FBA vs FBM: Which Solution Is The Best For Your Amazon Business

Sellers on Amazon broadly fall under two categories — FBA and FBM.

FBA (Fulfilment by Amazon) is a process by which Amazon provides an array of services to sellers whereby storage, packaging, and shipping of products are looked after. All sellers have to do is have their products shipped to an Amazon warehouse or fulfillment center. Every time a customer places an order for a product, it will be packed and shipped to the customer by Amazon employees.

FBM or Fulfilled by Merchant is the system whereby sellers opt to store, pack and ship their products to customers by themselves. This means everything fulfillment-related is taken care of by sellers themselves.

While FBA is more widely used and preferred over FBM, there are still a large number of sellers who use FBM. Both models have their advantages and disadvantages. So, if you’re trying to make a decision between the two, this article will help you understand and come to a conclusion as to which solution is the best for your business.

Advantages and disadvantages of FBA

Advantages of FBA:

• With FBA, sellers automatically become eligible for Amazon Prime benefits.
• As stated earlier, everything fulfillment-related is taken care of by Amazon thus giving sellers more time to focus on other parts of their business.
• Custom service, product exchanges, returns, etc, are handled by Amazon.
• FBA sellers have higher chances of winning the Buy Box.
• Amazon FBA is a very efficient service, hence it ensures sellers have good performance scores and this boosts their ranking on Amazon search results.

Check out this video to know the Eligibility Requirements of Amazon Buy Box

Disadvantages of FBA:

• The prompt services provided by FBA entail FBA fees which can sometimes amount to a lot of your products being in storage for a long time. The fee structure is sometimes difficult to understand. That’s why we recommend using an Amazon FBA calculator to precisely calculate exactly how much you’ll be spending so that you can plan your course of action accordingly.
• The Amazon policies and fee structure are also subject to frequent changes and are regularly updated and sellers have no choice but to adhere to the new fees.
• While Amazon tries to provide the best customer service to all its buyers, the sellers on the other hand don’t have it easy. Amazon FBA Seller Support is said to be very hard to get in touch with when sellers have any queries or need to remedy some problems.

Advantages of FBM:

• FBA offers sellers higher profit margins due to the absence of FBA fees.
• Sellers have more freedom and control over running their business, pricing their products, etc.
• FBM sellers ship their products to big companies like UPS, and other big names in the industry that offer them extremely competitive prices on delivery and shipping.
• FBM entails sellers to fewer restrictions and policies.
• Makes room for the establishment of better personal connections with shoppers.

Disadvantages of FBM:

• It is more difficult for sellers to qualify for Seller Prime. Sellers have to have an outstanding performance like really cancellation rates, ship almost all orders on time, use Amazon’s recommended SFP carrier, etc like Amazon Shipping, USP, DPD, etc.
• Lower chances of winning the Buy Box.
• Unlike FBA, sellers who use FBM are more likely to have lower performance since Amazon has stringent policies in place for performance which are easy to achieve with FBA.

Determinants that will help you decide between FBA or FBM for your business:

Product type and characteristics

FBA charges for storage and shipping are calculated based on the weight and dimensions of the items. Choosing FBA or FBM for your business will depend on the type of product you’re selling. FBA is believed to be more suitable if your business deals with small, compact items. If you’re a seller of bigger, heavier items like furniture, heavy electronics, etc, FBM is the more profitable route.

Customer support

FBA is known to provide good customer service and handle customer complaints and experience well. As stated earlier, FBM makes way for sellers to establish and maintain more direct contact with customers thus improving their customer service and relations. However, FBA trumps when it comes to efficiency, and other benefits like Amazon Prime, the FBA badge, etc).

International expansion

FBM is said to be a good option if you’re selling within the country that you’re located in. However, if you’re looking to sell on Amazon US from outside of the US, with FBM, it is particularly difficult to do so. This is because Amazon is known for fast shipping and without FBA it becomes slightly more difficult to fulfill orders as fast as you can with FBA. This could result in a decrease in your FBA sales and hence FBM is not a favored option for selling globally.

Inventory management and control

With FBA, you have very little power over your products. Once your products arrive at the fulfillment center from wherever you’re sourcing them, there’s nothing that you can do to check on the quality, condition, etc, whereas, with FBM, you can definitely check on the quality and remove damaged or defective ones and ensure only the best quality products are delivered to your customers.

For FBA sellers, another major concern is restocking the right amount at the right time. If this is not done properly, your performance could go down if you ever run ‘out of stock. This could affect your ranking or you might end up overstocking which will result in expensive long-term storage fees because you are unable to move the products fast enough.

It takes time to figure out both FBA as well as FBM however with FBM, you have the option to rectify things sooner than you’ll be able to with FBA.

Conclusion

FBA is more suited to those businesses that can afford to spend more money at the initial stages itself, do not have their own warehouses and fulfillment personnel, and are looking to sell on global marketplaces.

FBM, on the other hand, is more suited to those who want more control over their products and fulfillment process, looking to sell on more than one eCommerce channel, and want higher profit margins.

If it’s difficult to make a choice between the two, you can opt to choose both. That’s right! Many sellers use a mix of both FBA and FBM. Remember to use FBA for smaller, lightweight products and FBM for bigger, bulkier products.