If you’re an online seller looking to utilize Amazon as a platform for selling your products, you’ve likely come across the terms “Fulfillment by Amazon” (FBA) and “Fulfillment by Merchant” (FBM). So, you might be asking, “Which is better for my Ecommerce business, FBA vs FBM?”
These two methods represent different approaches to managing your inventory and fulfilling customer orders.
It’s important to choose the right method for your business, as it can have a significant impact on your sales and is critical to your overall success.
In this article, we’ll explore the world of FBA vs FBM, discussing their advantages and disadvantages, and helping you determine which option is best for your business.
Which is Better for Your Business – FBA or FBM?
What is FBA (Fulfillment by Amazon)?
Fulfillment by Amazon, or FBA, is a service provided by Amazon that allows sellers to store their products in Amazon’s warehouses.
When a customer orders a product, Amazon takes care of the packing, shipping, and customer service. This allows sellers to focus on other aspects of their business while Amazon handles the logistical side of things.
Pros of Using FBA
- Simplified logistics and shipping: One of the main advantages of FBA is that it simplifies the shipping and logistics process for sellers.
- Amazon handles all aspects of order fulfillment, including packing, shipping, and tracking. This means that sellers can spend less time worrying about the logistical side of their business and more time on product development, marketing, and other important tasks.
- Access to Amazon Prime members: FBA products are eligible for Amazon Prime, the company’s popular subscription service that offers free two-day shipping on millions of items. This can be a significant selling point for customers and can help drive sales on Amazon for sellers using FBA.
- Improved customer service and returns management: With FBA, Amazon handles all customer service inquiries and return requests on behalf of the seller.
- This not only saves time and resources for the seller but also ensures a consistent and high-quality customer experience, as Amazon’s customer service team is well-trained and experienced.
- Enhanced visibility and trust on the platform: Products fulfilled by Amazon often enjoy increased visibility in search results and are more likely to be featured in the “Buy Box” on product pages.
Additionally, customers may be more likely to trust and purchase from sellers using FBA, as they know they can rely on Amazon’s customer service and return policies.
Cons of Using FBA
- High fees and storage costs: One of the primary drawbacks of FBA is the fees associated with the service.
- Amazon charges fees for storage, order handling, pick and pack, and weight handling. Additionally, long-term storage fees may apply if inventory remains in Amazon’s warehouses for an extended period. These costs can add up and eat into your profit margins.
- Limited control over inventory and branding: With FBA, sellers have less control over their inventory, as it is stored in Amazon’s warehouses.
- This can make it more difficult to manage inventory levels, track individual products, and ensure quality control. Additionally, FBA may limit opportunities for branding and personalization, as packaging and shipping materials are standardized.
- Possibility of commingling issues: Commingling refers to the practice of storing products from multiple sellers together in Amazon’s warehouses.
- While this can make the fulfillment process more efficient, it can also lead to issues if a customer receives a counterfeit or damaged product from another seller. This can harm your reputation and may result in negative reviews or account suspensions.
- Competition with Amazon’s own products: Amazon also sells its own products, which can sometimes compete directly with those of third-party sellers. This competition can make it more difficult for FBA sellers to gain visibility and sales on the platform.
What is FBM (Fulfillment by Merchant)?
Fulfillment by Merchant, or FBM, is an alternative to FBA where the seller is responsible for handling all aspects of order fulfillment, including storage, packing, shipping, and customer service. In this model, sellers maintain control over their inventory and shipping processes, allowing for more flexibility and potentially lower costs.
Pros of Using FBM
- More control over inventory and branding: FBM sellers have full control over their inventory, storage, and shipping processes.
- This allows for better inventory management, quality control, and opportunities for branding and personalization. Custom packaging and promotional materials can be used, giving your products a unique and memorable touch.
- Lower fees and costs: One of the main benefits of FBM is that it typically involves lower fees compared to FBA. While sellers are still responsible for Amazon’s referral fees, they can save on storage and fulfillment fees. This can lead to higher profit margins, particularly for sellers with lower sales volumes or larger, heavier products.
- Flexibility in shipping and fulfillment options: FBM allows sellers to choose their shipping carriers, methods, and fulfillment partners. This flexibility can help sellers optimize their shipping processes for cost and efficiency and potentially offer faster or cheaper shipping options to customers.
- Independence from Amazon’s policies and competition: FBM sellers operate independently from Amazon’s fulfillment network, meaning they are not subject to the same fees, storage policies, and potential commingling issues as FBA sellers.
This can provide a level of protection from competition with Amazon’s own products and policy changes that might negatively impact FBA sellers.
Cons of Using FBM
- Increased responsibility for shipping and customer service: FBM sellers are responsible for all aspects of order fulfillment, including packing, shipping, and customer service. This can be time-consuming and resource-intensive, particularly for smaller businesses or those with limited logistical capabilities.
