Comparing FBA vs. FBM: What's the Best Option for Your Business?
Introduction
Amazon FBA and Amazon FBM are two of the most popular ways to sell products online. Both have their advantages and disadvantages, so it's important to understand the differences between them before deciding which is best for your business.
What is Amazon FBA?
FBA stands for Fulfillment by Amazon, and it's a service that enables sellers to leverage Amazon's logistics network to store and ship their products. With FBA, sellers don't need to worry about storage space or delivery process. Instead, they can focus on marketing and customer service while Amazon takes care of fulfillment.
What is Amazon FBM?
On the other hand, FBM stands for Fulfillment by Merchant, meaning that sellers handle all aspects of order fulfillment themselves. This option is typically more cost-effective, as you won't have extra expenses associated with warehouse space or shipping costs. However, this means that you'll need to invest time in managing inventory levels, handling orders yourself, and organizing packaging materials before shipping out orders yourself.
To get started navigate to Seller Central.
Let’s explore some of the pros and cons of each service:
Pros of Amazon FBA
Access to millions of customers via Prime – When you use Amazon FBA, your products become eligible for free two-day shipping with Prime. This gives you access to millions of customers who prefer fast delivery times from trusted brands like Amazon.
Lower list prices – Since you don’t have to worry about shipping costs when using FBA, you can offer lower list prices than competitors who use other fulfillment services like FBM or a third-party warehouse.
Increased sales – Studies have shown that people are more likely to purchase items offered through the Prime program due to its quick delivery options and trustworthiness from being associated with a well-known brand name like Amazon.
Automation – With Amazon's Seller Central dashboard, using FBA can be automated so that your seller account runs smoothly without any manual input required from you as a seller.
Cons of Amazon FBA
Fees - While there are many benefits associated with using FBA services, it does come at an additional cost compared to other forms of fulfillment like self-fulfillment or third-party warehouses. You’ll incur both monthly storage fees as well as per item fees added on top of what you’re already paying in order fulfillment costs such as freighting costs or labor costs (if applicable).
Inventory management problems – As mentioned above in the “automation” section, using Seller Central dashboard allows for much easier automation compared to self-fulfillment methods; however there is still difficulty in tracking inventory levels accurately since all items must be stored in an Amazon warehouse/fulfillment center rather than your own warehouse/storage facility where inventory is easier to track manually if needed (for example during returns processing). • Longer shipping times - If your product isn’t stored close enough to an end user then it could take longer for them to receive the item due to its further distance from origin compared with traditional fulfillment methods such as self-fulfillment or 3rd party warehouses located closer geographically speaking than an Amazon warehouse/fulfillment center would be located in relation to its end user customer base (which increases wait time).
Pros of FBM
Control over operational tasks - When merchants fulfill orders themselves they gain full control over their operational tasks such as managing inventory levels accurately which helps ensure accurate ordering & stocking processes along with learning customer behaviors quicker & acting accordingly whenever necessary (easing returns processing too), plus they can also customize packaging materials with their own logo/branding which helps build better relationships with customers & increase brand loyalty overall too when done correctly
Cheaper - Self-fulfilling orders typically involves fewer fees than those charged by 3rd party warehouses/services or even those charged by Amazon itself through its various fulfillment programs such as Seller Central & Prime which makes selling via self-fulfilment methods much cheaper overall compared against other solutions available
Faster delivery times - By controlling their own operations merchants can cut down greatly on lead times from when an order is placed until when it gets shipped out due its capabilities in having items stocked locally & ready for shipment far sooner than having them stored remotely at a 3rd party location (as mentioned above) potentially hundreds miles away from the customers doorstep!
Profitability - It is possible that you could become more profitable selling larger or heavier items through FBM than FBA. This is the result of the cost of shipping those large items into the FN (fulfillment network) in small quanty on a pallet + warehousign space + pick, pack ship.
Cons of FBM
Time consuming - Although there are several advantages associated with self fulfilling orders yourself one major downside includes having less time available overall since it requires more attention directly relating towards fulfilling every order accurately & quickly instead letting someone else do most work while only needing minimal effort on behalf - The time consuming nature adds more stress onto merchants having all tasks completed correctly within allotted deadlines plus additional workloads related towards research into new markets/products etc which would have been handled automatically through utilizing 3rd party
Shipping costs - When you utilize Amazon FBM you either pay for shipping through your own negotiated freight with FedEx, UPS, or USPS or you may "buy shipping" from Amazon. In many cases those shipping fees could be higher than the fees associated with the product fulfillment through FBA
Customer Messages - expect to recieve more inquiries from customers asking "where is my stuff." If you are not setup to handle a large potential influx of buyer seller messages, and hunt down tracking for these customers then maybe FBM is not for you.
Account Health - Since you control the fulfillment you are responsible for it. If your rate of orders with problems related to tracking and delivery accuracy is negatively impacted becayuse of your performance or that of the freight company, then you are held responsible. This could also flag or restrict your account, especially around the holidays when order volume tends to increase.
Conclusion
Overall, both FBA and FBM have their pros and cons. With FBA, you get the convenience of outsourcing your fulfillment needs to Amazon but at a cost. On the other hand, with FBM, merchants gain full control over operational tasks such as managing inventory levels accurately which helps ensure accurate ordering & stocking processes along with learning customer behaviors quicker & acting accordingly whenever necessary (easing returns processing too), plus they can also customize packaging materials with their own logo/branding. However, it is time consuming and shipping costs may be higher than those associated with FBA. Ultimately, it’s up to each individual merchant to decide what works best for them depending on their budget and resources available in order to maximize profits while delivering an excellent customer experience. Amazon Consulting Services can provide valuable guidance in making this decision, offering insights tailored to a merchant's specific needs and goals.
Other great resouces include the below links:
Data Feed Watch FBA vs FBM
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