On Amazon, there are close to 3 million active merchants as of 2021. And according to Jungle Scout’s 2021 State of the Seller Report, almost every Amazon seller has a distinct strategy to succeed there.
The fulfilment method an Amazon seller selects, Fulfillment by Amazon (FBA) or Fulfillment by Merchant, is a significant differential (FBM).
We’ll examine the key distinctions between these two fulfilment strategies, including which is more demanding of experience and which is more lucrative, as well as the elements you should consider when deciding whether to sell on Amazon FBA or FBM.
1. What should a seller evaluate for Amazon FBA vs Amazon FBM
Do we have the ability to send packages at a lower cost? Do discounts for increased volume of shipping yield more profit?
How much will it cost to transport the units on Amazon? What is the popularity of the product?
Will there be extra storage costs?
Will the price increase be able to keep pace with FBA to offset the additional charges?
Understanding Amazon’s fulfilment costs aren’t easy. Amazon will charge you the higher the actual or dimensional weight, which is why it’s essential to understand each product’s tier before sending the product to FBA.
Amazon is always changing its pricing structure, and sellers must stay updated with these announcements.
2. What is Fulfillment by Amazon (FBA)?
Fulfilment via Amazon (or FBA, as it’s called in the world of seller circles) is Amazon’s fulfilment network available to sellers at a cost.
If you sell products through FBA, Amazon will pick packages, deliver, and provide support to customers for your products as you market them.
With fulfilment centres across the globe and in the United States, FBA enables sellers to outsource certain inventory-related operations while ensuring that their inventory is located close to their customers.
Additionally, for sellers with SKUs that are cross-brand within their Amazon inventories, Amazon can even reallocate inventory using the inventory of an additional seller to complete your purchase on that West coast.
The business then assigns the borrowed SKU and the volume into their stock to ensure the best customer experience.
3. What is fulfilled by Merchant (FBM)?
Fulfilled by Merchant, also known as FBM, describes when merchants complete their orders using privately owned logistics warehouses or third-party (3PL) partners.
With FBM, you’re required to oversee the Fulfillment of the items you’ve sold, from selecting to packaging and prep and shipping to your customers, as well as providing support or return requests as required.
4. Can you sell with FBA and FBM?
You don’t have to select either FBA or FBM. Both are acceptable.
In a study surveyed over 1000 Amazon sellers, 66% used FBA to process orders, and 6% utilized FBM. 29% utilized both FBM as well as FBA, however.
Nowadays, there is a sense of diversification and a backup plan. Combining FBA and FBM can help you achieve this.
March/April 2020 was a prime example of the importance of diversification. For most businesses, I’d suggest using FBA because you’ll be able to make faster deliveries this way.
At the time of the pandemic outbreak, Amazon could not take orders the way they normally handle, leading to slow shipping times (averaging approximately one month) and an inventory limit to replenish.
A while ago, Amazon switched preference for the Buy Box to FBM sellers because they couldn’t keep up with the volume of FBA orders.
n this instance, having Fulfillment via Merchant would allow you to keep offering shipping for one week and take away sales from competitors’ FBA sellers.
If this situation could occur shortly is unclear; however, it’s a good illustration of how diversification can benefit your company.
It’s possible that you don’t wish to have stock on a 3PL at all times.
You can look for possible providers and run an experiment with the service so that you’re sure you’ll be able to move to FBM in case of any issue with Amazon.
5. Why are more Amazon sellers shifting to FBM?
Do you remember our data point from the beginning of the blog? In 2021 the majority of vendors employed at most FBM increasing from 34 percent in 2020. Why?
The primary reason is that the Amazon FBA’s limited inventory levels have forced sellers to implement the mixed fulfilment method.
Since only nine percent of sellers completely FBM and the vast majority that utilize FBM also utilize FBA.
If you cannot put the entire inventory, you’d like to place it in FBA, but you’re forced to look for another FBA option.
