Regarding selling products on Amazon, sellers have two main options: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Both options have advantages and disadvantages and choosing the right one can significantly impact a seller’s success on the platform. In this blog post, we will do a friendly FBA vs FBM Amazon comparison to help sellers determine which option is the better selling option for their business.
Benefits of Amazon FBA
Amazon FBA is a service provided by Amazon that enables sellers to store their products in Amazon’s fulfillment centers. Amazon handles the seller’s packaging, shipping, and customer service, alleviating them of inventory management and order fulfillment logistics. This service also allows sellers to make their products eligible for Prime shipping, which can attract more customers and increase sales.
Prime Eligibility
Products that Amazon fulfills are eligible for Prime shipping. Prime shipping, a feature of Amazon Prime membership, offers numerous benefits to customers, such as fast and free delivery, which can significantly enhance the shopping experience.
By fulfilling their products by Amazon and being eligible for Prime shipping, sellers can tap into a broader customer base and attract more potential buyers. This increased exposure can lead to a higher sales volume, ultimately boosting the seller’s business and profitability.
Prime members prefer products with fast and free shipping, giving a significant advantage to sellers who use Fulfillment by Amazon (FBA).
Inventory Management
When you use Amazon’s FBA service, you won’t have to worry about inventory storage, packaging, or shipping. Amazon handles everything, from ensuring enough space to store your products to managing inventory levels to prevent overstocking or stockouts.
They also use high-quality packaging materials and standardized techniques to prepare each product for shipment, ensuring it arrives safely and securely. Additionally, Amazon partners with reliable logistics providers to deliver your products to your customers’ doorsteps quickly, and they keep you updated every step of the way with accurate tracking information.
By outsourcing sales, sellers can focus on crucial aspects of their business. Experienced professionals handle the sales process, freeing up marketing and product development time. This allows for continuous innovation, creating a competitive edge and customer satisfaction.
Customer Service
Amazon manages customer inquiries, concerns, and returns with dedication and a customer-centric approach to ensure a seamless shopping experience and prevent fraudulent activities.
This service can help sellers save valuable time and resources by eliminating the need for direct customer service engagement. This enables sellers to concentrate on crucial aspects of their business, such as product development and marketing, and allocate their resources more effectively towards core functions that drive success and profitability. Ultimately, this service streamlines operations improves efficiency, and optimizes overall productivity, leading to a more prosperous business.
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Drawbacks of Amazon FBA
Amazon FBA has various fees that sellers must consider. These include storage, fulfillment, long-term storage, listing, commission, and transaction fees. These fees can significantly reduce a seller’s profit margin, especially for low-profit margin products. To avoid losing money, sellers must calculate these fees when pricing their products and adjust their strategy accordingly.
Amazon FBA vs FBM fees
The Fulfillment by Amazon (FBA) program encompasses various fees that sellers must consider. These fees include storage fees, which are charges for storing products in Amazon’s warehouses. Fulfillment fees cover packaging and shipping costs and long-term storage fees for products that remain in Amazon’s fulfillment centers for an extended period. There may also be listing, commission, and transaction fees.
All these different fees can significantly reduce the profit margin for a seller. This is especially true for products that already have low-profit margins. To avoid losing money on each sale due to these additional costs, sellers must calculate these fees when pricing their products. By considering these fees and adjusting their pricing strategy accordingly, sellers can protect their profits and avoid losses.
Lack of Control
With the Fulfillment by Amazon (FBA) service, sellers experience decreased control over the entire fulfillment process. This means sellers who opt for FBA must relinquish a certain amount of authority and decision-making power when fulfilling customer orders. Sellers entrust Amazon to handle packaging, shipping, and delivery via FBA, limiting their control over these crucial aspects.
Many businesses heavily depend on Amazon’s platform to manage their inventory and shipping processes. This reliance on Amazon can occasionally give rise to various challenges, including stockouts where the desired products are temporarily unavailable due to supply constraints. Moreover, delayed shipments can sometimes occur, resulting in customers not receiving their orders within the expected timeframes. Therefore, it becomes crucial for these businesses to carefully monitor and manage their relationships and operations with Amazon to mitigate potential issues that could arise from these inventory and shipping dynamics.
Restricted Products
Sellers who use Amazon’s Fulfilled by Amazon (FBA) service may encounter limitations regarding particular products. These restrictions can make it difficult for sellers to fulfill orders and satisfy customers. Legal regulations, safety concerns, or specific logistical requirements may prevent traditional fulfillment channels from being used.
Sellers must proactively seek alternative solutions to ensure these restricted products’ prompt and lawful delivery to their customers. This might require exploring other fulfillment methods better suited to these products. By doing so, sellers can ensure that the restricted products are available to their customers efficiently and safely.
Benefits of Amazon FBM
Amazon FBM offers benefits like cost control, inventory flexibility, more control over packaging, lower shipping costs, avoidance of long-term storage fees, custom packaging/branding, and reduced dependence on Amazon. By leveraging these benefits, sellers can gain greater control over their costs, inventory, and customer service, potentially leading to increased profits and business growth.
Cost Control
As an alternative to Amazon FBA (Fulfilled by Amazon), Amazon FBM (Fulfilled by Merchant) gives sellers more significant control over their expenses. Here are some ways sellers can leverage FBM to manage their costs more effectively:
- Lower Fulfillment Fees: FBM allows sellers to fulfill orders themselves, which spares them from paying Amazon’s high FBA fulfillment costs. This can translate into substantial cost savings, particularly for larger order volumes.