- Limited access to Amazon Prime members: FBM products are not automatically eligible for Amazon Prime, which can limit their appeal to the platform’s millions of subscribers. While some FBM sellers can enroll in the Seller Fulfilled Prime program, this requires meeting strict performance metrics and may not be feasible for all sellers.
- Lower visibility and trust on the platform: FBM products may not receive the same level of visibility in search results as FBA products, making it more difficult to attract customers. Additionally, some buyers may be more hesitant to purchase from FBM sellers, as they may perceive a higher risk of shipping delays, returns, or customer service issues.
- Higher potential for logistical challenges: Managing the entire fulfillment process can be challenging, particularly for sellers without prior experience or resources. FBM sellers must ensure that they can effectively manage inventory, shipping, and customer service to maintain a positive reputation and avoid account suspensions or other penalties.
Factors to Consider When Choosing Between FBA vs FBM
When weighing the pros and cons of FBA vs FBM, it’s important to consider the unique factors that apply to your business. Some key considerations include:
- Size and scale of your business: Larger businesses with high sales volumes may benefit from the streamlined logistics and shipping offered by FBA, while smaller businesses or those with lower sales volumes may find FBM more cost-effective.
- Types of products you sell: Certain products may be better suited for FBA or FBM depending on factors like size, weight, and sales velocity. For example, large, heavy items may incur high fees with FBA, making FBM a more attractive option.
- Profit margins and fees: When choosing between FBA and FBM, consider the fees associated with each method and how they will impact your profit margins. It’s important to ensure that your chosen fulfillment method is financially viable for your business.
- Shipping and fulfillment capabilities: Evaluate your existing shipping and fulfillment capabilities when choosing between FBA and FBM. If you have the resources and experience to manage order fulfillment efficiently and effectively, FBM may be a good option. However, if you lack the necessary infrastructure or expertise, FBA can help streamline the process and ensure a positive customer experience.
- Customer service and returns management: Consider your ability to handle customer inquiries, returns, and other service-related tasks. FBA may be a better option if you want to outsource these responsibilities to Amazon’s experienced customer service team, while FBM can be suitable if you prefer to maintain control over these aspects of your business.
- Branding and presentation: If branding and personalization are important to you, FBM may provide more opportunities for custom packaging and promotional materials. FBA’s standardized packaging and shipping materials may not allow for the same level of customization.
Common FBA Seller Mistakes and How To Avoid Them
- Inaccurate or incomplete product listings: Consumers want to know the product before buying it, so optimize product listings with high-quality images, engaging titles, and informative descriptions. Ensure all relevant product information is included to help customers make informed decisions.
- Insufficient inventory management: Monitor inventory levels regularly to avoid stockouts and long-term storage fees. Consider using inventory management tools like Jungle Scout to help you stay organized.
- Not adhering to Amazon’s packaging and labeling requirements: Amazon could refuse, return or repackage, and get penalized for non-compliance. Familiarize yourself with Amazon’s packaging and labeling guidelines, and ensure your products are prepared according to their requirements before sending them to fulfillment centers.
- Ignoring Amazon’s policy changes and updates: Non-adherence to policies can get your account suspended and impact your business. Policies or requirements often change so regularly review Amazon’s policy changes and updates to ensure your FBA business remains compliant and adapts to any new requirements.
- Focusing solely on FBA and neglecting multichannel selling opportunities: Always have a backup plan. Consider diversifying your sales channels by selling on other platforms like Ebay or using a mix of FBA and FBM to minimize dependence on a single sales channel.
Common FBM Seller Mistakes and How To Avoid Them
- Inefficient shipping and logistics processes: Poor, delayed, or a complex delivery process can make or break your seller reputation. Establish a reliable and cost-effective shipping process, choosing carriers and methods that suit your business needs. Regularly evaluate your shipping performance to ensure timely and accurate deliveries.
- Inadequate customer service: With more control over your inventory and logistics, you are also responsible for dealing with customer concerns and issues related to them. Provide excellent customer service, responding promptly to inquiries and handling returns professionally. This will help maintain a positive reputation on the platform.
- Poor inventory management: Stay on top of your inventory stocks. Monitor inventory levels regularly to avoid stockouts and overstocking. Use Amazon seller tools and implement a robust inventory management system to stay organized and make informed decisions.
- Relying solely on FBM and ignoring the benefits of FBA or other fulfillment methods: Evaluate the pros and cons of different fulfillment methods and consider using a mix of FBA and FBM or partnering with a third-party logistics provider to optimize your fulfillment strategy.
- Not staying updated on Amazon’s policies and requirements: Regularly review Amazon’s policy changes and updates to ensure your FBM business remains compliant and adapts to any new requirements.
By avoiding these common mistakes and following the tips provided, Amazon sellers can improve their performance and success using both FBA and FBM fulfillment methods.
FBA vs FBM: Which is Better for Your Business – FAQs
What is the main difference between FBA and FBM?