Even if you can place your entire inventory into FBA, FBM is vital to ensure the security of you and your Amazon business.
Because Amazon determines inventory limits, your top sellers could be vulnerable to being stocked out if a promotional or peak season brings unexpected growth.
FBA sellers are typically plagued with months-long or even longer delays in receiving their orders, so even if you’ve made every effort, your item could remain out of stock because Amazon did not get it onto their shelves fast enough.
6. How to Structure a Joint FBA and FBM Strategy
With the convenience of FBA, Why would anyone choose to fill themselves with orders?
Before the outbreak, sellers could go by relying on FBA, which eased Fulfillment and decreased the requirement to source assistance from a third party. This is not the case anymore.
In the days preceding Prime Day, Amazon announced new restrictions on FBA. Therefore, sellers that do not have an efficient fulfilment process prepare to be short of stock.
But, by taking a combined method of Fulfillment, which is designed to meet your specific business requirements, you’ll keep inventory in stock and continue selling without interruptions.
Chapter 2: Amazon FBA vs FBM: How They Stack Up (Pros and Cons)
1. Pros of Amazon FBA:
a) Hands-off Fulfillment Process
The main differentiator between Fulfillments via Amazon, as opposed to merchants, is FBA’s greatest benefit, offering an entirely hands-off fulfilment and shipping.
When you become a seller on an Amazon FBA seller, you’ll be responsible for sourcing and purchasing the inventory, packing your items to be shipped to Amazon, and shipping the items to Amazon for Fulfillment.
That’s all there is to the process! In the end, Amazon FBA sellers get more time to concentrate on expanding their Amazon business and handling other tasks such as Fulfillment and shipping.
b) Competitiveness of the Buy Box
Every item sold by sellers delivered by Amazon is naturally more competitive to be placed on Amazon’s Buy Box.
This is crucial considering Amazon’s Buy Box accounts for roughly 82% of sales for any item.
With Fulfillment through Amazon is automatic eligibility for Prime shipping, which is a plus in and of it.
Due to the tendency to prioritize the fastest delivery times (second only to the lowest cost), FBA items with the standard Prime shipping will enjoy the advantage in the race to win Amazon’s Buy Box.
c) Eligibility for Prime Shipping
As previously mentioned, FBA offers are automatically available with Prime shipping, which is usual.
If you offer Prime Shipping, your offers will be accompanied by the sought-after blue Prime badge and the fastest delivery options. Amazon’s Prime shipping offers a 1-day delivery for free, as well as the standard for Prime customers.
Alongside the increased chances in winning more chances of winning the Buy Box, the availability of Prime shipping makes your offer more appealing, particularly to Amazon Prime members.
d) Amazon Provides Customer Support
In addition to taking care of all fulfilment and shipping duties, Fulfillment By Amazon will also provide customer support to the tasks managed by Amazon.
Customer service is a major overhead expense for online sellers in terms of time and cash. Outsourcing this completely around all hours of the day will give you more flexibility in managing the Amazon business more effectively and efficiently.
e) Amazon Handles Returns
Another advantage of selling via FBA is processing all returned inventory by Amazon.
Handling returns from customers (on top of the customer service before all returned items) is also required for substantial capacity in terms of manpower and physical storage space.
Outsourcing this job to Amazon will allow for the ability to reconcile returned units automatically and add unused or damaged inventory to your inventory.
If you have items that are likely to be returned, FBA will provide another hands-free experience.
2. Cons of Amazon FBA:
a) Additional FBA Fees
You might wonder what the benefits of removing all the logistical hurdles from your to-do list are. Amazon does not offer this service at no cost, and that’s the biggest drawback of using the Fulfillment program offered by Amazon.
Amazon is the one who funds this program through its FBA fees that are taken from the balance in your Amazon Seller Account balance before when funds are credited into your account at a bank.
