As an Amazon seller, choosing how to fulfill orders is a big decision. Do you pack each order yourself (FBM) or let Amazon do it (FBA)? Each choice has benefits and challenges, and the right fit depends on your business.
FBM means more control but also more work, while FBA offers ease but at a cost.
fbm-vs-fba-which-is-right-for-youWe understand the dilemma, so we've put together a complete guide to help you choose. Confused about FBM vs. FBA.
Read on to find our simple explanations to help you decide which is right.
Key Takeaways
FBA lets Amazon handle storage, packing, shipping, and customer service. It makes items Prime eligible but comes with higher fees.
FBM gives the seller full control over fulfillment and often has lower fees. It requires more work for order management and lacks automatic Prime eligibility.
When choosing between FBM and FBA, consider your product's size/weight, desired control levels over customer experience, tax obligations, and packaging needs.
Popular categories differ: FBA is common for small items like books or electronics; FBM works well for larger goods or personalized products.
Assess how each method impacts profitability—FBA may increase sales through Prime but incurs higher costs; FBM may offer better margins but require more hands-on involvement.
Understanding FBM & FBA
FBM, or Fulfillment by Merchant, means you handle the storage, packing, and shipping of your products yourself. FBA, or Fulfillment by Amazon, involves Amazon taking care of those tasks for you.
What Is FBA?
FBA stands for Fulfillment by Amazon. It's a service that lets you store your products in Amazon's fulfillment centers. Here, they handle storage, packing, shipping, and customer service for these items.
You send your goods to Amazon, and they take care of the rest after a sale is made.
This option gives you the advantage of being part of the Prime program. Your products become eligible for Prime two-day shipping, making them more attractive to buyers. FBA can help you win the Buy Box more often too.
This is where most sales happen on Amazon’s site.
Your inventory gets managed by experts with FBA. This saves you time so you can focus on other parts of your business, like finding new products or expanding your brand. Selling online becomes less stressful as Amazon deals with returns and questions from customers as well.
What Is FBM?
Fulfillment by Merchant (FBM) means you handle the entire process of selling your products on Amazon. You are responsible for storing, packing, and shipping orders to customers.
With FBM, you have full control over inventory management and shipping logistics, allowing for flexibility in how you run your online business.
This method is ideal if you want more control over the customer experience and prefer to manage all aspects of order fulfillment independently.
Through FBM, sellers can maintain a direct relationship with their customers while having greater control over the speed and quality of product delivery. Your profit margins may be higher due to lower fees associated with FBM compared to Fulfillment by Amazon (FBA).
Differences Between FBA vs. FBM
When selling on Amazon, choosing between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) is crucial. Each has its distinct features catering to different seller needs.
Aspect | FBA | FBM |
Fulfillment | Handled by Amazon | Handled by Seller |
Storage | Amazon Warehouses | Seller's Choice of Location |
Shipping | Amazon's Shipping Network | Seller's Preferred Carriers |
Customer Service | Provided by Amazon | Managed by Seller |
Returns | Processed by Amazon | Handled by Seller |
Fees | Higher due to Fulfillment and Storage | Varies, generally lower |
Prime Eligibility | Eligible for Prime | Not automatically eligible |
Control | Less control over fulfillment | Direct control over shipping and handling |
Considering these variations, the pros and cons of each fulfillment method become more apparent. Let's delve into what FBA and FBM offer, starting with the advantages and challenges of Fulfillment by Amazon.
Pros and Cons of FBA
When it comes to Fulfillment by Amazon (FBA), there are certainly advantages such as prime eligibility and buy box advantages, but there are also disadvantages like higher fees and potential product commingling.
Advantages of Using FBA (Prime Eligibility, Buy Box Advantages, Etc.)
Fulfillment by Amazon (FBA) offers several advantages for online sellers like you:
Gain Prime Eligibility: FBA products automatically qualify for Amazon Prime, attracting more customers.
Win the Buy Box: FBA sellers often win the coveted Buy Box, boosting product visibility and sales.
Access to Amazon's Shipping Expertise: Let Amazon handle shipping and customer service, saving you time and effort.
Enhanced Credibility: Fulfillment by Amazon lends credibility to your products, increasing customer trust and sales.
Scalability: FBA allows you to handle high sales volume without worrying about fulfillment logistics.
Focus on Business Growth: With FBA handling fulfillment, you can focus on growing your business and expanding your product line.
Disadvantages of Using FBA (Higher Fees, Comingling of Products, Etc.)
Using FBA can lead to higher fees, impacting your profitability. Additionally, commingling of products may result in quality control issues.
