If you're new to selling on Amazon, looking for alternatives for Amazon's holiday 2020 storage restrictions, or wanting to diversify your business solutions, the question of FBA vs. FBM is something you may be pondering. Whether you're wanting to decide if FBA (Fulfillment by Amazon) or FBM (Fulfillment by Merchant) is best for you, or even just want to better understand hat FMA and FBM even mean, this article is here to help.
Factors like product size, shipping speeds, and whether or not you want to deal with cranky customers are all things you'll want to consider. And while it can feel like a big decision with even bigger consequences if you choose incorrectly, there’s no need to stress. We’ll walk you through the pros and cons of both so you can make the best decision for your Amazon business.
What is Amazon FBA?
Fulfillment by Amazon, or FBA, is when Amazon stores, picks, packs, and ships your products while providing customer service.
Pros of FBA:
If you’re dreaming of never dealing with shipping or customers, you’ve already picked up on some of the pros of FBA. You also get to enjoy:
1. Automatic Amazon Prime Qualification…
… which will make your customers happy since every Amazon Prime member will receive free 2-day shipping. With 150 million Amazon Prime members in 2020, that can make a big AND lucrative difference.
2. Established Credibility
Amazon customers trust Prime Sellers more, which in turn could boost your sales over your non-Prime competition.
3. Greater Chance of Winning the Buy Box
Every seller isn’t eligible to win that oh-so-desired Buy Box. But if you choose FBA, you’re more likely to win it, which helps spur sales and increase conversions.
4. Multi-Channel Fulfillment
Want to expand your horizons and sell on other sites? Luckily for you, you can use FBA to fulfill orders from other sites, too!
Cons of FBA:
While FBA sounds enticing, it does come with a cost—literally.
1. The Cost of FBA
One of the downsides, of course, is the cost. With FBA, the price depends on the quantity of inventory Amazon stores for you and how long they store it for. Combined with the monthly fee of having a seller’s account, the price can be a dealbreaker for some.
Oversized items can incur profit-ruining fees, so be sure to do your research and get clear about your packaged measurements before you ship your goods straight to Amazon.
2. The Challenge of Tracking Inventory
When you’re not the one counting your inventory, it may become difficult to know exactly how much stock you have, what sells well, and what sells slower. That can turn restocking into a bit of a guessing game.
3. Higher Return Volume
While buyers love an easy return policy, they love an easy return policy. That may mean more returns—and more money lost—for you.
4. Shipping Products to Amazon
While you may not have to ship your products to customers, you still have to ship them to the Amazon fulfillment center. This process can become tricky fast, especially with Amazon’s hard-and-fast packing and labeling regulations.
5. Lost Branding Opportunity
When customers receive packages from Amazon fulfillment centers, they arrive in Amazon boxes. You lose out on unique packaging that could be used to further promote your product and brand.
What is Amazon FBM?
Fulfillment by Merchant, or FBM, is when you are responsible for shipping products to customers.
Pros of FBM:
When you choose fulfilled by merchant, Amazon leaves everything up to you, which can be a good thing for product promotion, conserving costs, and more.
1. Prime Potential
Choosing FBM doesn’t mean you’re ineligible for Prime, it just means you have to meet stricter shipping standards.
2. YOU Control Your Inventory
When you have complete control over your inventory, you improve quality control, know when to order more inventory, understand what’s selling well and what may need some help, and experience no delays because of Amazon.
3. No FBA Fees
Save that money or spend it on better marketing, PPC ads, photos, or whatever else you may need to further promote your product!
4. Higher Profit Margins
Without any fees, you make more money per unit you sell.
Cons of FBM:
While knowing the ins and outs of your inventory and cutting the costs sounds like a dream for some, FBM sellers shoulder more responsibility—and face tougher competition.
1. The Work of Shipping is on You
When you spend more time, selecting, packing, and shipping your products, you spend less time boosting your business.
2. Careful With the Shipping!
Since Amazon prides itself on customer service, you must take care when shipping products. Amazon is known to penalize and even suspend sellers that make shipping mistakes.
3. Price Products Lower to Compete
When it comes to the Buy Box, Amazon will probably favor FBA over you. So to increase your chances of being chosen by browsers, you may have to lower your prices to even be in the running.
4. You Deal with Customers
Anyone that’s dealt with customers knows that it’s not always fun and games. Typically, customers only contact you if there’s a problem, so you have to put on your customer service hat to please and appease disquieted clients.
5. Possible Diminished Sales
If you do FBM but you’re not eligible for Prime, you may see fewer sales. Amazon Prime members expect free 2-day shipping, and more than half of Amazon shoppers use Prime. If you’re unable to meet those metrics, expect to see fewer people clicking that buy button.
What Are You, an Amazon FBA Business, an Amazon FBM Business, or BOTH?
Even armed with all of the information, you may still be questioning whether you should let Amazon do the work for you or if you should do it yourself. Let us break it down for you:
Choose Fulfillment by Amazon if:
- The thought of dealing with crabby customers turns your stomach.
- You operate out of a small space and don’t have the room to store your products for shipment.
- You have a small, busy team that wouldn’t be able to manage the large workload of shipping products.
- Your product is small, costing you less to store them in Amazon’s warehouses.
- Your product sells fast, so it’s less likely to incur longterm storage fees.
- The extra cost of FBA doesn’t worry you or eliminate your profit margins.
- Winning the Buy Box and Prime users is important to you.
Choose Fulfillment by Merchant if:
- You have the space and means necessary to store and ship your products.
- You want to save on costs.
- You love providing excellent customer service.
- Knowing your inventory is vital to you.
- Your product is large and/or sells slowly.
Consider and create plans for FBA AND FBM
While you may have started reading this article with an either/or mentality, many of the top Amazon sellers combine both FBA and FBM to create a winning strategy. The COVID-19 pandemic and the chaos that ensued gave a clear advantage to sellers who had FBM plans in place (even if that wasn't typically their primary means of fulfillment).
It's unclear what the future will hold, but it's worth exploring backup plans BEFORE you need them so you can pivot when and if the need arises.
P.S. New to Amazon and need some help with your listing? Check out Marketing by Emma’s Emmazon listing optimization services to see what we can do for you! From keyword research to stellar A+ content that sells, our services and team can help.