FBA vs FBM: What Fulfillment Method Is Perfect For Your Business?
By Space Coast Daily // February 20, 2021
Every Amazon seller has to answer one simple question before they start selling on Amazon. How will I fulfill my orders? It is a simple question, but a seller must know their options before deciding on their fulfillment method.
For most sellers, there are two choices – FBA (fulfillment by Amazon) and FBM (fulfillment by merchant). Let’s dig a little and look at what the process is for both fulfillment methods.
Fulfillment by Amazon
With FBA, Amazon does most of the heavy lifting. The inventory is stored at Amazon’s fulfillment centers, and the retail giant also ships your orders.
In a nutshell, if you are an FBA seller, your sales process will look something like this:
1. You ship your product to an Amazon warehouse.
2. The products are stored at the fulfillment center. You will have to pay a storage fee based on the size/volume of the product. The type/category of the product also plays a role when deciding your storage fee.
3. Amazon packs and ships the product after an order comes in.
4. The retail giant handles customer care and follows up on the order. Returns and refunds are also handled by Amazon.
5. You will be credited your dues every two weeks.
Want to know how profitable you will be while using Amazon FBA? Use SellerApp’s FBA calculator to find out.
Pros of FBA
■ Logistics support: This is the primary benefit of FBA. Since Amazon takes care of storage and shipping (for a fee), the seller will have more time and money to focus on top-level strategy.
■ Scalability: This is a consequence of the logistics support from Amazon. Since you don’t need any of your infrastructure for storage or workforce for packaging and shipping, it is incredibly easy to scale your Amazon business with FBA.
■ Amazon Prime: Customers expect lightning-fast delivery. This is where Amazon Prime can help drive sales. Your products sold through FBA qualify for Prime delivery. Besides, Prime also gives you an advantage when competing for the Buy Box.
■ Customer support: Since Amazon takes care of customer support and returns, you won’t need to hire staff or spend time on customer support. This will also help you go global because you won’t have to worry about localizing your customer support!
Amazon FBA cons
■ It’s not free: You need to pay for the service. Inventory storage fees can add up if you are not careful and if your sales rate stagnates. The long-term storage fee is worse and can quickly drain your profits. There are other additional fees involved, which you can read about in the detailed Amazon FBA guide.
■ Lack of branding: Since Amazon packs and ships your product, it reduces the opportunity you have for branding and personalized packaging.
■ Inventory management: It is possible to lose track of your inventory levels when you don’t directly manage fulfillment logistics. If you ever run out of stock, Amazon will penalize the listing by reducing visibility and ranking. That is why inventory management is vital.
Fulfillment by Merchant
In this case, you will have to manage and store your inventory. You are responsible for packing and shipping the order as well. Individual sellers will also have to handle customer service and product returns.
Essentially, the seller has to shoulder a lot more work as compared to FBA. However, there are silver linings. Let’s take a look.
Pros of FBM
■ No storage fee: FBM is perfect if you are going to sell products with lower margins or products that have a low sales frequency. In both these cases, if you are using FBA, you run the risk of accumulating unmanageable levels of storage fees!
■ More freedom to build your brand: Since you are responsible for packaging and shipping, you have more freedom to include branding elements or provide a personalized customer experience.
■ Possibility for greater margins: If you create a well-oiled and optimized business, you will have greater margins with FBM as compared to FBA. While it is more difficult to scale and fulfill orders early on, in the long-run it could prove to be more profitable.
■ Seller fulfilled Prime (SFP): While being an FBM seller does not automatically qualify you for Prime delivery, you can apply for SFP. This requires a spotless sales history and seller feedback. You’ll also need a professional account to apply.
Cons of FBM
■ Difficult to scale: Amazon FBA makes it incredibly easy for businesses to scale. FBM, on the other hand, can limit your growth potential unless you invest more money into infrastructure and workforce.
Customer support: Scaling a business is not just about the logistics. You will also need to be able to address customer concerns and complaints. With FBA, Amazon takes care of that for you.
• No ‘fulfilled by Amazon’ tag: This might seem like a minor point. The ‘fulfilled by Amazon’ generally signals reliability and trustworthiness. Amazon customers don’t necessarily know about fulfillment methods. They just want their product delivered on time. This is where a direct association with Amazon can come in handy.
Now you know the major pros and cons of both FBA and FBM. This will enable you to make an informed choice when deciding on your fulfillment method. With that being said, it is important to note that you can switch between FBA and FBM whenever necessary.
Many sellers use both FBA and self-fulfillment strategies to make the most out of the Amazon marketplace. You should do that as well.
Don’t forget, fulfillment is just one part of the Amazon seller journey. You will need to focus on product research, product listing, SEO optimizations, effective marketing, and more if you want to ensure long-term profitability. You can simplify the entire process with an all-in-one tool designed for Amazon sellers – SellerApp. Don’t take our word for it, try the free trial!
Arishekar N, the Head of Marketing at SellerApp, specializes in digital marketing, in addition to website keyword optimization for search engines. His areas of expertise include enhancing the organic ranking of webpages on search engines with innovative SEO strategies and online promotions.