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Amazon FBA vs. FBM: Which Model is Best for Your Business?
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One of the most important choices you will ever make selling on Amazon is how to utilize either Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM). Both the fulfillment models differ from each other, and differences can have long-term effects on your success with an Amazon business. Both have pros and cons based on what you desire, what you can pay for, and how much control you desire over your business.
In this post, we compare Amazon FBA and FBM so that you can decide for yourself which business model works for you.
What is Amazon FBA?
Fulfillment by Amazon (FBA) is an initiative where you keep your products in Amazon’s warehouses, and they pack and ship them directly to customers. They also manage customer service and returns. When you are an FBA seller, you are able to use Amazon’s huge shipping network, Prime eligibility, and branding.
What is Amazon FBM
Fulfillment by Merchant (FBM) means that you, the seller, handle the storage, packing, and shipping of products directly to customers. With FBM, you’re in complete control of your inventory and shipping processes. Amazon acts only as a platform for listing your products, and you’re responsible for fulfilling all orders.
A Side by Side Comparison
Control Over Fulfillment
FBA: Under FBA, Amazon handles all the aspects of fulfillment. You ship your products to Amazon facilities, and they handle storage, packaging, shipping, customer service, and returns. It provides hands-off ease but ensures that you have less control over how your products are treated.
FBM: FBM means that you’re totally in control of your fulfillment process. You determine how your goods are stored, packaged, and shipped, and you handle the customer support issues and returns as well. Even though this method requires more flexibility, it uses up more time and energy on your part.
Which one do you prefer?
If you’d like to be hands off but leverage Amazon’s world-class logistic system, employ FBA.
If you prefer more control over the process and are willing to handle fulfillment yourself, FBM is your option.
Cost Structure
FBA: FBA storage, order fulfillment, and other services like customer service fees. While the fees are high, most sellers feel that the convenience provided by FBA is well worth it, particularly for dealing with returns, shipping, and customer service. But if you have an item that doesn’t sell fast, long-term storage charges can mount very quickly.
FBM: With FBM, you pay for shipping, packaging, and storage (although you could do these in-house or lease warehouse space). Although the upfront charges are less than FBA, you’ll need to consider the time and labor that goes into shipping yourself. Shipping charges also depend on where you are and how many orders you’re shipping.
Which is better?
FBA may be pricier, but it’s great for sellers who desire convenience and efficiency.
FBM can be cost-effective for low-inventory sellers or for small sellers who are able to ship on their own.
Customer Access and Prime Eligibility
FBA: The biggest benefit of FBA is that your products qualify for Amazon Prime, exposing them to more customers and boosting their sales. Prime customers tend to buy more items labeled “Prime,” since they can take advantage of speedy, free shipping.
FBM: FBM sellers are not inherently Prime eligible but can be part of Seller Fulfilled Prime (SFP). With the help of SFP, FBM sellers can provide Prime shipping from their warehouses. But meeting SFP’s requirements (i.e., prompt delivery and reliable shipping) is difficult.
Which one is superior?
FBA is a no brainer if you wish to benefit from the enormous customer base of Amazon Prime and lightning-speed shipping.
FBM can still get large volumes of customers, but you’ll be missing out on Prime benefits unless you’re using Seller Fulfilled Prime.
Shipping and Fulfillment Speed
FBA: FBA has a massive network of fulfillment centers where products can ship quickly, usually 1-2 days. Amazon takes care of the logistics so shipping is amazingly efficient, and you can trust their well-established infrastructure to deliver it on time.
FBM: Shipping speed is solely up to your fulfillment capacity. Whether you ship via third-party logistics (3PL) or yourself, you’ll have to make sure that you can provide delivery speeds Amazon expects, which can differ by region and product.
Which is better?
FBA typically offers faster and more secure shipping.
FBM can keep pace with FBA’s speed or beat it out if you’ve got an oil-slicked fulfillment process, but it is your job to police customer satisfaction.
Scalability
FBA: Scalability is the biggest strength of FBA. Your business grows, and Amazon’s fulfillment network grows right along with it. Whether you are growing into new markets or upping product numbers, FBA handles growth seamlessly without your concern for logistics.
FBM: FBM is scalable but requires a lot of effort if you scale too much. You will need to invest in warehouses for storage, labor, and shipping. When you scale too rapidly, you will also encounter order fulfillment challenges as well as handling customer expectations.
Which one is better?
FBA is perfect for sellers who want to scale easily and quickly since Amazon handles most of the logistical challenges.
FBM is less effort to scale but more effort on your part once you’re larger. You’ll have your own fulfillment and infrastructure staff when you’re larger.
Customer Service and Returns
FBA: Amazon provides customer service and returns for FBA products. If something is wrong or someone has a question about a customer order, Amazon’s customer service will deal with it. This can be a huge time-saver for sellers who do not wish to do so themselves.
FBM: As an FBM seller, you’re responsible for customer service and handling returns. This means you’ll need to be responsive to customer inquiries and handle any returns or exchanges. Depending on the volume of your sales, this can be a significant time investment.
Which is better?
FBA is ideal for sellers who want to offload customer service and returns to Amazon’s experienced team.
FBM allows you complete control over customer interactions, something that can be advantageous if you prefer to offer them a customized experience or fix problems in a particular manner.
Which Fulfillment Model is Best for You?
Your business’s size, objectives, and resources will ultimately determine the choice between Amazon FBA and FBM. Let the following scenarios guide your decision:
Select FBA if:
- You want to focus on building your business rather than handling fulfillment.
- You want to tap into Prime customers and ride Amazon’s fulfillment network.
- You are expanding quickly and must outsource logistics to Amazon.
Choose FBM if:
- You want greater control over inventory and fulfillment operations.
- You have a small operation and can handle fulfillment without needing Amazon’s infrastructure.
- You are happy to handle customer service and returns in-house.
Conclusion
Each of FBM and Amazon FBA has its strengths, and the most suitable model for your business is a matter of how much control you would like to have over your operations, cost base, and long-term growth strategy. FBA is ideal for companies that need a hands-off solution and scalability, whereas FBM offers more flexibility and control over fulfillment.
Regardless of the model you choose, Amazon success essentially boils down to knowing what your business requires, streamlining operations, and adapting over the years. A weighing of the merits and demerits of every model enables you to make an informed choice on the basis of your business agenda and ensures sustained growth.