As we all know, SOUQ (an e-commerce platform in the Middle East) currently has two main business models: FBS model and self-delivery model. FBS, or Fulfilled by SOUQ, is SOUQ’s official warehousing and distribution system, while self-delivery is the way merchants store and deliver by themselves. These two models have their own advantages and disadvantages. This article will focus on the disadvantages and pitfalls that may be caused by a single FBS model.
First of all, the benefits of the FBS model are obvious. There will be an FBS logo on the product display page, which has increased the exposure of the product to a certain extent, especially under the same conditions, the products of the FBS model are often more popular than the self-delivery model. All stores support both self-delivery and FBS models when they are opened, which provides merchants with a two-pronged business model. However, if these two methods are operated separately, there may be some obvious problems, especially if the FBS model is used alone.
The following are several pitfalls that may exist in the single FBS model:
1. Stock pressure pit.
The FBS model stipulates a minimum inventory quantity. If a merchant chooses to upload a product using the FBS model, it must also list the corresponding number of products in the FBS warehouse. In the absence of transparent information on the sales volume of Middle Eastern products, this means that merchants must store a large number of products in the FBS reserve, which significantly increases the cost and risk of starting a business.
2. Time pit.
One of the most attractive aspects of the FBS model is the delivery time, but merchants often overlook the time it takes to deliver goods to the FBS warehouse. Considering the time required to ship from China to the Middle East, including customs clearance, transit warehouse sorting, etc., the entire process may take a long time, even up to thirteen days. This also assumes that customs and logistics in the Middle East operate efficiently, which may not be the case in reality.
3. Traffic pit.
The small blue logo will be displayed on the product page of the FBS model, which does help in attracting buyers, especially compared with the self-delivery model under the same conditions. However, it should be noted that FBS only provides one link, while the self-delivery model allows merchants to create multiple links to display the same product, and even create different links based on different prices, which makes the self-delivery model more flexible in pricing and sales, and sometimes even more competitive.
4. Storage pitfalls.
Although SOUQ officially announced in 2017 that it would charge FBS storage fees, the actual operation has not been started due to the special circumstances in the Middle East. In addition, FBS storage has restrictions on the volume of goods, and goods exceeding a certain size will become very inconvenient. If FBS starts to charge storage fees, merchants may face additional risks and cost pressures. In contrast, the self-delivery model has more sales channels and faster supply speed. In the long run, the storage costs of FBS may exceed the costs of the self-delivery model.
It should be pointed out that these pitfalls mainly exist among overseas sellers, and these problems are not obvious for local sellers in the Middle East. In the future, as more distribution systems are established, SOUQ merchants may use more goods from overseas warehouses for distribution, and no longer need to advance the cost of purchasing and SKUs from China. However, the single use of the FBS model may not have obvious advantages in strategy.
The best way may be to use both the self-delivery and FBS models at the same time, use FBS for trial sales, and then gradually switch to the self-delivery model to increase sales. In addition, you can also consider storing part of your overseas warehouses in FBS and selling on other platforms at the same time to achieve supply sharing, reduce inventory risks, and increase the number of SKUs. Although these models are not yet mature, as more merchants join, this model is expected to grow and develop.
A major problem with the self-delivery model is security, but as long as this problem is solved, merchants can join with more confidence. After all, the Internet is very developed today and industry information is relatively transparent. When choosing a business model, merchants should carefully consider various factors and make wise decisions based on their own circumstances.