FBA vs FBM: Which is Better for Amazon Sellers?
Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) are the two order fulfillment methods on Amazon. FBA is an Amazon service for sellers, allowing them to store products in Amazon’s fulfillment centers, and the company picks, packs, ships, and provides customer service for these items. With FBM, sellers take care of the storage and delivery themselves.
Each of these fulfillment methods has its upsides and downsides. You can choose either FBA or FBM, depending on your product or business type. You can also combine both methods in your Amazon store.
This post will help you better understand the pros and cons of FBA and FBM and compare them. Based on that, you can select the model that works best for you.
Amazon FBA vs. FBM
The main benefit of Amazon FBA vs. FBM is that it relieves sellers from fulfillment headaches and helps provide high-quality customer service. FBA is helpful for sellers who aim at rapidly scaling their Amazon business to reach large customer audiences and high-volume sellers. It’s also good for sellers who don’t have much experience in logistics.
FBA is a good way to handle fulfillment if you have high-volume inventory or select not to fulfill the orders yourself. However, it has certain disadvantages - substantial FBA fees, possibly more returns, and strict product prep guidelines.
Differently from FBA, with Fulfillment by Merchant, you select to deliver your products to the buyers via your own logistics network. You will need to store your products in your own warehouse or use a third-party company’s services. Also, you will have to take care of shipping, customer services, and returns yourself.
FBM is a good solution for specific types of products, for example, oversize, heavy, or fragile. Amazon fulfills those in separate warehouses and charges higher fees compared to products with standard tiers and weights. FBM also works well for exclusive products, items that do not have a fast turnover, or those sold in small volumes.
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FBA is better for you if:
- You sell big volumes;
- You do not want to fulfill the orders yourself;
- You don’t have a shipping and delivery partner;
- You don’t have a warehouse to store inventory;
- Your products have standard size tiers;
- You are OK with paying FBA fees.
FBM is better for you if:
- Your products don’t sell at a fast pace;
- You have experience in logistics;
- You have a reliable shipping and delivery partner;
- You have a warehouse to store inventory;
- Your products are non-standard;
- You want greater margins.
FBA vs. FBM - Pros and Cons
Pros of Amazon FBA
With FBA, sellers send their products to Amazon fulfillment centers. When a shopper makes a purchase, Amazon picks, packs, and ships the order, which means Amazon handles a big part of the delivery process on behalf of a seller.
Also, sellers who enroll products in FBA are eligible for Amazon Prime free Two-day shipping. That is a competitive edge since many buyers use Amazon because of this option.
In addition, FBA sellers can use unlimited storage space. Amazon has a vast network of warehouses globally. Merchants can store as many products as they need on Amazon.
Outsourcing customer service and return management
Amazon can provide customer service on behalf of Amazon sellers. It handles customer support via phone or email 24/7. This service is free.
Amazon anticipates return management as a customer service. It processes returns on behalf of FBA sellers. If customers want to return a product, Amazon directs them to their convenient online returns center.
Buy Box priority
Amazon prioritizes FBA sellers regarding product ranking in search results, visibility, and winning the Buy Box. When you use the FBA, your item will appear higher on the Amazon search results page and is more likely to win the Buy Box. Thus, it will sell more.
Cons of Amazon FBA
Substantial FBA fees
Though Amazon FBA is a convenient and efficient service, it costs money. Amazon charges sellers storage fees; therefore, you must sell products quickly to move your stock and avoid long-term storage fees. There are also other FBA fees for packaging, processing returns, and more.
That means you must accurately account for all these fees and ensure that your product is still profitable after deducting all FBA fees.
Also, Amazon changes its fulfillment policies and fees from time to time, and you need to keep yourself constantly updated not to lose money.
Higher product return rates
Amazon has a simplified return policy. That means a buyer can return most items purchased on Amazon for a full refund within 30 days. When customers request to return a product they bought via FBA, Amazon immediately takes the return funds from the seller's disbursement and gives the customer a shipping label to return the item to the proper warehouse.
Because of this easy customer returns procedure, FBA sellers can face increased return rates.
Strict product prep guidelines
When delivering inventory to Amazon fulfillment centers, sellers must prep and label it in line with Amazon’s guidelines. They are pretty detailed, and you need to follow them strictly. If your items are not packaged and labeled according to Amazon standards, it will reject your inventory at the warehouse. That will lead to delays in delivery.
Pros of Amazon FBM
Full control over packaging
FBM sellers can pack their products in line with their promo and marketing approach. This is especially important for exclusive products. You can also add insert cards or any other marketing material. Customized packaging makes your products stand out against the competition and build customer loyalty.
With FBM, there's a much lower chance of incurring unexpected costs when using FBA. Also, you have fewer losses due to changes in Amazon policies. You don’t have to pay long-term storage fees or similar charges because you don’t use Amazon fulfillment centers. You can have pre-agreed terms and conditions with your shipping company and fully control your expected profits.
Freedom to run the business your own way
FBM gives you good control over your inventory and its tracking in the delivery process. Since you store all inventory in one place, it’s easier to monitor and track it. Also, you have a better idea at which stage of the shipping process your product is at a specific time frame.
You can select a shipping carrier and change the company if you don’t like their services. You can handle returns and refunds as you think necessary as well.
Cons of Amazon FBM
High competition from FBA sellers
In many instances, Amazon can prioritize FBA sellers, especially when it comes to winning the Buy Box. Therefore, you must be highly efficient and ready to price wars to be able to withstand the competition.
One of the crucial disadvantages of using FBM is that you must take complete care of the logistics process. You are responsible for shipping products to buyers, which can take a lot of time, especially if you sell significant volumes.
FBM involves certain overhead costs. For instance, you'll need to pay for packaging materials and shipping labels. Also, you'll need to have a way to track your inventory if your shipping company doesn’t offer that service.
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Can Sellers Use Both FBA and FBM?
You can use FBA, FBM, or both for your product fulfillment. In fact, many sellers are doing the latter. That depends on your business and the exact product you sell. FBA vs. FBM has pros and cons, and you should use the best solution for each item you sell.
Moreover, you can sell different units of one and the same product with FBA and FBM by adding FBM to your FBA listing.
What is Better to Use FBA or FBM?
There’s no “one-size-fits-all” solution. In most cases, the choice between FBA and FBM depends on the business model and product type.
For instance, if you sell wholesale and need to process bulk products, it may be a good solution to use FBA because you can outsource delivery and customer service of a significant number of products to Amazon. Handling big volumes requires much time or hiring extra staff.
On the other hand, if you sell non-standard items, for example, oversize products, it’s better to use FBM because Amazon fulfills such products in special warehouses and charges extra fees for that. Also, this may cause delays in delivery.
The best way to choose between FBA and FBM is to calculate your expenses and see what’s more profitable. Simply compare Amazon FBA vs. FBM fees.
You can apply the Amazon FBA vs. FBM calculator to do it easily. Seller Assistant App’s FBM&FBA calculator will calculate your ROI and profit margin right on the Amazon product page. It will show Amazon fees and logistics expenses - referral fees, FBA fees, variable closing fees, and storage costs. You can also add product prep and shipping costs to your calculation.
FBA and FBM both have their advantages and disadvantages. Each of them is good for specific businesses and types of products.
The best way to choose between FBA and FBM is to calculate your expenses and see what’s
more profitable. Seller Assistant Аpp will help you with that. It combines an FBM&FBA profit calculator, IP Alerts, Quick View, Stock Checker, and Restrictions Checker in one tool.
Try Seller Assistant Аpp now. Register for our 14-day trial. Grow your Amazon business with confidence.