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Amazon has more than 2 million active merchants, and the number is growing by over 3,000 new merchants per day. As a seller on AMZ, you have two options for fulfilling orders. You can pay Amazon to handle it through the Fulfillment by Amazon (FBA) solution or take charge of the shipping process with the FBM or Fulfillment by Merchant option.
Now, the question is, which one is better – Fulfilled by Amazon vs. Fulfilled by Merchant? To answer that, let’s first understand the difference between the two. Fulfillment by Amazon allows the marketplace to ship orders on your behalf, while with FBM, you take full responsibility for shipping.
To learn more about both options and find out which is the best choice for you, read on!
Amazon FBA: Pros and Cons Overview
For a fee, sellers can subscribe to Fulfillment by AMZ, a service that includes storage, shipping, customer service, and returns for their marketplace sales. It can provide an easier way to manage their e-commerce operation, but it may not be the best choice for all products.
When Amazon fulfills a product, buyers can easily identify it. Most buyers also view Amazon fulfillment as trustworthy. A critical component of FBA is that the marketplace takes charge of your inventory. Depending on product preferences, cost considerations, and shipping times, you can pick either Amazon or seller-fulfilled.
Fulfillment by AMZ has been a game-changer for many sellers, providing them with various benefits and advantages. However, as with any program, it has its pros and cons. In this section, we will look closely at FBA to help you decide if it is the right choice for your business.
Pros of FBA
Greater exposure and sales potential
Using this model makes your products eligible for Prime two-day shipping, which can significantly increase your sales potential. Additionally, your products will be eligible for Amazon’s free shipping promotions, which can further boost your visibility and sales.
Reduced workload
AMZ handles your products’ picking, packing, and shipping, leaving you with more time to focus on other aspects of your business, such as product research and marketing.
Access to Amazon’s customer service
Fulfillment by AMZ sellers has access to Amazon’s customer service team, which can handle customer inquiries, returns, and refunds on your behalf.
Better Buy Box performance
Amazon’s algorithm favors Amazon-fulfilled sellers, giving them a higher chance of winning the Buy Box, which is the box on a product detail page where customers can start the purchasing process.
Improved storage
FBA offers sellers access to Amazon’s world-class storage facilities, which means you don’t have to worry about storage space and can store your inventory in the platform’s warehouses.
Multi-Channel Fulfillment (MCF)
For multi-channel merchants, the MCF program is a valuable perk. This service is similar to Fulfillment by AMZ, but with MCF, Amazon will handle order fulfillment from any selling channel, not just the AMZ marketplace. You can leverage Amazon’s fulfillment centers to deliver orders from your site or other marketplaces. Furthermore, the inventory stored in the platform’s fulfillment warehouses can cater to AMZ customers and customers from other channels you use.
Focus on selling
Running a successful shipping and warehousing operation requires hiring and training staff, managing inventory, negotiating carrier rates, purchasing shipping materials, ensuring on-time delivery, and shipping the correct items. The list of responsibilities can be daunting for many sellers. However, with Fulfillment by Amazon (FBA), sellers can utilize Amazon’s advanced fulfillment infrastructure to process and ship orders promptly. Additionally, the FBA program allows sellers to scale their businesses effortlessly without hiring additional staff or expanding their warehouse capacity to accommodate fluctuations in order volume.
Cons of FBA
Increased costs
FBA fees can add up quickly, especially for products with low-profit margins. Additionally, this model charges fees for long-term storage, which can be costly for slow-moving inventory.
Feel free to use SellerSonar’s FBA calculator to compare FBA with your fulfillment costs.
Loss of control
With FBA, you relinquish control over the picking, packing, and shipping of your products, which means that you may not be able to offer your customers the same level of personalized service.
Inventory management
With FBA, you must ensure that your inventory levels are constantly up-to-date or risk running out of stock or incurring additional fees.
Strict guidelines
FBA has strict guidelines on preparing and labeling products for shipment to their warehouses. If these guidelines are not followed correctly, it can result in additional fees or the rejection of your inventory.
Returns management
While FBA handles returns on your behalf, you may not have as much control over the process as you would if you were fulfilling the orders yourself. Additionally, FBA charges a fee for handling returns.
Amazon FBM: Pros and Cons Overview
Fulfillment by Merchant (FBM) is a program offered by Amazon that enables sellers to fulfill customer orders themselves instead of relying on Amazon’s fulfillment network. FBM provides more control over shipping and inventory management but also has some downsides.
