Amazon FBA vs FBM: Which Amazon Fulfillment Method to Choose?
Every Amazon seller aims to improve their sales and profits. To achieve that, they have to consider every area of their business when making decisions. One of these decisions has to do with choosing the right Amazon fulfillment method.
There are only two fulfillment options on Amazon – Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Each Amazon fulfillment method comes with its own advantages and disadvantages.
Before picking a method, having a clear understanding of their key differences is essential. Not because a certain strategy works for one seller doesn’t mean it would also work for another.
In this article, we’ll discuss how each Amazon fulfillment method works and look at their pros and cons.
Fulfillment by Amazon (FBA)
With FBA, all your packaging, shipping, returns, and even customer service are handled by Amazon. All you have to do is to send your desired inventory to an Amazon Fulfillment Center and they’ll do the rest.
Amazon FBA Pros
Saves time: You save time from packing items and mailing them to your customers. Every time a customer places an order, Amazon ships the item directly to them.
Opens up space: Amazon handles the storage space for you so you don’t have to fill your house with boxes and products, especially during busy shopping periods. Just make sure your stock up your inventory so you don’t run out of products.
Makes you Prime eligible: With FBA, your products are eligible for Prime shopping. Given that majority of Amazon shoppers are prime customers, your products become more appealing to them.
Increases Buy Box chances: Amazon favors FBA sellers when it comes to Buy Box eligibility. And since the competition on Amazon is tough, you have better chances of winning the Buy Box.
Amazon FBA Cons
Requires some effort: You have to prepare the products yourself before you send them to Amazon’s warehouse. This involves labeling items correctly and following other requirements so you can be sure that they are accepted. Otherwise, Amazon will send your products back and you have to go through the process again.
Charges storage fees: Storing your items in Amazon’s warehouse is not for free. You will need to pay for storage fees. If your items are not sold within 180 days, you will be charged for long-term storage fees. Thus, it is important that you send just enough inventory and restock efficiently.
Charges fulfillment fees: Amazon will do all the dirty work for you, but you have to pay a fee in exchange. Every time a customer places an order, Amazon charges you a certain fee. That said, you have to make sure you understand all the requirements before becoming an FBA seller so you know exactly what your margins and profits will be.
Limits inventory control: Since your items are stored in Amazon’s warehouse, you lose control over some aspects of your inventory, including the packaging. Also, if a problem with your inventory arises, you must rely on Amazon to resolve it.
Fulfillment by Merchant (FBM)
With FBM, you handle all aspects of Fulfillment. You list your products on Amazon, then store, pack and ship them as your customers order them.
Amazon FBM Pros
Hands-on fulfillment: Since you handle the fulfillment from A-Z, you have more control over your inventory. You can easily track and restock inventory, as well as, have access to it whenever you need to.
Saves money on fees: Being an FBM seller means avoiding storage fees and fulfillment fees associated with Amazon FBA. However, this doesn’t mean you no longer have to pay for storage, fulfillment and shipment expenses
Makes slightly higher margins: By skipping out on Amazon fulfillment fees, you are more likely to earn more on each sale, depending on the product. However, you miss out on the benefits of being Prime, which could drive more sales.
Amazon FBM Cons
Places more responsibility: More control over your business means more responsibility to fulfill. You should be on top of your shipping and customer service. Otherwise, your seller metrics will suffer.
Reduces Prime opportunities: Although seller-fulfilled Prime offers all Amazon sellers the benefits of FBA without the increased FBA fees, the criteria for approval can be quite extensive and stringent. You need to have a professional account with outstanding records and existing premium shipping order volume, among others.
Requires lower selling price: To win the Buy Box and compete with other FBA sellers, you will need to keep your prices low. This may pose a negative impact on your margins and could start a pricing war.
FBA or FBM: What’s best for you?
Now, you know the pros and cons for each Amazon fulfillment method, it’s time to make a decision. Here’s a quick breakdown to find out which method is ideal for you.
FBA fits your business if:
- Your products have fast turnover
- Your products are small, lightweight and expensive
- You care less about commingling
- You lack manpower to fulfill orders efficiently while still offering good customer service
FBM fits your business if:
- Your products have slow turnover
- Your products are big, heavy and cheap
- You find commingling risky
- You have sufficient manpower and storage to fulfill orders efficiently while still offering good customer service
In conclusion, deciding on an Amazon fulfillment method is challenging. There is no perfect formula to make the decision easier. Plus, there is a load of factors you still have to consider, including the size and needs. As your Amazon business grows, continue to weigh your fulfillment options and make the best decision based on your bottom line.