One of the most common problems that sellers face on Amazon is choosing an option to fulfill their orders. They can either do it by themselves, that is, use the Fulfillment by Merchant (FBM) way, also known as Merchant Fulfilled Network, or they can rely on Amazon to do the heavy-lifting, a.k.a Fulfillment by Amazon (FBA). Both of these systems have their own sets of pros and cons and if you are confused between the two, don’t worry – you are not alone. With that in mind, we have prepared this comprehensive guide to help you pick an option between Amazon FBM vs. Amazon FBA.
What’s The Difference Between Amazon FBA and FBM?
- With Fulfillment by Amazon, you store your products in Amazon’s fulfillment centers and the company picks, packs, ships, and provides customer service for these products.
- An FBA business model can be particularly helpful for sellers hoping to rapidly grow a scaling Amazon startup and reach more customers.
- With FBA, your items are eligible for Amazon Prime free two-day shipping and all Amazon customers can get free shipping on eligible orders, therefore making your items more appealing to a large audience.
- There are two types of merchant-fulfilled operations that you can have as a seller operating on the Amazon marketplace — Fulfillment by Merchant or Seller Fulfilled Prime.
- With Fulfillment by Merchant, you elect to ship your items to each customer via your own logistics and operational processes, with product stored in your own warehouse (or a warehouse of a third-party company) instead of at Amazon’s fulfillment centers.
- FBM can make sense for specific types of items, such as items that are large or heavy, do not have fast turnover, or are being sold in small volumes.
- Regardless, FBA and FBM business models differ highly and the one that is right for you will depend on the size of your business, the items in your catalog, and your individual goals and strategies.
What factors should you consider while choosing a fulfillment method?
There are six major factors you should consider before you select a fulfillment method on Amazon:-
- Size and weight of the product
- Control of customer experience
- Seller feedback
- Inventory turnover rate
- Expenses and fees
Which method to choose based on the above factors?
Here is a quick overview of which method you should use based on factors given above:
You should use FBM if
- You want more control over your customers
- Your excellent customer service practices are in place
- The products you sell are oversized or heavy
- You already have logistics in place
- You’re able to mitigate the expenses involved in fulfilling your own products
- Your inventory turns over slowly
You should use FBA if
- The products you sell are small and lightweight
- You’re okay surrendering control to your customers to Amazon
- You want Amazon to handle your customer service
- Your inventory turns over quickly
- You do not have logistics in place
- Your expenses would be higher if you fulfilled your own products
What Are the Benefits of Fulfillment by Amazon?
- FBA Sellers almost always get the Buy Box, which is the ideal situation for any product
- Amazon takes care of customer service and shipping
- Conversions are generally higher because people trust Amazon to take care of them
- They store the inventory for you and do the picking from their warehouses
- Retail operation open 24/7
- Much larger target audience
- Super Saver and Amazon Prime Membership shipping benefits
- Simplified returns process
- More free time to grow the business
- Great for retailers selling large, heavy or low-priced items where packaging is labor intensive and independent shipping costs may be prohibitive
- To know more about FBA see this guide Everything you need to know about FBA (Fulfillment by Amazon)
What Are the Benefits of Fulfillment by Merchant?
- Seller maintains a sense of control over the business
- Margins are greater
- Opportunity to build an independent brand is more feasible
- Less unavoidable losses due to changes in Amazon policies
- Less paperwork, particularly when dealing with non-sales-tax states
- Freedom to run the business exactly as seller chooses
- More control over your inventory
- No unexpected costs
- Easier to maintain both online and offline retail activity with one inventory
Conclusion: Amazon FBA vs. Amazon FBM – Which One to Choose?
- After understanding how the two fulfillment methods work, it is safe to say that Amazon FBA should be preferred when you have a popular product with a fast turnover. Since you are likely to receive multiple orders a day, it is better to have Amazon take care of fulfillment and other associated processes.
- At the same time, you should also ensure that your items are not bulky or heavy to not incur high FBA fees. While these fees are inevitable with FBA, they are certainly worth it, given that they help you get the Prime badge and the Buy Box advantage.
- On the other hand, it is better to go with Amazon FBM or Seller Fulfilled Prime provided you have a product with low sales velocity. Since the orders you receive may not be consistent or frequent, there is no point in paying Amazon FBA storage fees. It will also bode well for you to choose this fulfillment option if you already have an established shipping network.
- Additionally, FBM will work well if your items are particularly heavy, large, and require specialized packaging. It will give you more control over your packaging, and you can pack your products the way you want. If you do take the FBA route in this case, then your products may not be handled properly and may even lead to damages. All of this is in addition to incurring high fulfillment fees.
- Therefore, the scale of your business and the type of items you are selling matter a lot when it comes to selecting one between FBA and Amazon FBM. For better results, our experts can help you out with this.