FBA (Fulfillment by Amazon) is a service provided by Amazon where they handle storage, packing, shipping, and customer service for your products. With FBA, you send your products to Amazon’s fulfillment centers, and they take care of the rest.
FBM (Fulfillment by Merchant), on the other hand, requires the seller to handle all aspects of order fulfillment, including storage, packing, shipping, and customer service. In this model, sellers maintain control over their inventory and shipping processes.
How do fees compare between FBA vs FBM?
FBA fees typically include storage fees, fulfillment fees, and Amazon’s referral fees. Storage fees are based on the amount of space your products take up in Amazon’s fulfillment centers, while fulfillment fees depend on the size, weight, and type of your products.
FBM sellers only pay Amazon’s referral fees, and save on storage and fulfillment fees. However, they need to cover their own storage, packing, and shipping costs, which can vary depending on their chosen shipping carriers and methods.
Can I use both FBA and FBM for my Amazon business?
Yes, you can use both FBA and FBM for your Amazon business.
Many sellers choose a hybrid approach, using FBA for some products and FBM for others, depending on factors like product size, weight, sales velocity, and profit margins. This allows you to take advantage of the benefits of each fulfillment method while mitigating their respective drawbacks.
How does FBA affect my product’s visibility on Amazon?
Products fulfilled by FBA generally receive higher visibility on Amazon due to their eligibility for Amazon Prime and the platform’s preference for FBA products in search results. FBA products also benefit from Amazon’s trusted customer service and fast shipping, which can lead to more positive customer reviews and increased sales.
However, FBM products can still succeed on the platform with optimized product listings, competitive pricing, and excellent customer service.
How do shipping times and costs differ between FBA vs FBM?
FBA products benefit from Amazon’s extensive fulfillment network, which usually results in faster shipping times and lower shipping costs. These products are also eligible for Amazon Prime, which provides free two-day shipping for Prime members.
FBM shipping times and costs depend on the seller’s chosen carriers, methods, and fulfillment partners. FBM sellers have the flexibility to choose their shipping options, potentially offering faster or cheaper shipping to customers.
How does customer service and return handling work with FBA vs FBM?
For FBA, Amazon handles customer service and returns on the seller’s behalf. This includes managing customer inquiries, processing returns, and issuing refunds when necessary.
With FBM, the seller is responsible for handling all aspects of customer service and returns, which can be more time-consuming and resource-intensive. FBM sellers need to ensure they provide excellent customer service to maintain a positive reputation on the platform.
Is FBA or FBM better for small businesses or new sellers?
The choice between FBA and FBM for small businesses or new sellers depends on various factors, such as the seller’s resources, experience, and product type.
FBA can be advantageous for new sellers with limited experience in logistics and customer service, as Amazon takes care of these aspects. However, FBM can be a better choice for small businesses with specific branding requirements or those who want more control over their inventory and shipping processes.
How can I switch between FBA vs FBM if I decide to change my fulfillment method?
To switch between FBA and FBM, you need to update your Amazon product listings to reflect the new fulfillment method. For FBA to FBM, you will need to create new FBM listings and deactivate your FBA listings.
Conversely, to switch from FBM to FBA, you’ll need to create new FBA listings and deactivate your FBM listings. Additionally, you’ll need to send your inventory to Amazon’s fulfillment centers for FBA or arrange storage and shipping for FBM.
How does FBA or FBM affect my eligibility for the Amazon Prime program?
FBA products automatically become eligible for Amazon Prime, giving sellers access to millions of Prime customers and providing free two-day shipping to those customers.
FBM products are not automatically eligible for Prime; however, sellers can enroll in the Seller Fulfilled Prime (SFP) program if they meet certain criteria, such as consistently fast shipping and excellent customer service.
What factors should I consider when deciding between FBA and FBM for my business?
When deciding between FBA and FBM, consider the following factors:
- Cost of fees, storage, and shipping
- Control over inventory, branding, and packaging
- Access to Amazon Prime customers and platform visibility
- Required resources and expertise for shipping and fulfillment
- Handling of customer service and returns
- Product type, size, weight, and sales velocity
- By carefully weighing these factors, you can make an informed decision about which fulfillment method is best for your specific business needs.
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FBA vs FBM: Which is Better for Your Business – Summary
The decision between FBA and FBM ultimately depends on your business’s unique needs, goals, and capabilities.
While FBA offers streamlined logistics and access to Amazon Prime members, it comes with higher fees and less control over inventory and branding.
On the other hand, FBM provides more control over these aspects but requires more hands-on involvement in shipping and customer service.
By carefully considering the factors discussed in this article, you can make an informed decision about which fulfillment method is best for your business.
Remember, the key to success on Amazon is not just choosing the right fulfillment method but also optimizing your product listings, pricing, and marketing strategies to stand out in a highly competitive marketplace.