In 2022, more than 68% of Amazon sellers rely on FBA and 11% chose the FBM route. About 20% of Amazon sellers have taken both FBA and FBM methods to fulfill their orders.
Both these fulfillment methods have their own set of pros and cons, as well as unique features and benefits. Making a choice between them can be a hard task and confusing to figure out which would work better for your business.
That’s why we are here to help you. We’ve curated a detailed guide on both these fulfillment methods to help you choose between them for your Amazon business.
Before we begin, if you are not familiar with the acronyms FBA and FBM, let’s do a quick recap and get ourselves acquainted with them first.
What are FBA and FBM?
FBA or Fulfilment by Amazon refers to the method where the seller sends their products to Amazon’s fulfillment centers or warehouses.
From here, Amazon takes responsibility for fulfilling the customers’ orders. They store the inventory and ship it to the customers, as well as manage other aspects like customer support.
FBM or Fulfilment by Merchant is the method in which the seller manages the whole process by themselves, including managing inventory, storage, shipping, and customer support.
Which should you choose – FBA or FBM?
Now you want to know which will work best for your business. Let’s take a quick glimpse of this comparison between FBA and FBM, and then get into the details.
FBA method would work better if:
- Your products sell well on Amazon i.e., they have a good turnover rate.
- Your products are lightweight and can be easily handled without any risk of damage during shipping.
- You do not have the storage space for your inventory.
- You are unable to find time to manage and fulfill the orders by yourself.
- You are willing to pay additional FBA fees.
- You aren’t confident about handling your customers yourself or want Amazon to handle the customer services.
FBM method would be best if:
- Your products have a low sales velocity or you are just starting out new.
- Your products are heavy or bulky and can be difficult to package or handle because of the risk of getting damaged during shipping.
- You have sufficient storage space for your inventory.
- You are capable of managing and fulfilling all the orders on your own.
- You want to earn more profit margins.
- You provide good customer service and want control over your customers.
How to decide on a fulfillment method for your business?
There are different types of selling that Amazon sellers use to sell their products on Amazon such as:
- Online Arbitrage
- Retail Arbitrage
- Drop shipping
One of the most important factors to decide on a fulfillment method is by checking your type of selling method and sales strategy.
Unique Advantages of Using FBA
Eligible To Access Amazon Prime
When you sign up for FBA, you are also eligible to access Amazon Prime and can show to your products to over 80 million Prime subscribers. You can also avail of Amazon Prime’s two-day free shipping, which most customers love.
With this advantage, your products will be accessible to more customers, and you can easily make more sales and profits since the listings are associated with Amazon.
Gain Advantage Over Winning Buy Box
The Buy Box is a special feature in Amazon that most sellers compete to win because sellers with the buy box have an increased potential to earn more sales than other sellers.
The Fulfilment method is a major factor that influences the chances of winning the buy box. Sellers who chose FBA have more chances of winning the Buy box compared to other non-FBA sellers.
Since the Buy Box helps to get more sales, it is important for sellers to win it and FBA sellers have an extra edge over it.
Higher Ranking For Your Products
While it is not explicitly stated, one of the major factors for ranking on Amazon is FBA. Since Amazon optimizes the listings for Amazon SEO, it gets more exposure, sales, and a higher position in the search results.
Amazon customers also prefer to buy products from FBA sellers than others, thus leading to sellers getting more traffic and conversions.
Thus, sellers with FBA have more chances of their products ranking higher in the search results.
Save Time For Other Important Tasks
Since Amazon will take care of the fulfillment and other related activities, such as storing inventory, shipping, logistics, and customer support, you can focus on other crucial tasks.
Especially if you have another job in hand and can’t find much time to manage your Amazon business, letting Amazon do the work would be a better option.
Better Customer Service & Returns Processing
Apart from handling the fulfillment process, Amazon also manages other aspects such as customer service and returns processing. As there is a team of experts at Amazon who will look after this, you can be assured that your customers receive the best customer support.
Amazon will also ensure that it promptly processes any returns that might happen in the process.
Disadvantages of Using FBA
High FBA Fees
One of the major disadvantages of FBA that most sellers shy away from is the high fees for fulfilling the orders.
As a seller, you need to consider this with the profit margins you expect to gain from selling the products via FBA. Apart from this, there are additional fees to store your inventory in Amazon’s warehouses and the usual Amazon fees to sell your products on the marketplace.
Products Get Mixed Up
Since Amazon manages a lot of products of various categories in their warehouses, the orders are likely to get mixed up incurring losses or returns.
To avoid this, the products must be labeled properly before dispatching them to the warehouses.
Less Control Over Packaging
Sellers who chose FBA have less control over packaging their products, and instead, have to abide by Amazon’s strict rules of packing which can be tedious and time-consuming.
They are also at a disadvantage because they are not able to personalize or choose packaging for customers during festive sales or events.
There are tax liabilities that every seller must adhere to, and these tax liabilities can vary depending on the region.
Since FBA sellers have to spend a lot of the fulfillment fees, as well as other charges, they can be at risk of getting poor profit margins if their products don’t sell well enough.
Advantages of Using FBM
Eligible For Seller Fulfilled Prime & Buy Box
Similar to FBM, Amazon Seller Fulfilled Prime puts all of the responsibility on the merchant to fulfill customers’ orders and deliver them on schedule. This one has a significant advantage though: merchants can show the Prime emblem on listings that they fulfill themselves and take advantage of all the benefits that come with it without signing up for FBA. Additionally, it makes it possible for vendors to compete for the coveted Buy Box.
Excellent Profit Margins
Since sellers do not have to pay high FBA fees, or inventory storage and related charges, they can expect to get more profit margins.
They’ll be able to save a lot of these extra charges and earn better profits for their sales.
More Control Over Packaging
Sellers who opt for FBM have the complete liberty to pack the products however they like and even customize/personalize packaging for customers during festive sales or any occasion if they wish to.
More Control Over Inventory
As sellers are managing and storing the inventory themselves, they can easily track and monitor it during shipping.
Thus, FBM sellers have more control over their inventory than non-FBM sellers.
Disadvantages of Using FBM
High Competition From FBA Sellers
The fact that they lose the majority of their sales to FBA merchants is a major concern among many FBM sellers.
Most customers prefer to buy products with the Prime emblem or are fulfilled by Amazon since it looks more trustworthy to them. That is why it’s good to have a powerful brand marketing strategy, along with fine quality products, positive customer feedback, competitive pricing, and SFP membership to tackle this issue.
Stress On Responsibilities
When FBM sellers take the responsibility to manage your Amazon business on their own, there will be a lot of pressure to handle all the tasks efficiently.
Induced stress and tense situations can happen when trying to have all the activities in control while trying to get more sales and profits.
Final Thoughts – Amazon FBA or FBM?
Now you know how both the fulfillment methods work, and their distinct advantages and disadvantages over one another.
Therefore, it’s best to take your time to analyze the two methods and how they will work for your business, while also considering important factors like:
- Sales Velocity or Turnover Rate
- Size/Weight of the product
- Storage & Logistics
- Selling Costs & Other Expenses
- Customer Experience & Support
This will help you determine the right fulfillment method for your business and help get more sales and profit margins for your business.
For more tips and information on Amazon selling, keep checking amz blog.