The Risks of Relying on Amazon Multi-Channel Fulfillment (MCF)

Sami Syed


June 13, 2019

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Amazon FBA Versus MCF

Fulfillment by Amazon (FBA) has long been a staple of the Bezos universe. Traditionally, Amazon will store, pick, pack and ship the products you sell on through this service.

But Amazon now offers Multi-Channel Fulfillment (MCF), a subprogram of FBA that expands FBA-like services beyond its own site. MCF essentially lets you utilize Amazon’s fulfillment services for other channels you sell on, allowing you to take the fulfillment and customer service out of your hands. It attracts many small-to-mid-sized sellers with the promise of operational efficiency.

<table class="tg">  
   <th class="tg-9hbo"></th>
   <th class="tg-9hbo"><strong>FBA</strong></th>
   <th class="tg-9hbo"><strong>MCF</strong></th>
   <td class="tg-yw4l">Channels</td>
   <td class="tg-yw4l">One (</td>
   <td class="tg-yw4l">Multiple (Other Marketplaces and Your Webstore)</td>
   <td class="tg-yw4l">How It Works</td>
   <td class="tg-yw4l"><ol><li>Create product listing on Amazon</li><li>Prep and ship inventory in accordance to <a href="">Amazon’s guidelines for FBA</a></li><li>Upon receiving an order, Amazon will pick, pack and deliver products</li></ol></td>
   <td class="tg-yw4l"><ol><li>Create product listing on Amazon</li><li>Prep and ship inventory in accordance to <a href="">Amazon’s guidelines for FBA</a></li><li>Connecting your inventory management system via Amazon’s API to enable order routing</li><li>Non-Amazon orders will get routed to Amazon through your order management system via Amazon’s API
</li><li>Amazon will pick, pack, and deliver products</li></ol></td>
   <td class="tg-yw4l">Account/Setup Fees</td>
   <td class="tg-yw4l"><ul><li>Individual Seller Account: Free to sell, higher sales fees per sale</li><li>Professional Seller Account: 39.95 per month, lower sales fees per sale</li></ul></td>
   <td class="tg-yw4l"><ul><li>Pro Merchant or $39.99/mo. for exclusively using FBA/MCF for outside channels</li> OR <li>Per-unit fees variable by category, weight, etc. </li></ul></td>
   <td class="tg-yw4l">Additional Fees</td>
   <td class="tg-yw4l"><ul><li>Commission: 15% referral fee on sales</li><li>Storage fee</li><li>Shipping and handling fee</li><li>Individual sellers have higher sales fees and additional flat fee per sale</li><li>Some categories, like books and DVDs, charge additional variable closing fees</li></ul></td>
   <td class="tg-yw4l"><ul><li>Additional MCF fulfillment fees based on weight and size</li><li>No 15% commission fee</li><li>Same storage fee as FBA</li></ul></td>
   <td class="tg-yw4l">Shipping Options</td>
   <td class="tg-yw4l">One-day priority, two-day expedited, standard (3-5 business days)</td>
   <td class="tg-yw4l">Same as FBA</td>
   <td class="tg-yw4l">Services</td>
   <td class="tg-yw4l"><ul><li>Storage</li><li>Pick, pack and ship</li><li>Returns management</li><li>Customer service</li></ul></td>
   <td class="tg-yw4l"><ul><li>Storage</li><li>Pick, pack and ship</li></ul></td>
   <td class="tg-yw4l">Fulfillment Center Locations</td>
   <td class="tg-yw4l"><a href="">27 States</a></td>
   <td class="tg-yw4l">Same as FBA</td>
   <td class="tg-yw4l">Misc. Benefits</td>
   <td class="tg-yw4l"><ul><li>Prime Badge</li><li>Being able to ship quickly to all 50 states</li><li>Potentially better shipping rates</li></ul></td>
   <td class="tg-yw4l"><ul><li>Being able to ship to all 50 states for non-Amazon sales channels</li><li>Potentially better shipping rates</li></td>

But is it as good as it sounds? Is it a smart business strategy to rely on Amazon for order fulfillment? Here’s our take.

