Is Fulfillment By Amazon (FBA) or Fulfillment By Merchant (FBM) Best for Your Business?
The goal when developing your Amazon strategy is typically to increase sales and grow your bottom line. One of the main choices that need to be made when deciding to sell on Amazon is whether to sell your products through Fulfillment By Amazon (FBA) or Fulfillment By Merchant (FBM) and how to set up your account accordingly to reach these goals.
Fulfillment By Amazon (FBA)
If you enroll in the FBA program, you can automate your order fulfillment. Your inventory is sent to Amazon so every time you make a sale Amazon handles the fulfillment. Your products are stored in Amazon warehouses and Amazon takes care of customer regulations and shipping practices. If anything happens to go wrong with your orders or deliveries, Amazon takes care of everything including returns. An FBA business model can be particularly helpful for sellers hoping to rapidly grow a scaling Amazon business and reach more customers.
Amazon charges storage fees and fulfillment fees. These fees include Amazon’s 24/7 customer support and tracking information. FBA gives you more time to focus on growing your business and a higher chance of winning the Buy Box. Enrolling into FBA makes you eligible for Amazon Prime free shipping, therefore, making your items more appealing to a large audience.
Amazon has millions of active customers and Prime subscribers. Brands specifically available to Prime buyers are those that utilize FBA. These brands have an increased opportunity to gain more sales through Amazon FBA because they are more visible to Prime buyers.
Advantages of FBA
- Fast Delivery
- Effortless logistics and shipping
- Discounted Shipping Rates
- Management and Ease of Returns
- Customer Service Management
- Storage Space
Fulfillment By Merchant (FBM)
FBM allows merchants to be in control of their inventory storage, packaging, and shipping. Merchants can expect fewer fees paid to Amazon and higher margins as well as the elimination of delayed payments, fees to Amazon for handling your assortment or shipment costs to get products to fulfillment centers. With FBM you are in control of the selling process which allows you to establish your brand from the ground up.
Shipping via FBM allows you to ensure the quality of each item at the time it is shipped to customers resulting in less negative feedback. You can also provide personalized packaging for your customers compared to regular Amazon packaging. When selling through FBM, your inventory does not need to be paid for all at once and shipped to Amazon warehouses, so it is easier to get started selling faster. Amazon has strict requirements for accepting products into their warehouses and it can take time to ship your entire assortment to them.
Using FBM You will have to battle for the Buy Box. Sellers that control the Buy Box will have their product added to the customer’s cart and get the sale. Without control of the Buy Box customers will have to scroll down the page to find the small section and link under “Other Sellers on Amazon”. Not having the Buy Box can make it difficult to gain sales. If you are certain that there are no other sellers for your product, and you can win the Buy Box then FBM is a good option to sell through.
Advantages of FBM
- Control over Business
- No Unexpected Costs (No storage or fulfillment costs)
- Opportunity to build an independent brand
Seller Fulfilled Prime
There are more Amazon Prime customers then non-prime customers. Most of the consumers on Amazon searching for products get the benefits of fast free shipping of any eligible Prime product in less than 2 days. Ordinarily, these consumers only buy from sellers that offer Amazon Prime. Customers that buy from non-prime FBM sellers will have to pay additional shipping charges and will receive slower shipping which can result in your product getting overlooked. If you are an FBM seller it is possible to be accepted by Amazon into the Seller Fulfilled Prime Program which allows you to deliver to domestic Prime customers from your own warehouse. This badge is typically reserved for established businesses on Amazon with a track record of fast shipping and positive customer reviews. Once accepted into the program and your trial is complete you are able to store inventory in your own warehouse, process orders and buy shipping labels from approved carriers, pick, pack and ship your orders the same day and Seller Fulfilled Prime carriers collect and deliver orders in two days to customers.
Which Option Is Best for Your Business?
If you need help with your FBA or FBM strategy or have any additional questions, please do not hesitate to contact one of our Channel Key Amazon consultants. You can also reference the Amazon FBA calculator to help you decide whether to use Fulfillment By Amazon (FBA). The calculator allows you to compare FBA to FBM and to calculate the fees involved with FBA. As a full-service channel management agency, we are dedicated to helping you increase your sales.
Fulfillment by Amazon (FBA) Revenue Calculator
Use this calculator as a guide in evaluating FBA only. All you need to do is provide your fulfillment costs and the calculator will show you real-time cost comparisons between your fulfillment and Amazon’s offering for orders fulfilled for their FBA customers. Click here.
We hope that this post was insightful. If you have any additional questions leave a comment below, we’ll be there, we’ll respond, and we will help you through the process. If you found this post to be helpful, please like, share, comment, and tell other people about it.
If you need immediate advice or assistance with Amazon strategies? Talk to our Channel Key team. Thank you for reading.