Amazon Direct Fulfillment: A Comprehensive Guide for 1P Vendors

When it comes to how you fulfill on Amazon, you have choices.

For Amazon 1P vendors, also known as Amazon First-Party or Amazon Retail, one choice available – and one with several benefits – is Amazon Direct Fulfillment.

Vendors sell products directly to Amazon, which Amazon then sells to consumers on the Amazon platform, but Amazon does not necessarily need to be the one that ships the product.

What is Amazon Direct fulfillment?

Understanding Amazon Direct Fulfillment

Whether it's your go-to fulfillment solution or your backup plan, deciding how and when to make use of this method will depend on your needs.

How It Works

Amazon Direct Fulfillment is a retail dropshipping program, wherein Amazon forwards orders to the vendor, and the vendor then ships the order directly to the customer on Amazon's behalf.

Note: dropshipping is a fulfillment method where vendors ship orders directly to customers on behalf of a retailer, such as WalMart, Target, Amazon, etc. In that sense “direct fulfillment” is interchangeable with “retail dropshipping”.

In this relationship:

• Amazon purchases wholesale from the vendor
• Amazon markets those products on its platform, listing them as products “Sold by Amazon”
• When the customer orders, Amazon notifies the vendor and the vendor ships the product to the customer

FAQs & Comparisons

As different from the Fulfilled By Amazon (FBA) vendor arrangement, where vendors send inventory to Amazon fulfillment centers and Amazon handles shipping, with Direct Fulfillment (DF) vendors handle individual orders on Amazon’s behalf.

With both FBA and DF Amazon is selling the products – which means in both cases Amazon handles marketing and product listings. However, when it comes to Amazon Direct Fulfillment vs. FBA, on the fulfillment side there are advantages to each.

When is FBA better?

Consider these factors:

• FBA is available to both 1P (vendors) and 3P (third-party) sellers.
• With FBA, inventory sent to Amazon is fulfilled by Amazon.
• Since Amazon handles storage, shipping, and customer service, those responsibilities are offloaded.

This has been the model most vendors use, happily letting Amazon fulfill orders through FBA. However, during the pandemic major disruptions in supply chains saw many vendors opt to fulfill orders themselves.

It was during this time many began switching to Direct Fulfillment.

When is DF better?

Amazon vendor Direct Fulfillment benefits include:

• By handling the shipping you have more control over quality, packaging, etc.
• You aren't reliant on Amazon's ability to stock your products, giving you the flexibility to offer more.
• Streamlined operations reduce risk of supply chain delays.

As well, when using the Amazon Direct Fulfillment process there are additional resources available, such as the Vendor Direct Fulfillment Shipping API, which can be used to exchange shipment related documents with Amazon. Vendors can request shipping labels, send shipment confirmations, get packing slips, and retrieve customer invoices.

Again, Direct Fulfillment puts more control in the hands of the vendor.

What about FBM?

Fulfilled By Merchant (FBM) is yet another way to work with Amazon. There are similarities between FBM and DF, but they’re not the same.

Both require the merchant to fulfill and ship their own orders.

However, in the case of FBM the merchant is a 3rd-party seller, owns the products and is selling DTC (direct to consumer) via the Amazon marketplace. FBM sellers do their own marketing and product listings.

In the case of DF the merchant is a 1st-party seller, sells the inventory wholesale to Amazon, Amazon then does the marketing and sells the product to the end-consumer.

The Role of Logistics

Amazon Direct Fulfillment logistics require their own considerations. Proper logistics management holds your supply chain together.

When opting for DF you’ll want to ensure:

• Your warehousing and shipping infrastructure is robust and up to the task.
• Invoice processing, order management and other software are efficient and can manage the volume.
• Your personnel are trained and prepared to expedite deliveries.
• You have your packing and materials available and able to be easily replenished.
• Any other lines for processing orders are ironed out and take into account surges and other possibilities.

As you’ll be responsible for shipping the products Amazon has sold, you’ll want to be thoroughly on top of your ability to do so.

Enrollment

Getting started with DF is straightforward. If you're an existing Amazon vendor, from your Vendor Portal you can send a request to access Drop Ship Central and Direct Fulfillment.

