FBA vs FBM: Which One Should You Choose?
"You sell it; we ship it." This is a really catchy promo slogan of Amazon, an internationally renowned e-commerce platform. In addition to providing a marketplace for global sellers, Amazon has also muscled into the shipping industry.
Establishing an advanced fulfillment network in the world, Amazon has introduced a service called FBA (Fulfillment by Amazon). Under FBA, Amazon-registered sellers can send their products to Amazon's fulfillment centers, and Amazon is responsible for picking, packing, shipping, and providing after-sales services.
As for FBM (Fulfillment by Merchant), it is another option for Amazon sellers. With FBM, sellers skip the stage of storing inventory at Amazon's warehouses and ship products through their own logistics methods.
If you are looking for an FBA/FBM explainer, look no further. We are here to clear up your confusion. Below we will list the pros and cons of FBA & FBM, so you can make a wiser choice for your business.
- 1. What is FBA (Fulfillment by Amazon)?
- 2. What Are the Pros of FBA?
- 3. What Are the Cons of FBA?
- 4. What is FBM (Fulfillment by Merchant)?
- 5. What Are the Pros of FBM?
- 6. What Are the Cons of FBM?
- 7. Conclusions
1. What is FBA (Fulfillment by Amazon)?
Under FBA, the Amazon sellers will send their inventory to the fulfillment center owned by Amazon first. When customers place orders, products will be shipped by Amazon.
Of course, Amazon will not do that for free. There are at least a fulfillment fee and a storage fee. Storage fees vary based on the product size and product category. Fulfillment fees are determined by various factors: the costs of packing and shipping, the size and weight of your product, the tax regulations imposed in your region, and the fluctuations in freight rates.
2. What Are the Pros of FBA?
2.1 Leveraging the Prime Shipping
Customers subscribed to Amazon Prime are guaranteed to receive products within two days. And even Same Day Delivery is made possible sometimes. What's more, products using FBA fulfillment method are eligible for Prime shipping.
The speedy shipping time will largely give a boost to your potential sales. After all, no one will get what they want with a happy face when it keeps them waiting for what seems like a hundred years. Therefore, utilizing FBA to offer Amazon's Prime shipping option is a smart move to woo customers.
Sellers can create a product listing on Amazon and indicate FBA as your fulfillment method to customers, and the Prime badge will be automatically available. The rapid delivery times can really give FBA sellers a competitive edge. That is a win-win for both sellers and customers.
2.2 More Concentration on Your Main Business
Let's say you decide to manage fulfillment on your own. Then you have to find enough space for storage, keep track of your inventory, ship your products on time, and negotiate the shipping prices. The list goes on and on.
Amazon has developed its fulfillment centers with sophistication. The daily operation of its logistics network can maintain accuracy and efficiency. The heavy lifting is on Amazon's shoulders, so you won't be overstretched. As a business owner, you can channel your energy and efforts into somewhere more important: selling, marketing, and sourcing.
Besides, the FBA option can leave Amazon sellers with more room to maneuver. When the order volume changes, Amazon sellers do not have to worry about the inventory.
2.3 After-sales Services Taken over by Amazon
Dealing with customers calls for time and energy. Sometimes, there are annoying customers who may exhaust you. One obvious benefit of FBA is that Amazon will do that job for you. Amazon provides customer services and handles returns after shipping orders to customers. The returns process, in particular, is simplified when Amazon steps in. So you have more free time to grow your business.
2.4 More Exposure, Higher Store Rating
As we said above, displaying the Amazon Prime badge on items can gain more traffic. People trust Amazon for its long-standing commitment to the "customer-first" principle. Customers paying for the Amazon Prime subscription indicates their expectations of high-quality services. Sellers can make the most value out of that when utilizing FBA.
When Amazon channels traffic to FBA sellers, more orders could ensue. If sellers do sell fine products, the combination of higher sales and more reviews will leave an ever-increasing store rating in its wake.
3. What Are the Cons of FBA?
3.1 High Charges
Using FBA means your products will be stored in warehouses owned by Amazon until they sell. A monthly or a long-term storage fee is inevitable. Besides, all the FBA-associated fees (for example, a fulfillment fee) cannot be escaped.