Higher Fees: FBA charges storage and fulfillment fees, impacting your overhead costs.
Comingling of Products: Your products may get mixed with other sellers, affecting brand reputation and customer satisfaction.
Limited Business Control: With FBA, you have less control over shipping and customer experience.
Increased Competition: Many sellers opt for FBA, leading to higher competition for the buy box.
Pros and Cons of FBM
Advantages of using FBM include more control over the fulfillment process and lower fees, while disadvantages may include less visibility and more work involved in managing orders and customer service.
Advantages of Using FBM (More Control, Lower Fees, Etc.)
When using FBM, you have more control over the packaging and shipping process. You also benefit from lower fees than FBA.
You can personalize the packaging and branding to create a unique unboxing experience for your customers.
You have greater flexibility in managing inventory and restocking, allowing you to adapt quickly to demand fluctuations.
With FBM, you can directly handle customer inquiries, ensuring a personalized and responsive customer service experience.
Lower fulfillment fees mean higher margins for your products, maximizing your revenue potential.
You can choose your preferred shipping carriers and negotiate better rates based on your specific business needs.
Disadvantages of Using FBM (Less Visibility, More Work Involved, Etc.)
Using FBM has some downsides that you should consider:
Less visibility for your products compared to those using FBA, making it harder to attract customers.
More work is involved in managing shipping, customer service, and returns, which can be time-consuming and challenging.
Limited access to Prime eligibility, potentially reducing your appeal to Amazon's Prime customers.
How to Choose the Best Option for You
Consider factors such as the size and weight of your items, how much control you want over the customer experience, and your success rates in different categories for FBA vs FBM.
Also, take into account other considerations like tax obligations and packaging flexibility before making a decision on which fulfillment method is best for your business.
Factors to Consider (Size/Weight of Items, Control of Customer Experience, Etc.)
For FBA, success rates are often higher due to Amazon's efficient fulfillment and Prime eligibility, particularly for smaller items. FBM can be more successful for larger or unique items where sellers want greater control over the customer experience.
Popular categories for FBA include electronics, books, and small household goods due to faster shipping times. On the other hand, FBM is favored for items like furniture, custom crafts, and personalized products that benefit from direct seller management.
Also, consider the size and weight of your items to see if they are suitable for FBA or FBM, and your desired level of control in customer interactions.
Reflect on whether you prefer fast Prime shipping or managing your own brand experience. Keep an eye on popular categories as well as tax obligations when making this decision based on your specific business needs.
Other Considerations (Tax Obligations, Packaging Flexibility, Etc.)
When evaluating FBA and FBM, it's important to consider tax obligations and packaging flexibility. With FBA, you may have sales tax nexus in multiple states due to Amazon's fulfillment centers. This can lead to complex tax filing requirements.
Read our guide on Amazon FBA bookkeeping for tips on how to manage your finances.
On the other hand, with FBM, you have more control over your sales tax collection and remittance. Additionally, packaging flexibility is crucial for both methods.
FBA requires compliant packaging that meets Amazon's guidelines, while in FBM, you have the freedom to customize your packaging based on your brand identity.
Conclusion
When choosing between FBM and FBA, consider factors like item size/weight and control over customer experience. Success rates and popular categories for each method differ widely.
Keep in mind other aspects such as tax obligations and packaging flexibility too. Ultimately, the best option for you depends on your specific business needs and goals.
Once you've decided which one to choose, it's time to find the fulfillment path that aligns with your business needs and simplifies your selling process—check out our fulfillment services tailored for Amazon sellers.
FAQs on FBM vs. FBA
1. Is it better to use Amazon FBA or ship yourself?
Using Amazon FBA is typically better for sellers who want to scale their business and outsource logistics, whereas shipping yourself might be cost-effective for smaller-scale operations or for products with irregular sizes and weights that incur higher FBA fees.
2. Is dropshipping allowed on Amazon FBA?
No, dropshipping is not allowed on Amazon FBA as it requires sellers to send inventory directly to Amazon's fulfillment centers. However, dropshipping is allowed on Amazon following specific guidelines, like always being the seller of record and ensuring products are not shipped with packing slips from a third party.
3. What is better than dropshipping?
A private label or building your own brand can be better than dropshipping since you have more control over product quality, branding, and potentially higher margins. However, it requires more upfront investment and risk.
4. Is Amazon FBA good for beginners?
Yes, Amazon FBA can be good for beginners since it simplifies logistics and shipping, allowing new sellers to focus on building their brand and marketing their products. However, there is a learning curve and initial costs to consider.
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