Since June last year Fulfillment by Amazon (FBA) usage has grown considerably. Across all marketplaces the percentage of sellers using the service has on average increased by 10 basis points, for example on Amazon.com it is up from 58% to 69%.
Fulfillment by Amazon, or FBA for short, is an Amazon program which allows sellers to offload most of their warehouse operations to Amazon for an extra fee. As a result sellers using FBA get preferential treatment in buy-box rotation, and customers buying from them get the same two-day Prime shipping like when buying from Amazon itself.
FBA usage in the US marketplace has grown from 58% to 69%, in Spain from 49% to 60%, in Italy from 47% to 58%, in Canada from 38% to 53%, in Japan from 41% to 52%, in France from 41% to 51%, in Germany from 33% to 42%, in the UK from 33% to 39%, and in India from 23% to 35%.
For this research top 10,000 sellers on each marketplace were considered. They represent a major share of sales, and highlight what makes a successful seller. Even among top 100,000 Amazon.com sellers FBA is used by 61% of sellers.
According to Amazon, FBA units represented more than 55% of total third-party units in 2016 Q4. This figure has grown from 40% in 2014, to 50% in 2015, and to 55% in 2016. This matches our own findings. There might be more information in the upcoming fourth quarter financial results report.
Meanwhile Amazon is working on enabling Prime shipping for even more items. The company has recently said that over 100 million items are now eligible for free Prime shipping. The goal is to continue growing that in ways beyond FBA. Seller Fulfilled Prime was one of the first developments towards this, but today it remains rarely used.
The currently being tested FBA Onsite is an attempt to rethink it. Sellers participating in the program get on-site help from Amazon to improve their warehouse, and fulfillment process, ability to use Amazon’s own warehouse management software, integration with previously FBA-only programs like “Subscribe and Save” and “Small and Light”, Prime offers for Hazmat inventory, and access to low rates Amazon gets from shipping companies.
In short, a seller’s inventory remains in their facility, and orders are fulfilled through Amazon’s transportation network.
This is a key strategic development in their ecosystem. Fulfillment by Amazon (FBA) service under the hood is a dozen or so inventory, and fulfillment services. FBA Onsite is a way to utilize some of its components, except for the storage of inventory at Amazon’s warehouses.
It gives more flexibility to sellers with a capability to run their own warehouses, and allows Amazon to offer Prime shipping without having to build more warehousing. If Amazon is successful in offering Prime shipping using a network of FBA-enabled warehouses, they move closer still to being a retail infrastructure company.
Amazon’s focus is on the experience of Prime members, not the revenue from FBA fees. Many more services, and investments are expected from the company over the next five to ten years. In the meantime Prime memberships continue to grow, organically pressuring sellers to use FBA.