If you are an Amazon seller whose products are heavy or large, opting for FBA is relatively cost-effective because packaging coupled with independently shipping will burn cash.
3.2 Less Convenient Access to Inventory Management
Your inventory will be updated by the Amazon system automatically. The system will send you notifications when the inventory is low. Do not forget to replenish.
See? FBA does not mean a panacea. You cede your control over the inventory, but you still have to invest money and energy into it.
Overstocking products in Amazon warehouses is not a good option, either. Products stored in Amazon's fulfillment centers exceeding 365 days will be charged penalty fees. So pay close attention to the inventory and try your best to sell products within that period if you intend to avoid extra fees.
4. What is FBM (Fulfillment by Merchant)?
When using FBM, it is the Amazon seller who is responsible for storing products in their own warehouse and shipping orders to customers (but you can outsource the fulfillment part to a third party). Also, it also falls upon the FBM sellers to manage the customer support services.
No Prime badge, no Amazon support. The FBM sellers just tap into Amazon to be plugged into the e-commerce world of opportunities.
5. What Are the Pros of FBM?
5.1 Greater Profit Margins
Generally speaking, relying on FBM will bring you more profits. You don't have to pay Amazon. Of course, renting or even buying a warehouse costs money. Hiring and training staff will not be free. Let alone packaging and shipping orders. But if you do the math, you will find that going with FBA can be a more expensive option.
Besides, if your business is in its infancy or if you are tight on budget, choosing FBM will stand you in good stead. Opting for FBA seems like putting down security deposits for renting an apartment—pure spending with no returns.
To profit off the Amazon online market, FBM sellers can fix pricing in a more favorable way. When customers are attracted by low prices, the potential business opportunities will be expanded, thus lifting the profits. All in all, The relatively lower upfront cost enables FBM sellers to undercut FBA players on price.
5.2 Maintaining Direct Control over Your Business
With FBM, you have the freedom to shape your business exactly the way you like. The constant changes in Amazon policies will not exert an influence on you. In addition, having complete control over inventory means that both online and offline retailing are made possible.
5.3 Fewer Requirements to Meet
Amazon has imposed a set of rapidly-changing requirements for FBA sellers, instructing how to pack, label, and ship. Fulfilling rigorous requirements as well as demonstrating full compliance is an entry ticket to join the Amazon logistics network, whereas FBM sellers can avoid such a nuisance. They can prepare and package FBM products in any way they like.
6. What Are the Cons of FBM?
6.1 Calling for More Efforts
Of course, everyone's vision of building a business is to make profits. In the e-commerce world where the competition is pricking up its ears, FBM sellers have to at least manage inventory sensibly, ship orders promptly, and provide after-sales services carefully. If they are growing the business from scratch, it means more worries and more efforts. They have to be heavily involved.
6.2 Less Consumer Traffic
With Amazon beefing up traffic, FBA sellers stand a chance to monetize their popularity. In a stark contrast, FBM sellers don't get such support. They have to figure out some ways to attract customers and increase visibility. Again, a problem taxing the brains.
6.3 The Unavoidable After-sales Services
In addition to the pains brought by order fulfillment, another headache is dealing with customers. Processing returns, refunds, and exchanges are fraught with their own problems and complications. Heads-up, if you fail to give customers a satisfactory experience, it will hurt your business in the end.
7. Conclusions
Whether the FBA service is worth it depends on you. We cannot grant you a stress-free experience when using FBA. Nor can we guarantee you a profitable business if you opt for FBM.
As an international logistics service provider, Seabay Logistics resonates with all business owners who make every effort to develop. We know a one-size-fits-all solution does not make sense in the world of e-commerce. There are always bumps and bruises.
Anyway, we are here to facilitate the fulfillment process with our end-to-end logistics services, ensuring less trouble and more efficiency.
Be it an FBA seller or an FBM player, you can get professional solutions from us. For one thing, we provide FBA Prep & Shipping services, which take the hassle away from you before you store inventory in Amazon's fulfillment centers. For another, we can be designated by you to handle the FBM fulfillment process. All your specific shipping demands can be met if you reach out to us. Do not hesitate to contact us, so together we can take your business to a higher level.
