FBA VS. FBM
With Amazon, there are two major ways for business owners to ship their products: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). With Fulfillment by Amazon, Amazon deals with the shipping and handling of all orders. With Fulfillment by Merchant, sellers are fully in charge of the shipping process of their products. So what do FBA and FBM entail, and which is the better option? Here we’ll break down each shipping method and determine which is the most beneficial for your business.
There are many benefits to using FBA to ship your products, one of the most prevalent is Prime Shipping. Sellers who utilize this service gain access to free 2-day Prime shipping for their products. Amazon will advertise the Prime logo on your listings and consumers will see the phrase “Fulfilled by Amazon” on the product page. This is a huge benefit of FBA because it is very difficult for sellers who run their own shipping operation to compete with Prime shipping. Fast, free shipping was the number one reason online users shopped on Amazon as of January 2020. Amazon has mastered the shipping process with Prime, and thus having access to this service is a huge deal.
With Amazon FBM, sellers do have the option to use Seller Fulfilled Prime (SFP). SFP allows sellers to advertise Prime shipping without using FBA. However, to obtain SFP, sellers must have very impressive performance standards and be able to commit to fulfilling orders with 2-day delivery at no cost to Prime members. Sellers must pass a trial period to gain access to this program and because the standards are so high, SFP is not widely accessible to most Amazon sellers.
Another benefit of using FBA is being a preferred choice for the Amazon Buy Box. The Buy Box is the area of a product page where the customer will see “Add to Cart” and “Buy Now”. Getting your products to be sold through the Buy Box is not so easy as many brands selling the same type of product as you are competing for this spot. Winning the Buy Box is actually super important; according to Forbes, 80% of purchases are made via the Buy Box.
Amazon gives preference for the Buy Box to sellers who use FBA services. This is because more efficient, reliable shipping is a huge variable Amazon takes into consideration when calculating which seller wins the Buy Box, and the platform considers its own shipping services, FBA, to be perfect in this regard. This gives sellers with FBA a leg up over FBM sellers when it comes to the Buy Box, which can mean a lot more sales.
Another factor to consider when comparing Amazon FBA to FBM is control. With FBM, sellers have full control over the shipping process. This means business owners are in charge of things like transportation, warehouse staff, and customer service. This can be both good or bad. Some sellers prefer controlling shipping and handling, but the process can be complex. There are many factors that go into order fulfillment, and if a company is not well-versed in shipping and handling, it can be difficult to get orders out quickly and efficiently.
With FBA, sellers do not have control over the shipping process as it is fully in Amazon’s hands. But the plus side to this is that sellers do not have to put resources and time into shipping and can focus on running their online businesses. This is a far simpler option for many sellers who want to focus on selling rather than worrying about packing, shipping, and customer service.
Packaging & Labeling Requirements
Another aspect of Amazon FBA is the packaging and labeling requirements. Amazon has strict guidelines regarding the packaging and labeling of inventory. This means that if a seller puts the wrong label on a shipment, he can be charged hefty fees. With the wrong label, Amazon may reject your shipment altogether, which will cause you to waste time and money. Thus if you are planning to use FBA, make sure you consider the time and cost required to prepare your packages to ship to Amazon warehouses.
Specialized Services & Features
A significant perk of FBA is that the program comes with various services and features to help sellers. A major service that FBA covers is customer service and returns. Amazon takes care of this for all orders. This means the seller’s only job is to sell the products online and send shipments to Amazon FBA warehouses. Other than that, the rest is up to Amazon.
With FBM, sellers are in charge of their own customer service. This will require more time and resources but can be a positive for sellers as well. Being in charge of your own customer service means you will get direct feedback from your consumers and can deal with customers as you see fit for your brand.
Another feature Amazon FBA boasts is inventory management. With FBA, sellers will have an Inventory Performance Dashboard which will display an Inventory Performance Index score (IPI). This score gives sellers an idea of how efficient they are in managing their inventory. FBA also offers various tools and suggestions for sellers to properly manage their inventory and save money. One of these is the Restock tool on Seller Central which offers recommendations based on your sales history, demand predictions, seasonality, and your own input. Thus, FBA can be very helpful to sellers who want to be part of an organized system, rather than figuring everything out for themselves.
Fees & Cost
An important factor to consider when deciding how to ship your products on Amazon is cost. With Amazon FBA, Amazon takes care of the shipping process in its entirety. But this means the seller will have to pay fees for the following: inventory storage, fulfillment, order removal, long-term storage, unplanned services, and returns processing. This may seem like a lot of fees, but keep in mind Amazon is covering shipping, handling, and customer service.
With FBM, sellers will not have to pay fees for specific services, but rather will have to pay for the total cost of shipping and handling. For many sellers, the price of shipping can be more costly than the fees required to use FBA. This really depends on how efficient and cost-effective a company’s shipping process is. Some sellers can save money running their own shipping, as long as their fulfillment costs are lower than Amazon’s fees. When deciding between FBA and FBM, sellers should take cost into consideration and choose which option will make the most sense financially for their business.
All in all, there are advantages to both FBA and FBM, but if one option must be chosen for shipping, it seems FBA comes out the winner. Amazon FBA give sellers access to top-notch shipping and services. Because the shipping process is such a hassle for business owners, this can be a huge relief for many. 73% of Amazon sellers are currently taking advantage of FBA, and that number continues to grow. Try out Amazon FBA today and see what it can do for your business.