Choosing between FBA (fulfillment by Amazon) or FBM (Fulfillment by Merchant) gets pretty tricky when you don’t know about the advantages and disadvantages of each method. We all want to earn money by staying at home, don’t we? Amazon is the best way to do it! But one of the questions you face is; how to ship the orders. There are two specific ways to deal with orders on Amazon, FBA and FBM. Today, we will discuss the pros and cons of the two fulfillment types, and by the end of it, you will be able to choose the right fulfillment type for your business! Let’s get started!
1. What is FBA (Fulfillment By Amazon)?
FBA stands for Fulfillment by Amazon, which means you have to deliver your products to the Amazon warehouse, and Amazon takes care of the rest. Sellers store all their products in the fulfillment centers of Amazon. Once the order is placed for any product, Amazon takes the responsibility of picking the item and then packing, shipping, and delivering it to the customers!
Advantages of Amazon FBA
- When you are eligible for selling your products on Amazon prime, it comes with an opportunity of getting more buyers than usual. You will get the benefits of shipping products (for free at times!) to the customers within 1 or 2 days.
- The chances are increased for you to win the Buy Box!
- As we mentioned above, as a seller, you don’t have to worry about storing your products and then going through delivering them. Amazon takes care of it and does all the work for you. It can hold any size of items in its warehouses. Besides, it takes care of the packing and shipping of your product too.
- Customers trust Amazon. When you have the tag of FBA, buyers already know that the product will be of high quality as Amazon itself handles it. They don’t have to worry about receiving their purchase on time, which helps you build your reputation!
- Amazon deals with the deliveries, returns, and complaints about the order. Therefore, you get to spend that time elsewhere in your business!
- If you have signed up for Amazon FBA, then you can ship internationally too!
Disadvantages of Amazon FBA
- The control is not in your hands. Once you have signed up for FBA (Fulfillment by Amazon), it all goes under Amazon. It doesn’t allow you to choose how to store, select, pack, and deliver your products.
- It comes with a cost which is not always affordable for everybody! You will have to pay the fulfillment cost as well as the monthly storage cost. Paying monthly storage fees can get problematic if you have slow-moving items to sell or heavier ones. They won’t sell immediately, and you will have to pay the storage fees until it does. After 365 days long-term storage fees apply.
- There are stringent rules you need to follow as to how to pack your items to ship to the Amazon warehouse.
2. What is FBM?
Amazon FBM allows you to handle everything by yourself, without any help from Amazon. You are the boss of the whole process of fulfillment. You will have to create your product listing and then store, choose, pack, and deliver products to the customers all by yourself. Plus, you will be responsible for all the issues, returns, and complaints.
Advantages of FBM (Fulfillment by Merchant)
- You have control over everything. From storing your inventory to packing and shipping it, you can do it all. That comes with the advantage of lower costs.
- Storing inventory yourself is better if you are selling on platforms other than Amazon. You can store your products and keep track of them to know where your inventory exactly is.
- You can be creative and pack your items however you want to! That helps you build your image with your customers.
- You will earn slightly more on each product as you don’t have to pay additional FBA fees, which means a higher margin on products. However, you are most likely to get lesser sales.
Disadvantages of FBM
- By choosing FBM (Fulfillment by Amazon), you are signing up for more work. You are responsible for the entire process, from storing the product to packing and shipping it to the buyers. This can get pretty difficult for most of the sellers. You get busier each day with the increasing sales and don’t get time for anything else if you think about it.
- You are responsible for processing any returns, addressing customer complaints, or negative feedback.
- Sellers selling through FBM are most likely to face challenges while competing for the Buy Box and then keeping it. You will have to lower your costs to get the Buy Box, and even then, FBA sellers can easily beat you!
- When you don’t pay Amazon for shipping and packing, you will probably have increased overhead costs. Paying for your storage, packaging, and shipping of products can cost you a lot.
- You are totally responsible for shipping orders on time. Any delays will impact your seller metrics very negatively.
3. Which one is better for my business; FBA or FBM?
FBA is the best type to choose if you are a seller dealing with products that sell immediately. This way you are taking advantage of the FBA service without paying big storage fees. If you are a large seller with a maximum volume of products, then FBA is for you. FBA is for those sellers who can lower their prices and even cut down their profits at times to get the Buy Box!
On the other hand, FBM is better for small sellers as it is easier to deal with all the storing, packaging, and shipping. Fulfillment by Merchant enables you to control the entire process and doesn’t let you cut your profit margins either if you are not willing to compete.
However, it all depends on your business’s requirements and how you deal with tasks as a seller. We have given all the information that can come in handy regarding both fulfillment types, and now it’s up to you!