- Reduced Storage Fees: Storing inventory in Amazon’s warehouses through FBA can result in steep storage fees, particularly for slow-moving products. By contrast, FBM lets sellers store their merchandise in their facilities or third-party warehouses, which is often more cost-effective.
- Lower Shipping Costs: With FBM, sellers can choose their preferred shipping carriers.
- More Control Over Packaging: FBM sellers can select their packaging materials and methods, which enables them to manage packaging costs and potentially save on expenses.
- Avoidance of Long-Term Storage Fees: Amazon charges long-term storage fees for inventory stored in their warehouses for an extended period. By using FBM, sellers can avoid these fees since they do not rely on Amazon’s storage facilities.
By using Amazon FBM, sellers can gain greater control over their costs, which can lead to increased profits and business growth., sellers can have more control over their charges, resulting in potentially higher profit margins.
Inventory Flexibility
FBM sellers can benefit from storing their inventory in their facilities or using third-party warehouses in several ways:
- Cost Savings: Storing inventory in Amazon’s warehouses through FBA can result in high storage fees, especially for slow-moving products. By storing inventory in their facilities or third-party warehouses, FBM sellers can often save on storage costs and have more control over their expenses.
- Flexibility in Inventory Management: With FBM, sellers can manage their inventory as they see fit. They can easily access their list, adjust, and better understand their stock levels. This flexibility allows them to optimize inventory management strategies and avoid overstocking or understocking situations.
- Avoidance of Long-Term Storage Fees: Amazon charges long-term storage fees for inventory stored in their warehouses for an extended period. Sellers can avoid these fees by using FBM and keeping the list in their facilities or third-party warehouses.
- Faster Shipping: Storing inventory closer to their customers’ locations can result in faster shipping times. By strategically placing their own facilities or third-party warehouses across different regions, FBM sellers can ensure quicker delivery to their customers, leading to increased customer satisfaction and repeat business.
- Custom Packaging and Branding: FBM sellers have more control over packaging materials and methods. They can choose packaging that aligns with their branding and customer experience objectives. This control allows them to create a unique and memorable unboxing experience for their customers.
- Reduced Dependence on Amazon: By storing inventory outside of Amazon’s warehouses, FBM sellers are not reliant on Amazon’s storage facilities and systems. This reduces their dependence on Amazon’s infrastructure and gives them more independence and control over their business operations.
Overall, storing inventory in their facilities or using third-party warehouses gives FBM sellers more flexibility, cost control, and independence in managing their inventory. It allows them to tailor their inventory management strategies to their needs and potentially improve their overall business performance.
More Control over Customer Service
FBM sellers can leverage the direct control over customer service they gain by providing personalized support and building stronger relationships with their customers in several ways:
- Customer Communication: FBM sellers have the advantage of direct customer communication. They can promptly respond to customer inquiries, address concerns, and provide personalized assistance. By being responsive and attentive to customer needs, FBM sellers can build trust and loyalty, leading to stronger relationships.
- Customized Packaging Inserts: FBM sellers can include personalized notes, thank-you cards, or other promotional materials in their packages. This allows them to create a more personalized and memorable unboxing experience for their customers. Adding a personal touch allows FBM sellers to make customers feel valued and appreciated.
- Personalized Offers and Discounts: FBM sellers can tailor their offers and discounts to specific customer segments based on their purchase history or preferences. By providing personalized deals, FBM sellers can show that they value their customers and understand their needs. This personalization can help strengthen customer relationships and encourage repeat business.
By leveraging these strategies, FBM sellers can provide exceptional customer service, build stronger customer relationships, and differentiate themselves from competitors. This direct control over customer service allows FBM sellers to create a personalized and memorable experience that can lead to increased customer satisfaction and loyalty.
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Drawbacks of Amazon FBM
FBM sellers handle their own shipping, which can result in longer processing and delivery times. They need to allocate resources for fulfilling orders, including packaging, shipping, and customer service. FBM sellers lack access to Prime shipping, which can discourage some customers from purchasing their products. These drawbacks should be considered when deciding between Amazon FBA and FBM.
Shipping Speed
FBA sellers have an advantage regarding fast shipping speeds due to Amazon’s vast network of fulfillment centers. FBM sellers, on the other hand, must handle their shipping, which can result in more extended processing and delivery times. This can lead to lower customer satisfaction and potentially fewer sales for FBM sellers. FBM sellers can focus on providing exceptional customer service and differentiation to overcome this challenge.
Time and Resources
FBM sellers are responsible for fulfilling their orders, which can be time-consuming and resource-intensive. They must allocate packaging, shipping, and customer service resources, including handling inquiries, complaints, and returns. FBM sellers can use various tools and strategies to manage these tasks effectively, such as inventory management software, shipping management platforms, and automated messaging systems.
Lack of Prime Eligibility
FBM sellers cannot access Prime shipping, which means their products are not eligible for free two-day shipping for Prime members. This can deter some customers from purchasing their products, as Prime members often prioritize products that offer fast and free shipping. Prime eligibility is one of the main advantages of using Amazon FBA, as it allows sellers to tap into the large customer base of Prime members who are more likely to make purchases. Therefore, FBM sellers may need to find other ways to attract customers, such as offering competitive pricing or unique product features.
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Conclusion
When analyzing Amazon seller FBA vs FBM depends on various factors, including the seller’s business goals, budget, and resources. FBA offers convenience, Prime eligibility, and customer service support but comes with fees and limited control. On the other hand, FBM provides cost control, inventory flexibility, and more control over customer service but may lack fast shipping and Prime eligibility. Sellers should carefully evaluate their options and consider their specific needs to determine which option is the better selling option for their business.
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