Pros of FBM
More control
With FBM, you have full control over the fulfillment process, from packing and shipping to returns and customer service. This lets you personalize the customer experience and ensure your brand’s unique touch is evident in every interaction.
Lower fees
FBM sellers can avoid the storage and fulfillment fees associated with FBA. It can be especially beneficial for low-margin or low-volume products, as cost savings can help improve your profitability.
Better margins
FBM can also help you increase your profit margins. By fulfilling orders, you can save on shipping costs, reduce handling fees, and avoid long-term storage fees.
More storage options
With FBM, you are not limited to Amazon’s fulfillment centers for storage. Instead, you can use your own warehouse or rent space from a third-party provider. This gives you more flexibility and control over your inventory.
More freedom
FBM also allows you to sell on other marketplaces and your website. It means you can expand your sales channels beyond the marketplace without paying Amazon’s fees.
Brand opportunities
As an FBM seller, you can build a strong brand by directly communicating with your customers. You can gain insight into their complaints, feedback, and preferences and respond quickly to improve customer satisfaction.
Cons of FBM
More work
With FBM, you are responsible for all aspects of fulfillment, including packing, shipping, tracking, and customer service. It can be time-consuming and labor-intensive, especially if you have many orders.
Shipping logistics
FBM requires you to manage your shipping logistics, including negotiating carrier rates, purchasing shipping materials, and ensuring timely delivery. It is especially challenging for small businesses with limited resources.
No access to Amazon Prime
FBM sellers cannot access AMZ Prime, a major selling point for many Amazon customers. It puts FBM sellers at a disadvantage compared to FBA sellers.
Less Buy Box chances
When it comes to winning the Buy Box, SFP performs better than standard FBM but still falls behind FBA. Therefore, if you have a highly competitive product, it may be worthwhile to explore other fulfillment options.
Competition with FBA sellers
Selling on Amazon using FBM comes with tough competition from FBA sellers. Amazon prioritizes the development of its fulfillment services, giving FBA sellers an advantage in most areas. However, FBM sellers can still succeed by joining the SFP program and implementing exemplary brand marketing, offering fantastic products, providing excellent customer service backed up by positive reviews, and maintaining competitive prices. It takes a lot of effort to stand out from the competition on the platform, but with the right strategies, FBM sellers can still thrive on AMZ.
FBA vs. FBM on Amazon: How to Choose?
When deciding between using Amazon FBA or FBM as your fulfillment method, there are several important questions you should ask yourself to determine which option is best for your business:
- What is your budget for fulfillment?
FBA involves fees for storage, shipping, and other services, while FBM requires you to handle these costs yourself.
- How much control do you want over your fulfillment process?
With FBA, Amazon handles most of the logistics, while FBM gives you more control over the shipping and handling process.
- How much inventory do you plan to store?
FBA may be more effective for businesses that need to store large inventory, while FBM may be better for smaller inventory levels.
- How quickly do you need to fulfill orders?
Fulfillment by AMZ can offer faster shipping times and Prime eligibility, while FBM may take longer to fulfill orders.
- How important is the Buy Box to your business?
FBA is likelier to win the Buy Box, while FBM may struggle to compete with FBA sellers.
- Do you plan to sell on multiple sales channels?
FBM may be more flexible for selling on multiple channels, while Fulfillment by Amazon is limited to the marketplace.
By answering these questions, you can evaluate each option’s pros and cons and decide which fulfillment method best fits your business.
Final Verdict: FBA vs. FBM
Ensuring you fulfill orders correctly, safely, and on time is critical when selling online. Failing to do so can lead to negative consequences such as returns, bad reviews, and low account health metrics. Hence, choosing FBA or FBM is an important decision for Amazon sellers.
Selecting the right fulfillment method and logistics partner is crucial to ranking high, maximizing sales and conversion rates, and keeping customers satisfied. For example, FBA can help you secure the Buy Box and offer fast, free shipping with AMZ Prime, while FBM allows you to sell with fewer fees and a more personalized approach than many other Amazon sellers.
Choosing between FBA and FBM will help you build a more profitable Amazon business. However, it is essential to consider the type of business you want to run before choosing the right fulfillment method.
Regardless of your chosen method, it is crucial not to overlook your listing optimization and monitoring. Using trusted software such as SellerSonar can help you save time and reduce risks in your business processes, allowing you to focus on selling your products on Amazon.
Register for a 29-day free trial to see how you can benefit from SellerSonar now!
