E-Commerce Trends Similarities and Differences between Amazon FBA and Shopee FBS

World’s Largest Shopping Mall ‘Amazon’ vs. Southeast Asia’s No. 1 Shopping Mall ‘Shopee’ Amazon, an American multinational technology company, is currently the world’s largest online retail company. Amazon mainly focuses on e-commerce, digital streaming and cloud business and has recently expanded into artificial intelligence (AI) business. Amazon’s total market value recorded 82.4 trillion KRW as of 2022, making it one of the most valuable companies in the world.

Shopee is an e-commerce platform company launched in Singapore in 2015 and has become the largest e-commerce platform in Southeast Asia. With its high price competitiveness, Shopee rapidly gained ground along with the rising mobile penetration in the Southeast Asian region and is recognized as the most successful case of platform localization. According to the Hanoi Times, Shopee recorded a market share of 57% in Vietnam, 40% in Indonesia, 71% in Malaysia and 57% in Thailand in the SEA e-commerce market in 2021. Shopee is currently engaged in diverse businesses such as Shopee Pay, Digital Wallet, and Shoppe Delivery, in addition to e-commerce business.

The Reason Why Amazon and Shopee Introduced Fulfillment Service

FBA (Fulfillment By Amazon) is a service provided by Amazon that enables sellers to store their products at Amazon’s local fulfillment center. Amazon introduced the FBA in 2006 to address sellers’ concerns from operating the logistics process. When a customer makes an order, Amazon supports the storage, packaging, and shipment process on behalf of the seller.

The biggest advantage of FBA is that it has access to vast customer-based data provided by Amazon and has increased customer satisfaction through faster delivery. Consequently, FBA created an opportunity to drive Amazon’s growth by increasing customer satisfaction and sales, and is considered as one of the most successful projects that has contributed to Amazon’s position today, which is ‘king of e-commerce’.

Shopee’s fulfillment business is called FBS (Fulfillment By Shopee) or SBS (Service By Shopee). Shopee’s fulfillment business operates similarly to the Amazon’s FBA, and if a seller stores a certain amount of products in the local warehouse, the local employees take charge of storage and inventory management. The local employees also handle packaging and delivery service when a customer makes an order.

Shopee started its business as a reverse direct purchasing model in 2015, and Shopee Korea started its business in 7 SEA countries including Taiwan in 2016. Shopee attracted Korean sellers using B2C method where export customs clearance is easier in the same way as FBM (Fulfillment By Merchant) where sellers directly ship product to customers. As a result, tens of thousands of Korean brands and manufacturers have joined Shopee and are actively selling their products in SEA countries. Most of the items sold are lightweight products that incur relatively low logistics costs, such as cosmetics. This is because products that are relatively heavier or bulkier than regular cosmetics, such as shampoo and other daily necessities, are not suitable for B2C sales due to high logistics costs. To address this problem, Shopee launched fulfillment business that can save transportation costs. Fulfillment Service with Improved Efficiency through Optimization System Amazon FBA’s huge success is largely credited to its powerful logistics service and optimization system. Amazon currently operates hundreds of warehouses around the world, which allows it to deliver products to customers within a short period of time. Paid customers who can enjoy fast delivery service using Amazon FBA will be given Amazon Prime logo, and Amazon check customers’ products before delivery, which in turn improves customer credibility.

Amazon FBA service provides information such as inventory management, order processing, and estimated time of delivery through an automation system using AI and machine learning, which enables sellers to focus on customer service. As such, Amazon endeavors to offer successful fulfillment service experience to its sellers. Amazon’s fulfillment business has set standards for competitors as a successful e-commerce model, and Shopee, which has grown into the largest platform in SEA, has also joined the race of fulfillment business.

Using the Shopee’s FBS (SBS) service, sellers can enjoy the following four benefits:

The first benefit is reduced operating costs. Shopee has added B2B (Business to Business) option via ocean transportation, which can reduce logistics costs by more than 40% on average compared to SLS (Shopee Logistics Service). Sellers can also save packaging and delivery costs since warehousing work is carried out in SEA countries.

The second benefit is fast delivery. Normally, it takes 7 to 14 days to receive an order through B2C option and deliver product to customer. However, since inventory is brought to local warehouse in advance before receiving order and making delivery, customers can receive products within 1 or 2 days, leading to high satisfaction and revisit rate.

The third benefit is operational convenience. Thanks to fast delivery, the relevant CS (Customer Service) work is significantly reduced and inventory that needs to be managed in real-time is entrusted to Shopee, which reduces the overall workload of sellers.

The fourth benefit is special marketing support provided by Shopee. Various events continuously take place at Shopee. Therefore, sellers have chance to participate in marketing events that emphasize fast delivery, and initial sellers will get marketing credits that can be used for in-app advertisement.

How to Start Selling on Amazon FBA and Shopee FBS(SBS) Amazon FBA USA has a considerable number of partners (logistics companies, education companies, etc.) and anyone can start selling products on the platform unless they sell restricted items. The process of becoming an Amazon seller is illustrated below in a simplified diagram:

1) Sign up for Payoneer : Sign up for ‘Payoneer’ – a settlement agency – and create your account to settle sales amount.

2) Create Amazon Account : Access Amazon Seller Central and enter your basic information (business registration number, name, address, tax ID, etc.). Once you have a video interview with Amazon and verification process is completed, your Amazon account will be created.

3) Amazon FBA Setting : Proceed with basic settings for shipping plan as well as labeling and packing required by Amazon in your Amazon account.

