Amazon FBA vs MCF: What's the Difference?
Fulfillment by Amazon (FBA) and Multi-Channel Fulfillment (MCF)—these two Amazon services may sound the same and have some overlap, but there are several key differences that every e-commerce merchant should know. Both services provide sellers with efficient ways to manage their inventory and deliver products to customers. However, they differ in their scope, functionality, and application. In this article, we'll delve into the details of Amazon FBA and MCF, highlighting their differences and helping sellers make informed decisions about which option suits their needs best.
What is Fulfillment by Amazon (FBA)?
FBA is Amazon's in-house fulfillment service that enables sellers to store their products in Amazon's vast network of fulfillment centers. When a seller opts for FBA, they send their inventory to Amazon's warehouses, and from that point on, Amazon takes over the storage, packing, shipping, and customer service for those items. Amazon has extremely high standards for storage and fulfillment. Their global logistics infrastructure is unrivaled, using state-of-the-art technology like artificial intelligence and robotics. This is what sets Amazon apart as the most successful e-commerce company in the world. Their massive economies of scale and 29 years of data-driven experience allows them to provide obscenely low shipping/storage rates and blazing fast delivery times.
As an independent business owner, you will find it impossible to compete with their costs and timing, which is why so many e-commerce merchants decide to sell on Amazon using FBA. It was once possible to achieve an Amazon Prime badge without opting in for FBA and sending inventory to Amazon's fulfillment centers. This required something like a 99.98% successful delivery rate within 2-3 days. So few merchants were able to meet this criteria that Amazon stopped accepting any new Prime badge applications. They claim that they will re-open Prime badge eligibility in 2023, but unless you have access to an advanced logistics network, the odds of being approved are slim. Alternatively, anyone with a business can sign up for FBA and start selling on Amazon, leveraging their Amazon Prime customer base and 2-day shipping offerings, for a small monthly fee of $39.99.
International Fulfillment Services
FBA is a global service, with international shipping offerings and marketplaces. One of the key advantages of using FBA is their global fulfillment center network. While international customers can purchase products from your local fulfillment center, they will incur higher fees and be excluded from Amazon Prime. That is unless, you set up an international marketplace specific to their area and send your inventory to a fulfillment center in that region.
Amazon operates in several worldwide regions including North America, South America, Europe, Australia, and much of Asia. International shipping is included in the FBA service offerings. As a US seller, you will automatically have access to Canada and Mexico for the same monthly price. Certain regions like North America and Europe share the same fulfillment centers, while countries like the UK and Australia will require independent setup. You can find more details about FBA's international orders and fulfillment requirements per country/region here. Requirements change based upon where your business is based, which fulfillment center you send your orders to, and where you want your products to ship to.
What is Multi-Channel Fulfillment (MCF)?
MCF utilizes the same storage and fulfillment methods as FBA. This means that if you sign up for FBA, you automatically have access to MCF. However, you can sign up for MCF independently of FBA. This means that you can send your inventory to Amazon's fulfillment centers and have them manage logistics for you without actually selling those products on Amazon. With MCF, merchants can route their Shopify, Walmart, eBay, and other orders to MCF for fulfillment. Our Shopify MCF app allows you to do this automatically. You can think of MCF as a sort of third party logistics (3PL) provider. They offer similar fulfillment prices as many other 3PL providers but without any minimums. Additionally, their global network and hardened logistics model makes them more reliable than many other 3PLs. On a large scale, however, MCF is usually more costly than the average 3PL.
Why Wouldn't I want to List Products on Amazon?
There is no denying that Amazon is a monopoly. With that, comes a lot of efficiency, but also some business bullying. Here are some reasons you might not want to list your products on Amazon:
- Branding: Customers will buy from Amazon.com before buying from your store. Customers are familiar with Amazon and love their Prime benefits like free fast shipping and hassle-free returns. Even if you offer your product for a lower price on your store, customers will likely go to Amazon first. This takes away any branding opportunities from your website.
- Marketing: Amazon does not share customer data with its merchants. If a customer purchases your product through Amazon or Amazon Prime, Amazon will not share any of that customer's data with you besides their name and city. Obviously, that is not so good for marketing. If you have any plans on building a customer base you can track and communicate with, you might not want to list your products on Amazon.
- Intellectual Property: Amazon is notorious for stealing profitable product ideas. If you are selling a unique product with low competition and high margins, Amazon will catch on to this. If they find it beneficial, they will likely make an Amazon Basics knock off and compete with you directly. It sounds crazy, but that is just the type of ruthlessness that got them to where they are today.
FBA vs MCF: Key Differences
FBA and MCF do have a lot of overlap, but they are considered two distinct services. Here are some of the key differences between FBA and MCF:
When you make a sale on FBA, you are responsible for an FBA fee and an Amazon referral fee. Referral fees are usually 8-15% of the total product price, depending on the category. Shipping and logistics fees are normally relatively low, but scale up depending on the product's size and weight. The FBA fees is charged once per product only when it is sold. Amazon outlines its referral fees and FBA fees per category here. Technically, the fee accounts for both storage and shipping. The catch is that Amazon can charge long-term storage fees for products that are stored for more than 180 days and have a low sell-through rate.
The main difference with MCF is that Amazon does not charge a referral fee. The referral fee is basically commission for Amazon facilitating the sale. Since you are not selling on Amazon with MCF, there is no referral fee. However, the fulfillment fees are higher, since the sale is technically made outside of Amazon's network. In this way, Amazon makes up for the difference (no, you can't win with them). Amazon breaks down their MCF fees here. If you are strictly using MCF without and FBA account, you will have to pay a small monthly storage fee as well.
Amazon FBA packaging will always ship with Amazon-branded packaging. With MCF, you do have the option to ship with white label or non-branded packaging. However, you will have to pay a 5% fee to block Amazon logistics (those blue Amazon trucks) from fulfilling the product. This may be somewhat restrictive and can slow down your fulfillment speeds.
With FBA, Amazon handles all aspects of returning merchandise agreements (RMAs). They handle the customer services, the return shipping, and the re-stocking. Customers do often abuse Amazon returns and you will likely find return rates to be higher when you use FBA. Depending on the RMA reason, you may or may not have to cover the cost of the return. If the product is in a "sellable" state upon return, FBA will repackage the item for you for free. This makes things convenient, but also takes a lot of control away from you.
With MCF, you as the merchant are responsible for all customer return inquiries, return shipping, and repackaging. The good news is that the return process is in your hands. The bad news is that you'll have to put more resources towards this process.
Understanding the differences between Fulfillment by Amazon (FBA) and Multi-Channel Fulfillment (MCF) is vital for e-commerce merchants seeking efficient and cost-effective fulfillment solutions. FBA offers the advantage of leveraging Amazon's global logistics infrastructure and Prime benefits, making it an attractive choice for sellers focused primarily on the Amazon platform. However, it may come with some drawbacks, such as limited branding opportunities and potential competition from Amazon's own products.
On the other hand, MCF provides the flexibility to expand sales across multiple channels, enabling sellers to reach a broader customer base beyond Amazon. With MCF, sellers can route orders from various platforms to Amazon's fulfillment centers, benefiting from the reliable fulfillment service they offer. However, it may come with higher fees and a lack of Amazon's recognizable branding.
Ultimately, the choice between FBA and MCF depends on individual business goals and strategies. For sellers seeking simplicity and access to Amazon's Prime customer base, FBA is a compelling option. Meanwhile, those looking to diversify their sales channels and maintain control over branding and customer data may find MCF more suitable.