Amazon Exec on Outsourcing Fulfillment

Every ecommerce merchant must address, at least in some capacity, fulfillment. One company that does this in a big way is Amazon. It now offers fulfillment and warehousing expertise to any ecommerce merchant via its “Fulfillment by Amazon” service. To explain this service and how it could help smaller ecommerce merchants, I recently spoke with Tom Taylor, vice president of Fulfillment by Amazon.

PeC: Can any merchant outsource fulfillment and warehousing to Amazon?

Tom Taylor: Absolutely, yes. We originally started with the idea of Fulfillment by Amazon by soliciting our customers who wanted a better shopping experience, but we realized that the sellers, ecommerce merchants, sell on many different channels, maybe Amazon, maybe other channels, and we knew that to make Fulfillment by Amazon compelling, we have to enable for any channel.

PeC: Does a merchant have to use Amazon’s other services to use your fulfillment services?

Taylor: No, they don’t, although we certainly find that once you’re already using Fulfillment by Amazon, perhaps you might as well sell on Amazon, but it’s not required.

PeC: Walk us through the operational issues. How does order information go from the merchant to your fulfillment services?

Taylor: We have three ways an ecommerce site could communicate with us. They receive an order, process payment on their system, and then come into what we call Seller Central, a user interface that a merchant could use sort of one-by-one orders. In addition, we also have feed support and APIs for some larger sellers that may want to integrate directly with us.

PeC: Many merchants have third-party order management software and accounting packages. Do you sync with some of those?

Taylor: Through APIs or feeds, depending on the packages that they have, they can give us the request for the shipment. Also, we’re working with some integrators to provide that support for the more popular packages.

PeC: You have warehouses around the U.S. and the world. How do you determine which warehouse a merchant’s products will reside in?

Taylor: It’s a fairly simple algorithm. We look to reduce the cost to the merchant for their inbound transportation to us.

PeC: How does your pricing system work?

Taylor: Our pricing is always available at Fba.amazon.com. It’s there. It’s driven around a weight and shipping speed. We don’t have any setup costs. We don’t have any receiving costs. So, it’s a very scalable pricing mechanism. Here’s an example. If you were selling, say, a 2-pound, $200 camera, it would cost you about $2 to do the fulfillment, and if we were doing the shipping on your behalf, it would be $4.75 for standard shipping. So, if you look it up on the table, it’s very predictable — simple and easy to use.

PeC: With Amazon’s volume of shipping, will a merchant save shipping costs?

Taylor: It depends on the situation. We certainly feel our pricing is competitive. It’s not just the size of our organization or our shipping volume. You mentioned our different fulfillment centers around the U.S. and the world. If Amazon can get your inventory very close to a customer, I can save on shipping, which is another big advantage of Amazon.

PeC: Anything else?

Taylor: There are two things. The first is international growth. Fulfillment by Amazon works in Japan, Germany, the U.K., and France, where we have websites and fulfillment centers, and we’re starting to see a number of merchants who are saying, ‘Wow. I never would have thought I could have been going into the Japanese market, and yet I can if I use Fulfillment by Amazon.’ Lastly, we are growing Fulfillment by Amazon, and we have thousands of merchants today. We will continue to grow that, but it is available for merchants to try out for free after a rebate at Fba.amazon.com.

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