Why You Should Think Twice Before Using MCF

1. MCF Gives Amazon All the Leverage

Outsourcing such a large part of your ecommerce operation as fulfillment to Amazon can have catastrophic consequences if things turn south. The retailer assumes full control over your inventory, leaving you defenseless if your account were to get suspended or your inventory were misplaced.

In other words, if Amazon shuts down your seller account because of poor seller performance or other reasons (including ones out of your control), your FBA fulfillment network may go down with it. Amazon will fulfill pending orders prior to the time of the suspension but will no longer receive and ship orders after that. There’s also no guarantee that you will be able to get any inventory you sent to Amazon back after the fact. Some sellers claim that they can only retrieve inventory around active listings, not deleted listings.

Stranded inventory will additionally affect your Inventory Performance Index (IPI). Amazon will limit how much storage space you’re allowed to use in their FBA warehouses if you have a low IPI.

It's worth noting that sellers have noticed Amazon prioritizing FBA orders over MCF ones, leading to slow fulfillment times and canceled orders.

amazon seller says amazon prioritizes fba orders over mcf orders

Don’t Let This Happen to You...

One previous Top 15 Media Seller on Amazon, Peter, woke up one morning to find that his Amazon account was permanently closed. Why? He was under suspicion of selling a counterfeit DVD without any proof that the DVD in question was his. He had 55,000 DVDs stored in FBA warehouses--all which either had to pay Amazon 15 cents per unit to destroy his items ($8,250 in total) or pay 50 cents per unit to have them returned ($27,500 in total).

To make matters worse, Peter was sued by a large DVD manufacturer and distributor. Turns out that when he signed up for FBA, he had checked off an option called “co-mingling” that lets Amazon mix his inventory with that of other FBA resellers of that item (none of these items will have a Merchant ID sticker on them). Unfortunately by this point it was too late...Peter eventually lost the court case. Though once a huge proponent of Amazon’s FBA program, he walked away defeated and bankrupt.
Read his full story.     

2. All Packages are Branded as Amazon, Diluting Your Own Brand

Every order fulfilled by Amazon will, by default, get shipped in a standard Amazon box with Amazon-branded packing slips. While MCF offers several branding options, you’ll ultimately have to fork up extra money to ship orders in non-branded boxes.

This can lead to a jarring experience for your customers. Imagine ordering something off of a brand’s Shopify site and receiving an Amazon box in return. Naturally, you’d think, “I didn’t order anything from Amazon” and confusedly open the box. Not a great first impression. Afterwards, your customers may even go back to as opposed to your site to repurchase items or discover other items by your brand.  

3. Other Marketplaces Simply Won’t Accept it  

Walmart openly forbids sellers from fulfilling Walmart orders via Amazon, citing the same reason as above.  

"Sellers should not use FBA or any system that will deliver items purchased through Walmart in competitors' packaging, as this implicitly advertises another marketplace and causes customer confusion," writes the retailer.

We’ve also seen other channels like eBay suppress sellers who use FBA MCF. Many won’t acknowledge Amazon Logistics codes as valid tracking numbers, though a growing percentage of FBA MCF orders are delivered through this last-mile delivery program.

As an FBA seller, you don’t have control over which carrier Amazon uses to fulfill orders. So if your order is attached to an AMZL code, then both you and your customer lose sight over the location of your package.

seller complaint over Amazon Logistics tracking
Source: eBay forum

This could ultimately hurt your brand image, seller performance and/or buy box win-rate, especially if a channel can’t tell the proximity of your fulfillment center to buyers (see next section).

Note: Marketplaces may not be so keen to accept your seller application if they learn that you’re supporting Amazon by using MCF, either.  