4) Product Listing : Create a product detail page by writing down the title, description, price of the product, using eye-catching images and keywords.

5) Delivery : After receiving the estimated product volume by your recommended shipping company or the company you intend to use, discuss quotation and shipping schedule with the company and proceed with warehousing in FBA according to the company’s guide.

However, Shopee FBS (SBS) places certain conditions on its aspiring sellers since the business is still in its early stages and there are restrictions of space in local warehouses. The biggest difference between Shopee and Amazon is that Shopee first determines the suitability of the product to be sold in the local market. Currently, Shopee gives priority to the existing power sellers who can generate large sales through SLS (Shopee’s logistics service), while internally conducting discussions to give opportunities to other small and medium-sized sellers.

The process of becoming a Shopee seller is as follows:
1) Access Shopee and apply for FBS seller
(*This service is only available to the registered sellers and new sellers are not admitted)
- Determine the suitability of Shopee
2) FBS ‘Shop’ opening and account setting by Shopee
3) Access FBS ‘Shop’ and select the product to be warehoused from the listed products
4) Apply for warehousing of the selected product within Seller Central
5) Contact with the logistics company introduced by Shopee to adjust shipment schedule
6) Proceed with air / ocean shipment after adjusting schedule
7) Store the product in the Shopee’s warehouse
- Purchaser : Order
- Shopee’s warehouse : Process the order
- Shopee : Perform delivery Standards of Using Fulfillment Service In general, Amazon’s cost structure is largely divided into two parts: fulfillment fee and storage fee. Fulfillment fee consists of screening, packaging and delivery costs that are incurred following shipment of each product. Costs are charged differently depending on the size, weight, destination and delivery period selected by customer. Storage fee is charged in Amazon’s CBM unit and is based on inventory storage period (whether it is during the peak season) and storage capacity. Due to such complicated charging standards, Amazon offers pricing calculator for each country, allowing sellers to check the estimated cost by entering the relevant product information.

*Countries where Amazon FBA service is available
Amazon FBA service is currently available in the following countries:
- North America : USA, Canada
- South America : Mexico
- Europe : Austria, Belgium, Denmark, Finland, France, Germany, Hungary, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Turkey, the United Kingdom, etc.
- Asia : Japan, Singapore, United Arab Emirates
- Oceania : Australia

Unlike Amazon that has a complicated cost structure, Shopee’s fulfillment cost simply consists of handling fee and storage fee. Handling fee is charged according to the length or weight of the product to be shipped from warehouse based on product unit. Storage fee is charged based on ‘Storage Cost x 12/365 x Stock Total CBM’ according to the number of days stored. Shopee’s handling and storage fee incurred locally are much lower than those incurred in other countries like US or Korea, serving as an efficient method to reduce transportation costs generated during the initial investment and alleviate the cost burden of operation since they are cheaper than air transportation.

In the traditional logistics market, the presence of local importer (partner) was essential to sell product on behalf of seller. However, Shopee enabled sellers to sell products without the presence of importer using import agency. An import agency refers to a company that conducts customs clearance with the responsibility for imported products without an importer. By paying certain amount of fee to the import agency, it became relatively easy for sellers to enter the local market.

* Countries where Shopee FBS service is available
Shopee FBS service is currently available in the following 5 countries:
- Malaysia, Thailand, Philippines, Singapore and Indonesia Making Full Use of Benefits of Fulfillment Service Amazon employs various marketing strategies such as SEO, PPC advertisement, and affiliate marketing, which leads to strong impression and sales if used well. The first strategy is ‘Sponsored Products Ads’, a marketing method where keywords related to products are put out to bid and exposed on top of the product page based on PPC (Pay-per-click) cost method, Amazon’s representative keyword advertisement method. The second strategy is ‘Deals and Promotions’ which offers deal promotions available in Amazon such as coupons, lightning deals, review program, etc. The third strategy is ‘Amazon Influencer Program’ where social media influencers promote products to their followers.

Then, what about Shopee? Shopee offers incentive packages by country to provide impression accounts and vouchers in order to promote sales of new sellers, and carries out monthly promotion events exclusive to fulfillment sellers. Moreover, Shopee offers in-app advertisement credits and accounts to promote campaign and product, which can cover the costs required for PPC advertisement.

Just as Amazon gives Prime logo to sellers who use Amazon FBA, Shopee creates FBS tags and categories while promoting its FBS (SBS) service that offers fast delivery to induce more purchases. Making use of such benefit will be an effective way for sellers to increase their sales.

Since Shopee has similar processes with Amazon in terms of cost structure and warehousing of replenished inventory following product sales as well as promotion, sellers using Amazon FBA will not have any difficulties to use Shopee. However, the unique characteristics of SEA countries must be noted: SEA countries may have advantage of low operating costs compared to Korea and other foreign countries, but they may require higher storage fee than general fulfillment services for products that have not been sold well. Furthermore, additional disposal fee may be incurred when disposing products in these countries, although such fee will vary from market to market.

Amazon and Shopee’s fulfillment services will not only increase customer satisfaction but also generate sales and high-quality services. Furthermore, they can attract more customers to the platform. We hope many sellers proactively use these fulfillment services and take full advantage of their benefits.

# References [1] https://contents.premium.naver.com/connectx/us/contents/220403211412775Dd
[2] https://docs.google.com/presentation/d/1IDwjnwLn9aNxkxbJ32NswGyQCAIJpKp6/edit#slide=id.p81
[3] https://shopee.kr/edu/article/15062

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