If you're just getting started follow these steps:

• While setting up your Vendor Central account, ask your onboarding contact to check the “DF” box.
• You'll receive an invite to enroll in the Drop Ship Central portal.
• The Drop Ship Central portal will be where you manage your DF orders.

Pros & Cons

There are few perfect solutions in business, and vendor operations are no different.

When it comes to the Amazon Direct Fulfillment option, there are pros and cons.

Pros:

• You retain control over the fulfillment process, giving you the opportunity to decide how items are shipped and oversee quality control.
• No need to send bulk inventory to Amazon, and no reliance on their capacity or limits.
• Amazon handles the marketing and selling of your products.
• There is no Amazon Direct Fulfillment cost. Shipping fees are covered by Amazon, with the vendor responsible only for labor cost and packaging.

Cons:

• Both a Pro and a Con; with Amazon Direct Fulfillment the vendor is responsible for shipping and all the logistics and overhead that incurs.
• Limited if nonexistent marketing control.
• Potentially lower visibility in Amazon searches, as Amazon tends to prioritize FBA listings.

Amazon direct fulfillment benefits are balanced with those few cons, of course, but DF can be a solution for 1P vendors looking to exercise more control.

Once you’ve made the decision to go this route, what are the best ways to take full advantage?

Best Practices

With the right approach you can leverage Direct Fulfillment to improve your operations and customer experience.

Leveraging Analytics for Better Performance

Analytics are as important to the fulfillment side of your business as they are to any other. By tracking performance metrics you gain the insight needed to refine your operation and maximize margins.

Routine monitoring keeps you ahead of the curve when it comes not only to preventing issues, but using data to refine and improve.

Best practices when it comes to exploiting the value of data are threefold. Use what you learn from your analysis to:

1. Stabilize operations and reduce errors
2. Improve efficiency
3. Discover new/better ways to do things

As an Amazon vendor part of your routine monitoring would include recouping chargebacks, shortage, and overbillings that you’re owed. Tools like ChargeGuard profit recovery from Carbon6 help do that.

Inventory & Operations

A few additional best practices when it comes to inventory and operations.

Maintain Levels: be prepared for spikes and even lulls, ensuring your inventory levels are current and aligned with demand.

With the complexity of most inventory operations, software and other solutions become vital. Tools like SoStocked by Carbon6 help with accurate inventory oversight and management.

Streamline: optimize your shipping and other facets of fulfillment operations. Tighten and improve, constantly.

Stay Connected: stay in close touch with Amazon. They are your partner. Address compliance issues promptly.

Monitor Metrics: as mentioned in the section above. Keep an eye on things like order defect rate (ODR), late shipments, and other relevant KPIs (key performance indicators). Data is your friend.

At the end of the day succeeding with Amazon Direct fulfillment is a holistic approach, combining inventory management, efficient process, and data-driven decisions.

Future Trends in Amazon Direct Fulfillment

Advances in shipping and delivery continue to race ahead. If you stop and think about improvements to fulfillment operations in general over even the last decade, our modern-day solutions for ordering, shipping and delivering consumer goods are quite remarkable.

Amazon vans and planes, same-day delivery, pickup lock-boxes, the beginnings of aerial drone deliveries, just-in-time manufacture and shipping, more and more marketplaces offering free shipping and on and on.

A time traveler from the year 2000 coming forward to today would be amazed. They’d probably have a hard time believing the sheer convenience those of us living today enjoy, nay, expect.

And yet, you can bet we’ll keep wanting more.

(Yes, it’s strange to imagine the year 2000 as a time in the distant past, but that’s our reality. Welcome to the future.)

What will the coming years hold? Specifically, as it regards Direct Fulfillment?

We can expect more autonomous technologies, specifically advances vendors will be able to take advantage of. AI will likely play more and more of a role, taking charge of route optimization, perhaps even drone drivers/vehicles, even robots.

Other trends we might see:

• Real-time shipment tracking
• Increased sustainability
• Last-mile innovations
• Increased optimization for customer satisfaction
• Expanded global reach
• Better supply chain resilience
• Streamlined process integration with more platforms

In short, as we people of Earth buy more and more online, getting the stuff we buy quickly and efficiently will become more and more important.

As a vendor you do yourself – and all of us – a favor if you’re more and more prepared to get us your amazing products (the ones we just bought) completely hassle-free and right when we need them.