4. You can’t choose where your inventory is physically located.

When you send an FBA inbound shipment, Amazon will choose how to disperse your items. This may mean that you don’t have a ton of quantity in stock in certain locations.

One seller claims that “the larger quantity you send in, the more likely it will all go to the same warehouse.”

In the case of “co-mingled” inventory, Amazon may not even use your stock to fulfill orders. Peter, the seller mentioned earlier, found that all of his 55,000 units were stored in two FBA warehouses, though Amazon completed orders from other warehouse.

When he went to retrieve his unsold inventory from Amazon after his account got suspended, Amazon shipped items from nine different warehouse. In other words, they sent back another seller’s new sealed items to Peter.  

5. It might be more expensive than it’s worth

Participating in MCF requires paying for fulfillment and monthly inventory storage in addition to shipping. Not to mention, you must be a Pro Merchant (at $40/month) to list products exclusively for MCF—otherwise, you’re required to simultaneously sell your products on for them to be eligible for MCF.

examples of Amazon MCF fees applied to products
Source: Amazon

Amazon FBA fulfillment fees for MCF are relatively higher. The same item shipped through FBA can cost dollars more per unit if sold on external sites and shipped through MCF. MCF fulfillment fees aren't lowered like FBA fees during the holiday season. But between those months—October to December—FBA storage fees increase dramatically across the board.

Stale inventory can rapidly drive up storage costs, i.e., if you’re having trouble selling the units in your FBA warehouse, Amazon will impose long-term storage fees after 365 days (Amazon updated these terms in 2019). You’ll be charged $6.90 per cubic foot or a $0.15 per-unit long-term storage fee, whichever is greater.

Conversely if you try to retrieve your items from Amazon, you’re facing shipping and/or removal fees, assuming you can get it back at all.

These various fees coupled with little-to-no oversight over where your inventory is located can lead to headaches later down the road.

Alternatives to MCF

We get it. Without FBA, you’re likely facing common bottlenecks in order fulfillment:

  • Not enough warehouses in various places to offer fast delivery
  • Not enough staff on hand
  • Don’t/can’t afford the overhead of managing your own warehouse operations
  • Not enough time or tools to calculate the storage space needed and how to divvy up stock  

And running your own fulfillment network is no small feat. Fortunately, there are third-party logistics (3PL) solutions that offer a good in-between, providing similar benefits as FBA while giving you more control.

3PLs like Deliverr, FedEx Fulfillment, and Fulfillment Works provide access to warehouses around the country, fast fulfillment and returns management without hinging itself to a specific marketplace. So if your eBay, Amazon, Walmart or other seller account goes down, your fulfillment network will continue running as normal. Read a full comparison of the leading 3PLs.

Alternatively, if you’re looking to expand an existing fulfillment infrastructure, you can install a warehouse management system (WMS) or a commerce operations platform like Zentail to alleviate some of the burden. Tools like this can ensure airtight connections between your various sales channels, warehouses and apps to automatically sync inventory, send orders and track shipments from one place.

Both Deliverr (via 3PL) and Zentail (via your own fulfillment network) can help you gain access to seller perks like Walmart’s 2-day shipping tag by improving your ODR and other seller performance metrics.

Read Also: How to Measure Your Ecommerce Marketplace Success: 5 Key Metrics

The Key Takeaway  

FBA/MCF is tantalizing for those who aren't in a position to set up an in-house fulfilment operation and/or want to offer faster/cheaper shipping to different parts of the United States.

But keep in mind that FBA/MCF can potentially lead to a  misleading customer experience, limit your control, and put your whole operation at risk if your Amazon account were to get suspended.

For this reason, you’ll want to consider options, such as 3PLs or multichannel fulfillment systems that can be integrated into your existing operations.

If needed, we recommend keeping FBA to Amazon only and expanding your own shipping capabilities. The most ideal setup is one that you own, if only because it keeps your fate in your own hands.

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