Online shopping may have replaced going to a brick-and-mortar store for many consumers, but that doesn’t mean those shoppers are willing to wait weeks for products to come to them. “In this day and age, in the consumer psyche, you are battling against Amazon and how they’ve shifted consumers to think you should have a product at your door in two days,” Minted New York founder Marcus Milione says on an episode of Shopify Masters. His firsthand experience highlights just how important it is for ecommerce merchants to establish a quick and effective process for order fulfillment.
As part of the Minted New York brand promise, Marcus ships products to customers within 24 hours of them placing an order. In doing so, Marcus has created a successful ecommerce company that meets his customers’ expectations of high-quality products delivered fast. In a competitive market where shoppers expect their online purchases to arrive soon after they’re ordered, one option is for entrepreneurs to take order fulfillment into their own hands using a direct fulfillment model.
Here’s how direct fulfillment works, as well as how you can use a direct fulfillment program offered by Amazon to reach new customers.
What is direct fulfillment?
Direct fulfillment is a strategy where a merchant, manufacturer, or vendor ships products directly to customers. Ecommerce companies using this direct-to-consumer (DTC) distribution model process customer orders and as well as store, pick, package, and ship purchased products.
Merchants can set up a direct fulfillment center in their own warehouse space or partner with direct fulfillment services like the Shopify Fulfillment Network—a service that stores inventory and fulfills orders for Shopify merchants who manage and oversee the process directly from their Shopify accounts.
By contrast, an indirect distribution model works with intermediaries or third-party companies like distributors, wholesalers, or retailers who fulfill orders for merchants. Dropshipping is also an indirect fulfillment model in which merchants sell directly to customers and partner with a third-party dropshipping supplier to process and ship orders to those customers.
What is Amazon Direct Fulfillment?
Amazon Direct Fulfillment is a program where Amazon vendors handle order fulfillment for products that Amazon sells and advertises. The Amazon Direct Fulfillment program, previously known as Amazon Dropship Central, was launched in response to supply chain issues during the COVID-19 pandemic.
When a customer orders a product within the Amazon Direct Fulfillment supply chain, Amazon processes the order and notifies the Amazon vendor. After receiving the order information, the vendor ships that order directly to the end customer. Amazon covers the shipping costs—including returns—and manages post-purchase customer service interactions. Meanwhile, vendors fulfill orders by storing, packing, and shipping purchased products.
Amazon Direct Fulfillment vs. Fulfillment by Amazon
Amazon Direct Fulfillment and Fulfillment by Amazon (FBA) are both programs offered by Amazon, but there are a few key differences between them:
Users
Amazon vendors (who sell products to Amazon at wholesale prices for resale) use the Amazon Direct Fulfillment program and sellers (who sell products to consumers via Amazon’s marketplace) use the Fulfillment by Amazon program.
FBA is designed to help Amazon sellers store and ship their products in Amazon warehouses. Amazon Direct Fulfillment takes the opposite approach with vendors helping Amazon with storage and shipping. Vendors handle the order fulfillment process while letting Amazon take responsibility for listing and marketing those products.
Costs
With the FBA program, Amazon purchases products from sellers in bulk. The seller then pays to package and ship their products to Amazon warehouses.
By contrast, Amazon covers shipping costs for vendors using Amazon Direct Fulfillment. Vendors participating in the Amazon Direct Fulfillment program only have to provide fulfillment labor and packing materials.
Listing details
Amazon sellers using FBA list their products under their own brand name, so that the products are often marked as "Ships from Amazon and sold by [brand name].” Amazon tends to prioritize FBA listings in search results.
By contrast, vendors participating in Amazon's Direct Fulfillment program handle order fulfillment for products listed as “Sold by Amazon.”
