A Simple Breakdown of Amazon FBA and FBM

When it comes to selling on Amazon, you have two fulfillment options to choose from; Amazon FBA & Amazon FBM. Both methods offer unique advantages to sellers depending on their needs and preferences. As such, you must select a suitable fulfillment method that will put your business in the best position to succeed.

In this article, we’ll simplify everything you need to know about Amazon FBA & FBM so that you can determine which method works best for your e-com business.

How Fulfillment by Amazon (FBA) works

Fulfillment by Amazon (FBA) gives you complete access to Amazon’s vast logistics network. With Amazon FBA, your only concern is to send your inventory to their warehouse, and Amazon will do the rest of the work for you. Everything from packing, shipping, and handling customer returns is dealt with entirely by Amazon, meaning third-party sellers get to automate their shipping services.

It’s a pretty straightforward concept; you do the selling, Amazon does the shipping. That’s why many e-commerce sellers use Amazon FBA because of its convenience and efficiency. Whether you’re just starting or have been selling in Amazon for a long time, FBA is a reliable method to get your products to your customers.

Reasons to use Fulfillment by Amazon

There are a couple of reasons why Amazon FBA is the preferred fulfillment method by many e-commerce sellers. FBA provides plenty of advantages, and these are:

1. Outsource the fulfillment process

The most significant advantage to Amazon FBA is that you outsource the whole fulfillment process. You don’t have to manage your inventory or pack the products yourself. With Amazon FBA, you can feel confident knowing that Amazon’s logistics system has got you covered every step of the way.

Because of this, FBA sellers have more time on their hands, allowing them to focus on other important aspects of their business. If scalability is your main priority, then using Amazon FBA as your fulfillment method will let you do just that.

2. Lightning-fast shipping

Another benefit of using FBA as your primary fulfillment method is accessing Amazon’s Prime Shipping. We all know that fast shipping times are crucial to customer satisfaction, and Prime Shipping ensures that your products arrive on customer doors the same day they order them! There’s a reason why many customers highly covet that blue badge. When you have Prime Shipping, your product listings will appear more attractive to the eyes of potential shoppers.

3. Hassle-free returns

When you operate a large business, handling customer returns can take up plenty of your resources. You need the workforce and the warehouse space to manage product returns efficiently. If not, you’ll end up with many unsatisfied customers. The great thing about Amazon FBA is that they will handle all customer returns and add undamaged/unopened packages to your inventory.

4. Buy box eligibility

One thing that Amazon sellers constantly compete over is the buy box. The buy box is essentially a widget that appears on the right side of a product detail page. Amazon FBA sellers get instant eligibility on the buy box, resulting in greater sales potential and product visibility. There are plenty of factors that affect buy box eligibility, and fast shipping is one of them.

5. Worry-free customer service

Aside from fulfilling orders and handling customer returns, FBA also outsources the customer service aspect of your business. The advantage of this is that your business gets 24/7 customer support and provides you with greater freedom in terms of time and other resources.

How Fulfilment by Merchant (FBM) works

Fulfillment by Merchant (FBM) shifts the logistics aspect to the seller’s side. Here, you are granted complete control of the fulfillment process and get to handle your packing and shipping exactly how you want it. As you know, Amazon’s FBA charges you an additional fee for each item they fulfill and ship out.

With FBM, you are free from the additional costs that go with FBA, giving you a healthier profit in return. In addition, you get to set your shipping rates based on location, item weight, and other noteworthy variables. FMB works best for sellers with logistical expertise as they know how to calculate shipping expenses and maximize profit margins.

Reasons to use Fulfillment by Merchant

There are instances where sellers may prefer FMB over FBA. If you find yourself wanting to control the logistics and customer service part of your business, then Fulfilment by Merchant is a great choice. Here’s why you should use FBM:

1. Total control over your inventory

When you fulfill orders yourself, you have complete visibility of your inventory and warehousing. You don’t have to worry about product availability or replenishment since you manage everything yourself. Being hands-on with your inventory can quickly correct shipping mistakes and implement strict quality control before sending out the products.

2. Customize the packaging experience

One advantage that FBM has over FBA is that you can customize the packaging experience. You can use your own packaging designs and incorporate a few elements to make it stand out from the competition. With FBA, you’re stuck with the same packaging materials that Amazon uses on all of the products they fulfill. While that’s great for consistency, it doesn’t make your packaging unique.

3. Reduced fulfillment costs

Amazon’s FBA fees are based on the size of the item they fulfill, so if you sell large, bulky items, you’ll find it costly to use their service. With FBM, you won’t incur additional fulfillment fees, storage fees, referral fees, or other related costs. You can utilize FBM when you sell large items with low-profit margins to save money and maximize your earnings.

4. Handle returns and customer service

While some people may view this as a con, others view it as an advantage. The reason is that you can directly address the pain points that your customers experience and provide better service in return. Identifying the errors and eliminating them early on is key to lowering your return rates and improving customer satisfaction.

5. Access to Seller Fulfilled Prime

While FBA sellers get instant access to Amazon Prime, that doesn’t mean FBM sellers are entirely left out. The good news is that Amazon offers a program called Seller-Fulfilled Prime, where FBM sellers can deliver to domestic Prime users straight from their warehouse. The catch is that you need to meet specific eligibility criteria to qualify for Seller-Fulfilled Prime and complete a trial period to avail of the service.

Once you complete the trial period, you are automatically enrolled, and you can start offering your products with the Prime badge. With Seller Fulfilled Prime, you increase your chances of winning the buy box, and you benefit from lightning-fast shipping while still maintaining total control over your packaging and shipping.

Fulfillment by Amazon vs. Fulfilled by Merchant: Which one is better?

When choosing a fulfillment method for your business, it all comes down to your needs as a seller. Some sellers swear by Amazon FBA, while others use a combination of the two for better efficiency. Let’s break it down into simple bullet points:

Fulfillment by Amazon is better for your business if:

• You want to outsource the logistics aspect of your business.
• You sell products in high volume.
• Your profit margins are large enough to offset Amazon’s fees.
• You are comfortable letting Amazon handle the returns and customer service.
• You want to win the buy box and get instant access to Prime Shipping.

Fulfillment by Merchant is better for your business if:

• You sell large, heavy items with slow inventory turnover.
• You want more control over your packaging and shipping.
• You want to increase your profit margins.
• You want to sell items beyond the approved categories for FBA.
• You want to provide end-to-end services to your customers.
• You are confident with handling customer service and logistics.

Both fulfillment methods have advantages and disadvantages, and it’s up to you to weigh them out as a seller. Most people will find that Amazon FBA is the most efficient way to ship products to their customers. You benefit from Amazon’s logistics expertise, and you get a whole, hands-free experience with their service.

For sellers who don’t want to be tied with Amazon’s fulfillment fees, then Fulfillment by Merchant is the option for you. Just know that you’ll be taking on more responsibilities as a seller, but if you feel okay with that, then you won’t have any issues in the future.

Conclusion

Amazon FBA and FBM may sound complicated at first, but things start to make a little more sense when you break them down. You don’t have to limit yourself to just one fulfillment method, as every seller’s needs will be different. Use the information in this article to help you decide which fulfillment method you should use for your business.

Knowing the financial health of your business is crucial to maintaining profitability. If you need expert bookkeeping services, our team is ready to help. Simply fill out the form and we’ll gladly assist you.