One of the most basic issues that Amazon sellers have is deciding which option to use to fulfil their sales. They can do it themselves, using the Fulfilment by Merchant (FBM) method, also known as Merchant Fulfilled Network, or they can enlist Amazon’s help, using Fulfilment by Amazon (FBA).
According to a survey, most Amazon sellers choose FBA as their fulfilment method, with a third using Amazon FBM. Some businesses use both methods to send orders, while others use only one technique.
When comparing FBA vs. FBM, keep in mind that Amazon businesses aren’t one-size-fits-all, so fulfilment methods must match your company’s aims and demands. FBA and FBM are vastly different, and each provide characteristics that appeal to different types of businesses, based on their size, profitability, and goals. Both methods have their own set of advantages and disadvantages, so don’t worry if you’re torn between the two.
We have compiled a list of differences between Amazon FBA and FBA in this article for you to take an informed decision about expanding your business.
But first, let’s understand what exactly the two terms mean.
What is Fulfilment by Amazon (FBA)?
You keep your items at Amazon’s fulfilment facilities, and Amazon chooses, packs, ships, and offers visibility and customer service for them. Amazon FBA enables vendors to grow their businesses and reach out to more customers.
Sellers ship their goods straight to Amazon, which stores them and fulfils all the orders. The sales are still managed by the sellers. Consequently, if Amazon has your purchases in stock, the rest is taken care of for you.
Pros of using FBA
- When you sign up for FBA, you have access to sell to Amazon Prime customers.
- Amazon handles everything for you. Keep track of your listings, make sure you have enough stock, and leave the fulfilment to the professionals.
- Through the FBA network, FBM sellers will spend less on shipping costs. Amazon works with a variety of delivery companies in addition to its own.
- FBA items receive the Prime privilege, making them eligible for Prime free delivery.
- Returns and refunds are handled by FBA as part of the fulfilment process. However, this might lead to further problems in the future.
- Amazon FBA sellers have limitless storage space in their warehouses. Amazon has warehouses throughout the world, with more on the way.
- Amazon provides FBA sellers with customer service 24 hours a day, seven days a week, as well as a platform to handle your own customer service needs.
- You have a better chance of winning the Buy Box if you use FBA, and therefore better sales.
Cons of using FBA
- The costs involved are high, in terms of inventory storage and the FBA fee that you need to pay Amazon. Your profit margins will be significantly reduced as a cumulative result of all such payments made in process.
- Merchants with a high degree of logistical experience may be able to accomplish it for less money than Amazon.
- Sellers that use Amazon’s FBA service must adhere to Amazon’s strict packing guidelines. If this is not done, the goods may not be sent to the consumer at all.
- Be prepared to do things Amazon’s way if you use FBA. It is highly unlikely that you will be allowed to supervise your inventory.
What is Fulfilment by Merchant (FBM)?
You can choose to ship your products to each customer using your own logistics and operational methods, with merchandise housed in your own warehouse rather than at Amazon’s fulfilment centres, with Fulfilment by Merchant.
FBM makes sense for some sorts of commodities, such as those that are huge or heavy, have a slow turnover rate, or are sold in tiny quantities.
As an Amazon marketplace seller, you can choose between two types of merchant-fulfilled operations – Fulfilment By Merchant (FBM) and Seller Fulfilled Prime (SFP).
Pros of using FBM
- The seller keeps a sense of control over the company.
- The margins are wider.
- Opportunity to develop an independent brand is more possible
- Changes in Amazon policy have resulted in fewer unavoidable losses.
- Less paperwork, especially when dealing with states that do not charge sales tax.
- More control over your goods No unexpected expenditures Freedom to manage the business as the seller sees fit
- With one inventory, it’s easier to keep track of both online and offline retail activities.
Cons of using FBM
- Even if you aren’t paying FBA fees, you will have other costs to consider, such as employee salaries, warehouse rent, utilities, and so on.
- Many FBM vendors lament the fact that they lose the majority of their sales to FBA sellers.
- You have a lot more responsibility as a chunk of the storage and delivery process is on you.
What are the key differences between FBA and FBM?
Here are some of the key differences between FBA and FBM:
FBA stands for Fulfilment By Amazon, and it implies your merchandise is totally fulfilled by Amazon. Everything is taken care of by Amazon. You ship a portion of your goods to Amazon fulfilment centres, where it is held until a buyer decides to purchase it.
However, fulfilment is in your hands with FBM. Customers will make their purchases as usual on Amazon, but your firm will ship the things straight to them without any interaction from the company.
- Sellers that sell in large quantities
- Retailers are preparing to reduce costs to the smallest profit margin feasible.
- Products that are unique
- Small quantities or one-offs
- Sellers that wish to use Seller Fulfilled Prime
FBA charges you an additional fee which is not required in the case of FBM. If you are using FBM, then you will be managing all operations including storage, handling, packaging and returns all by yourself. It involves more work but at the end of the day, you don’t need to share a portion of your margins with Amazon.
FBA limits your ability to conduct promotions on other marketplaces or on your own website as Amazon has complete control over your stock. Whether it comes to knowing exactly what’s in stock and when inventory is growing stale, having Amazon hold your inventory might make things complicated.
On the other hand, you keep total control over your inventory using FBM, as there is no inventory divided between Amazon’s and your own warehouses. You can keep all your merchandise in one single area, giving you total control over your storage.
When Amazon fulfils your merchandise, the marketplace manages returns and delivers top-notch customer support on your behalf. Smaller firms will profit from the time savings and increased resources as a result of this.
This can be quite a hassle for you logistically if you choose to go for FBM as Amazon has a strict set of guidelines.
The purpose of your Amazon business is to increase sales and increase profits. The question is whether Amazon’s Fulfilment By Amazon (FBA) or Amazon’s Fulfilment By Merchant (FBM) is the better option for your company. Many merchants are unaware that they may register for both, thereby doubling their visibility and sales prospects.
FBA vs FBM Video – Difference between Amazon FBA and FBM
FBA vs FBM: What are the right questions to ask?
Now that you know the key differences between the two fulfilment methods, in order to decide between both, you need to ask the following questions for your business:
- Is it possible to ship at a minimal cost? Is it possible to make more money by increasing shipment volume discounts?
- How much will it cost each product to ship to Amazon? What is the item’s popularity?
- Will there be any extra charges for monthly or long-term storage?
- Is the higher pricing still competitive enough with FBA to offset the added fees?
Based on your answer to these, you need to find out which option will be more economical for you.