Advantages of Amazon Direct Fulfillment
- No customer service or shipping costs
- More control over the order fulfillment process
- Less risk of stockouts
- Increased catalog
Amazon Direct Fulfillment offers a few unique advantages for sellers who are interested in setting up their own direct fulfillment operations:
No customer service or shipping costs
Businesses using the Amazon Direct Fulfillment program gain access to Amazon's customer service, which takes responsibility for any post-purchase customer communications and product returns. This feature of Amazon Direct Fulfillment can free up time for you to focus on other aspects of your business, including product development, streamlined order fulfillment operations, and attractive product packaging.
Amazon covers all shipping fees other than the cost of fulfillment labor and packing materials. For companies with a streamlined order fulfillment process in place, this arrangement can reduce overhead and potentially increase profit margins.
More control over the order fulfillment process
By managing order fulfillment, companies using Amazon Direct Fulfillment can maintain quality control when they store, pack, and ship products. Merchants with their own warehouse space can take control of the order fulfillment process through Amazon Direct Fulfillment and improve the customer experience with strategies like expedited shipping and a memorable unboxing experience.
Furthermore, Amazon Direct Fulfillment removes the additional step of sending products to Amazon warehouses, which can reduce supply chain issues by removing an extra step in the fulfillment process.
Less risk of stockouts
Online retailers using Amazon Direct Fulfillment can monitor their own stock keeping units (SKUs)—codes used to identify specific products—and maintain good inventory levels in their warehouses.
Increased catalog
An online retailer can use Amazon Direct Fulfillment to list their entire inventory rather than just the products being held in an Amazon warehouse. Without relying on Amazon’s capacity for stocking your products, you can use Amazon Direct Fulfillment to list your complete catalog of products and potentially increase sales overall.
How to enroll in Amazon Direct Fulfillment
- Ensure you meet the criteria to qualify
- Sign up for Direct Fulfillment on Vendor Central
- Provide relevant information
- Upload your inventory
If you’re already an Amazon vendor, send a request through your Amazon vendor portal to gain access to Amazon’s Drop Ship Central and Direct Fulfillment. If your business is not yet listed as an Amazon vendor, here are a few simple enrollment steps to follow:
1. Ensure you meet the criteria to qualify
Before beginning the setup process for Amazon Direct Fulfillment, make sure you’re eligible for the program. You need to have an Amazon business registered in the United States as well as your own warehouse space in the United States.
Your warehouse must have the capacity to store, pick, pack, and ship orders accurately and keep the products and packages in perfect condition. Additionally, you’ll need to read through and agree to Amazon’s terms and conditions.
2. Sign up for Direct Fulfillment on Vendor Central
Set up an Amazon Vendor Central account by contacting your Amazon account manager and requesting an application. While setting up your Vendor Central account, request that your onboarding contact check the Direct Fulfillment box on your application. If approved, you’ll receive an invitation to enroll in the Drop Ship Central portal, where you can manage your own direct fulfillment orders.
3. Provide relevant information
While enrolling in the Direct Fulfillment program, provide information about your order fulfillment operations, including warehouse information, hours of operation, carrier pickup times, and any scheduled closures.
Determine what type of shipping label to use for your products. Depending on how you plan to market your brand and the product packaging, choose an Amazon shipping label or your own shipping label.
4. Upload your inventory
Once your application has been approved and you’ve been set up on the Vendor Central portal, Amazon will send you instructions on how to upload your inventory information into the portal. Amazon typically sends this information within 48 hours of your application’s submission and approval.
Once you’ve uploaded your entire inventory, feed information into the system and Amazon will list your products on its marketplace.
Direct fulfillment FAQ
What are alternatives to Amazon Direct Fulfillment?
There are several alternatives to Amazon Direct Fulfillment, including the Shopify Fulfillment Network for Shopify merchants, as well as other third-party logistics (3PL) businesses.
What is Amazon Direct Fulfillment?
Amazon Direct Fulfillment is a program offered by Amazon that involves vendors handling order fulfillment for products listed, marketed, and sold by Amazon on its platform.
Is an Amazon warehouse the same as a fulfillment center?
An Amazon warehouse is a type of fulfillment center that purchases products wholesale from retailers and fulfills those orders after they’ve been purchased on Amazon’s marketplace.
