When it comes to selling products on Amazon, there are two primary fulfillment methods to choose from: FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant).
Each method has its own set of advantages and disadvantages and they're both eligible for Amazon Advertising campaigns. As a seller, it’s understandable to have trouble deciding between the two. In short:
FBA (Fulfillment by Amazon) involves Amazon handling storage, shipping, and customer service, offering Prime eligibility but incurring additional fees. FBM (Fulfillment by Merchant) requires sellers to manage these aspects themselves, providing more control over costs and branding but lacking Prime eligibility and Amazon's logistics support.
As former Amazon and Walmart sellers with immense experience in both Amazon FBA and FBM, our hope is that this article can shed some light on how each fulfillment method works and discuss what would sway a seller to choose one over the other.
We’ll start by discussing the pros and cons of many sellers’ chosen method, the FBA method:
Fulfillment by Amazon, or FBA, is a popular fulfillment method that allows sellers to store their products in Amazon's fulfillment centers. When utilizing Amazon FBA for fulfillment, the seller is responsible for sourcing their items and shipping them to an Amazon FBA warehouse, where Amazon then takes care of the entire fulfillment process, including picking, packing, shipping, and customer service.
Perhaps the main advantage of using Amazon’s FBA service is that you are able to achieve hands-off fulfillment. With FBA, you can focus on growing your business while Amazon handles the logistics.
This can save you time, reduce the stress of managing shipping, eliminate your need to handle customer service issues, and save you the trouble of having to store all of your items in a warehouse.
Another of the most alluring benefits of choosing Amazon FBA vs Fbm is that items fulfilled through FBA are eligible for Prime shipping.
Amazon’s Prime service requires no introduction: it’s renowned for it’s higher visibility, increased sales, and fast shipping. By using Prime, you’re also benefitting from customers’ trust in Amazon’s fulfillment process.
All of these factors lead to potentially higher conversion rates and fewer returns. In fact, many buyers won’t buy items that aren’t Prime eligible. This means that despite the higher fees associated with choosing FBA, you’ll likely sell more items more quickly.
In short, FBA’s convenience makes it easy to scale your business, as you’ll be able to move more inventory more quickly without having to worry about warehousing space, hiring additional staff, or managing shipping logistics as your sales grow.
The obvious downside of using FBA is that it costs more. Amazon has an entire pricing structure dedicated to storage fees and fulfillment fees.
Many sellers initially find this structure confusing, as storage fees vary based on the length of time an item sits on a shelf in an Amazon warehouse and fulfillment fees vary based on the final value of the item sold.
Additionally, FBA sellers must compete with other sellers for limited warehouse space during peak seasons.
Fulfillment by merchant, or FBM, is an alternative fulfillment method where sellers handle the entire process themselves, from storing inventory to packing and shipping orders. If you’ve ever sold items on eBay or Etsy in the past, you’ll be familiar with the process.
If it’s not obvious from the list above, sellers who want full control over their entire process, costs, and brand may benefit from using FBM. You choose your shipping methods and packaging materials, which leads to a very predictable cost structure per sale.
Additionally, since you’re fulfilling the order yourself, you’ll be able to include any branded packaging or inserts you wish.
Lastly, since you’re not paying Amazon for storage or fulfillment, you’ll have higher profit margins on a per sale basis, and even be more flexible on the sale prices of items you need to move out of your inventory.
FBM also comes with its own set of challenges. The most obvious one is the need for dedicated storage space. If you don’t have a dedicated warehouse, you may quickly find that your spare room or garage gets overrun by items you’re planning to sell on Amazon.
Additionally, you’ll need to come up with a reliable inventory system so items don’t get lost or broken before they’re sold.
Lastly, you’ll saddle the responsibility of handling all customer inquiries and returns, and have to do so without the benefit of Prime eligibility, which can impact sales for some products.
The decision between FBA and FBM depends on your specific business model, goals, and resources. Depending on the situation, both options can be the right choice. Both models can easily leverage some of the other profit-improvement strategies we've outlined elsewhere, like kitting, bundling, and Amazon repricing.
As some general guidelines, here are the types of sellers we see doing the best with each option:
In the FBA vs FBM debate, there is no one-size-fits-all answer. Your choice should align with your business strategy, product type, and available resources. Some sellers can even use a combination of both methods for different product lines.
If you’d like to consult with our expert Amazon sellers about which option is right for you, get in touch with us. We are constantly working to help our sellers maximize their profits, while handling the logistics for them, and our prep center manages both FBA and FBM client accounts.
Ultimately, the key is to evaluate your specific situation and goals carefully, keeping in mind the pros and cons of each fulfillment method, to determine which one is the best fit for your Amazon business.
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