

With Small and Light, Amazon has created a special FBA shipping method with which small, light, and inexpensive products can be shipped quickly and cheaply.

For the buyer, the advantage is that products with a selling price of maximum 10 EUR (including VAT) can be purchased with Prime shipping (1-2 days) without the rules of a Plus product applying (for a Plus product, the purchase value for free shipping must be 25 € despite Prime membership). From a merchant's perspective, the shipping fees are significantly lower compared to the standard fees for Fulfillment by Amazon. For merchants who do not yet use the Central Europe or PAN-EU program, there is also no penalty fee of 0.15 EUR (previously 0.35, before that without any penalty fee).

However, the requirements for products for Small and Light are quite extensive:

• lighter than 225 grams
• smaller than 33.5 cm x 23 x 4.6 cm
• max. price of 10 EUR (including VAT)
• ~sold at least 10 times in the past 4 weeks~
• offered on amazon.de
• product condition "New"
• no dangerous goods
• no erotic items
• no FSK18 or USK18 products
• no e-cigarettes or related products
• no products that require registration or other age verification
• no products prohibited for Fulfillment by Amazon
• no temperature-sensitive products in the period from May 1 to October 14
• ~delivery of min. 24 units per SKU~

Is Small and Light Worth It?

The shipping fees of Small and Light are significantly lower compared to all other "Fulfillment by Amazon" programs for an item in large letter format (33 x 23 x 2.5 cm up to 225 grams):

Depending on the chosen shipping model and item, it may even be worthwhile to lower the selling price here, as the shipping costs are up to 40% lower in the best case.

Update 18.10.19

Since October 2019, the Central Europe program can also be used for Small and Light. This allows additional shipping costs of 0.30 EUR to be saved. For our example product, this means:

Compared to local shipping within Germany, 55% can be saved this way. Additionally, Small and Light is now available for large letters according to Amazon's price list also in Italy, Spain, and France.

Conclusion

As a merchant, you should regularly check whether you are properly positioned in the current shipping model. An analysis of the goods flows as well as a precise comparison of the different models can quickly lead to enormous cost savings. Amazon also regularly changes the conditions (Change in FBA Long-term Storage Fees, Adjustment of FBA Shipping Fees)

While the tax requirements initially seem challenging when taking the step toward internationalization, the resulting savings in the new shipping tariff can often outweigh the accounting costs.

So a merchant with a local shipping model from Germany with 10,000 orders per year, depending on the proportion of foreign orders, often already has the potential to take the step toward Europe-wide storage.

Here you can find the current Amazon price list (as of September 2019)

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