Fulfillment costs can account for up to 20-30% of an e-commerce business’s total expenses. For sellers on platforms like Noon or Amazon, choosing the right fulfillment strategy is crucial to maximizing profits. While Fulfillment by Noon (FBN) and Fulfillment by Amazon (FBA) offer convenience, they often come with high fees that can eat into your margins. On the flip side, Fulfillment by Merchant (FBM), a cost-effective alternative gives sellers more control over their operations.
In this blog, we’ll explore how FBM can help you maximize profits on Noon or Amazon. We’ll break down the costs associated with FBN and FBA, compare them to FBM, and provide actionable tips to help you decide which fulfillment model is right for your business.
FBN is a service where Noon handles the entire fulfillment process, from storage to delivery. Sellers send their inventory to Noon’s warehouses, and Noon takes care of packing, shipping, and customer service.
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FBA works similarly to FBN but on Amazon’s platform. Sellers send their inventory to Amazon’s fulfillment centers, and Amazon handles storage, packing, and shipping.
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FBM is a model where sellers handle their own fulfillment of orders from e-retailer platforms like Noon and Amazon. This includes storing inventory, packing orders, and shipping them directly to customers.
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To understand which fulfillment model is the most cost-effective, let’s break down the fees associated with each:
Fee Category | FBN | FBA | FBM |
Referral Fees | 5-15% of sale price | 6-15% of sale price | 5-15% of sale price |
Storage Fees | $0.75-$1.50 per cubic foot/month | $0.75-$2.40 per cubic foot/month | Seller’s own storage costs |
Pick and Pack Fees | $1-$3 per unit | $2-$5 per unit | Seller’s own labor costs |
Shipping Fees | Included in FBN fees | Included in FBA fees | Seller’s negotiated rates |
Long-Term Storage Fees | $6.90 per cubic foot after 6 months | $6.90 per cubic foot after 6 months | N/A |
Additional Fees | Returns handling, labeling | Returns handling, labeling | Seller’s own costs |
Analysis:
FBN is specifically designed for the Middle East, offering localized fulfillment that caters to regional preferences. This includes faster delivery times and culturally relevant customer service.
For example, during Ramadan, FBN ensures timely deliveries after sunset, which is crucial for customer satisfaction in the MENA region.
FBN’s logistics network enables same-day or next-day delivery in key markets like the UAE, Saudi Arabia, and Egypt. This speed is a significant competitive advantage, especially in a region where customers value fast shipping.
Noon handles storage, packing, shipping, and customer service, allowing sellers to focus on growing their business. This is particularly beneficial for small businesses or sellers who lack the resources to manage logistics.
With reliable delivery and hassle-free returns, FBN helps build customer trust and loyalty. Happy customers are more likely to leave positive reviews and make repeat purchases.
FBN is exclusive to Noon’s platform, meaning you can’t use it for sales on other marketplaces or your own website. This limits your flexibility if you want to diversify your sales channels.
While FBN offers convenience, its fees—such as storage, fulfillment, and long-term storage fees—can add up, especially for slow-moving inventory. For example, long-term storage fees can be as high as $6.90 per cubic foot after six months.
FBN handles packaging and shipping, which means you have limited control over how your products are presented to customers. This can be a drawback for brands that want to create a unique unboxing experience.
Products fulfilled by Amazon are eligible for Prime, which offers fast, free shipping to millions of Amazon Prime members. This can significantly boost your sales, as Prime members tend to favor Prime-eligible products.
FBA gives you access to Amazon’s vast customer base, including international markets. This is a huge advantage if you’re looking to expand your reach beyond your local region.
Amazon’s reputation for reliable and efficient fulfillment can enhance customer trust in your brand. Many customers prefer buying products fulfilled by Amazon due to its proven track record.
FBA’s fees, including storage, fulfillment, and long-term storage fees, can be expensive, especially for low-margin products. For example, storage fees can range from 0.75to0.75to2.40 per cubic foot per month, depending on the time of year.
Once your inventory is in Amazon’s fulfillment centers, you have limited control over how it’s managed. This can be problematic if you need to make quick adjustments to your inventory strategy.
FBA charges higher fees for oversized items and imposes long-term storage fees for slow-moving inventory. This can eat into your profits if you’re not careful with inventory management.
With FBM, you have full control over inventory, packaging, and shipping. This allows you to customize the customer experience, from personalized packaging to branded inserts.
FBM can be more cost-effective than FBN or FBA, especially for high-volume sellers with efficient logistics. You avoid many of the fees associated with FBN and FBA, such as storage and fulfillment fees.
FBM allows you to interact directly with customers, which can enhance loyalty and brand perception. For example, you can include thank-you notes or special offers in your packages to encourage repeat purchases.
You can negotiate better shipping rates with carriers or choose the most cost-effective option for each order. This flexibility can help you reduce shipping costs and improve profitability.
FBM requires you to manage all aspects of fulfillment, including storage, packing, and shipping. This can be time-consuming and complex, especially for small businesses or startups.
Without the logistics infrastructure of FBN or FBA, you may struggle to match their delivery speeds. This can be a disadvantage in markets where customers expect fast shipping.
Managing your own fulfillment increases the risk of errors, such as shipping the wrong product or missing delivery deadlines. These mistakes can lead to negative reviews and lost sales.
Fulfillment costs directly impact your profit margins. While FBN and FBA offer convenience, their fees can significantly reduce your earnings, especially for low-margin products. On the other hand, FBM allows you to control costs and optimize your fulfillment process, making it a more profitable option in many cases.
Trade-Offs:
For sellers leveraging Fulfillment by Merchant (FBM) on platforms like Amazon and Noon, partnering with an expert like Qafila can significantly enhance profitability while maintaining control over the fulfillment process. Qafila offers a suite of tailored services designed to streamline FBM operations, reduce overhead costs, and elevate customer satisfaction.
By integrating advanced technology and a robust logistics network, Qafila empowers sellers to optimize their fulfilment, ensuring fast, reliable deliveries that meet the high expectations of Amazon and Noon customers. This partnership allows sellers to focus on scaling their business and refining their product offerings, all while keeping fulfillment costs in check and maximizing profit margins.
Qafila’s specialized FBM solutions address key pain points for sellers, providing tools and support to boost efficiency and competitiveness. Key advantages of working with Qafila include:
Choosing the right fulfillment model is critical to maximizing profits on Noon or Amazon. While FBN and FBA offer convenience, their high fees can eat into your margins. Fulfillment by Merchant (FBM) provides a cost-effective alternative for sellers with efficient logistics and a desire for greater control.
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