2021-11-02

What are the Benefits of Amazon Seller Central FBA vs FBM

What are the Benefits of Amazon Seller Central FBA vs FBM?

 

Online e-Commerce platforms like Amazon have changed the way we sell, shop and understand the market. With hundreds of thousands of active sellers on the platform and many more launching their small businesses each day, the e-Commerce platform makes significant headways. 

 

So, if you are going to launch your business on Amazon, it becomes imperative for you to understand the pros and cons of Fulfillment by Amazon (FBA) vs Fulfillment by Merchant (FBM). We are here with a comprehensive guide to help you in making this decision.

 

What are FBA and FBM?

 

FBA is the selling mode where the sellers send their products to Amazon’s warehouse or fulfilment centres directly. Amazon provides the activities relating to packing, shipping and customer service. To provide these services, Amazon charges a monthly storage fee besides the applicable fulfilment fee. In FBM, the seller handles the storage of the products and provides logistic services like shipping or customer services. The seller can also outsource their products to a third party for fulfilment purposes. 

 

Advantages and Disadvantages of FBA

 

There are many benefits of FBA, and for this reason, it is prevalent among sellers. The primary motive of any seller is to reach the maximum number of customers in a very efficient manner, and FBA ensures this by providing highly efficient operational and logistic services. Below are some of the benefits of FBA: 

 

● Easy packaging and shipping of order: Since the seller has already sent the product to Amazon’s warehouse, whenever a customer buys a product, Amazon swings into action and gets the stuff packed and shipped, thus, taking care of all steps involved in this process. 

  

● Eligibility for Amazon Prime: Even as there are multiple ways to get the prime badge associated with any of your products, the easiest and accessible way for most sellers is by taking the FBA service. Amazon Prime is a subscription service that gives users access to many Amazon offerings like priority delivery, music and video streaming, etc. Amazon Prime customers, who number in millions and form a loyal customer base of Amazon, get one or two-day delivery for eligible products (with prime badge). And the best way to get this prime badge is by sending products to the Amazon warehouse. Prime eligibility increases the revenues of the sellers’ manifold.   

  

● Entry into the coveted “Buy Box”: On the Amazon website or in the App, there is a section where two things are listed - add to cart option and the buy now option. Even as many factors decide which seller out of many offering the same product will make it to the buy box, one crucial element is whether or not the seller has availed the FBA. There are rigorous standards for sellers to make it to the buy box. FBA helps in meeting those standards. It is essential because most of the Amazon sales happen through the buy box only. 

● Free from customer dealing: As Amazon fulfils the order, customers are dealt with by Amazon only. Returns are therefore much easier to manage.     

  

Even as there are many benefits of FBM, it also has some drawbacks. Below are some of them:

 

● The cost: FBA does not come for free. Amazon charges fees for maintaining the warehouse and fulfilling the orders. These charges vary based on multiple factors, even including seasons. Since warehouse cost is computed based on the volume of the product, sometimes a very large-sized product may have a relatively higher FBA cost than the worth of the product itself, thus putting a dent in the seller’s profit margin. 

 

● Rejection of products: Since Amazon manages the warehouse and fulfils the order, it asks sellers to meet stringent packing requirements when sending their products to the warehouses. If sellers don’t meet Amazon’s standards, they may be asked to send things again, which might turn into a cumbersome task in the long run. 

   

Advantages and Disadvantages of FBM

 

While FBA is the dominant method, FBM is also used by sellers and have several advantages: 

 

● Touch with the customer: Some sellers build their brands by engaging closely with the customers. Such engagement is only possible through FBM. Customer feedback also helps them improve. Moreover, through FBM, the seller can package the product in ways they deem fit, in line with their marketing principles. 

 

● Cost: While Amazon FBA may be cost-effective in some cases, it may also be costlier, as highlighted in the previous section. Therefore, if a seller has the logistical expertise and money, it becomes cheaper for them to manage the logistics of their products. 

 

● Control: FBM puts the seller in total control. Therefore, a seller is spared from Amazon’s stringent and often changing policies for FBA.

 

But FBM also has certain disadvantages:

  

● Losing out on buy box: As mentioned earlier, buy box leads to most sales on Amazon. And not having FBA is one crucial factor that may result in a seller not getting converted into a buy box position. 

 

● Losing out Prime customers: It is challenging to get a Prime badge without FBA, losing a lucrative loyal Amazon customer base.

  

● Returns headache: Processing returns from customers may also be a big headache for sellers.

 

Conclusion

 

As stated above, both FBA and FBM have their own advantages and disadvantages. As a seller, your decision to choose either FBA or FBM should be based on the product that you sell. If you are getting multiple orders per day for your product with a fast turnaround, you can opt for Amazon FBA. But make sure that the product is not heavy or requires specialized packaging as you may have to shell out more fees. 

 

If you are starting your business or have fewer orders, you can opt for FBM, and it can also help you create your own brand identity. Your choice should depend on your product and the size of your business. So, choose what suits you the best.

By Adam E. Wilkens