Amazon offers a range of FBA-related costs, including Professional Account charges ($39.99/month), referral fees, fulfilment fees, and storage charges for long-term storage (described in the following paragraphs).
b) Inventory Storage Fees
The main benefit of Fulfillment offered by Amazon is the capability of Amazon to ship your goods in a short time using Prime shipping.
This can only be achieved if your inventory is in a location close enough to allow Amazon to access it at any time and load it and shipped the very same day, in many instances.
Therefore, when you sell your product through FBA, Amazon will store your inventory on your behalf in their fulfilment centres and warehouses.
Like the price of Fulfillment, Amazon does not offer this service for free, either. Amazon will charge storage fees for the inventory stored in fulfilment centres, depending on the volume and length of time it’s been in the centre.
c) Less Inventory Control and Visibility
The added complexity of selling your products as FBA is the additional pitstops of your product, particularly to Amazon’s warehouses, before it can be sold and delivered to buyers.
This additional step adds time and uncertainty regarding how you can track your items and may make it difficult to properly time replenishments or reorders
d) Strict Requirements for Inventory Preparation
As the seller, you aren’t responsible for packing and delivering your inventory through FBA to buyers, but you’ll still need to prepare your inventory for shipping via Amazon directly.
To do it, Amazon has rather rigid rules and guidelines to prepare your inventory correctly so that Amazon can accept it.
1. Pros of Amazon FBM:
a) Greater Inventory Control
You can simplify your business more flexibly with full control of your warehouse, inventory, and warehousing.
Furthermore, once inventory arrives at Amazon, the customer has less information about its condition until a buyer can receive it.
Maintaining complete control of your inventory through Amazon FBM will reduce the possibility of being out of stock or mistiming a crucial replenishment.
b) No FBA Referral or Storage Fees
If you sell as an FBA, one of the major drawbacks is the substantial fee increase. Amazon will charge an affiliate and fulfilment fees when processing the FBA order.
Also, Amazon will charge storage charges for your inventory according to the amount and length of time it is stored at their facilities.
While you’ll ultimately be accountable for the expenses associated with storage and shipping, you’ll have more control over the costs. FBA charges tend to rise annually during busy holiday shopping seasons.
In the larger context, Amazon’s fee structures could reduce certain products or even be non-profitable.
c) Greater Control over Returns
While there are many benefits to outsourcing fulfilment services to Amazon through FBA, it is a typical problem for several sellers.
One of the major issues for sellers who use FBA is the potential for errors made by Amazon’s employees that can lead to the return or refund being requested by the buyer.
Damaged inventory, damaged goods, or delays during the FBA process are considered the seller’s responsibility, and their accounts could be impacted as a result.
In ensuring that you control this process of Fulfillment, you’re getting rid of Amazon as a possible source of failure for both you with your buyers.
d) Opportunity for Seller Fulfilled Prime
One disadvantage of selling as a seller fulfilled offer is that it’s less competitive with Amazon Buy Box; however, Amazon Buy Box, there is a solution to this.
There is a middle ground between Fulfillment via Amazon and Fulfillment through merchants referred to as Seller Fulfilled Prime.
2. Cons of Amazon FBM:
a) Greater Responsibilities
The name suggests the Amazon FBM program means that you, the seller is accountable for fulfilling and shipping orders to the customers.
Due to Amazon’s focus on customer satisfaction, any errors that occur during the Fulfillment or shipping process are your responsibility as the seller.
Based on the nature of the error or violation, Amazon may begin to penalize the seller’s Amazon Seller Account, such as the possibility of deactivation or suspension of listings.
b) Additional Overhead Costs
According to the terms, FBM sellers must fulfil each order by themselves, with the aid provided by Amazon FBA.
Although FBA orders are charged the cost of Fulfillment and shipping included in the fees, FBM shipping costs will require separate payment through the sellers.
You will be solely responsible for the warehousing process and Fulfillment as well as any related expenses.
Additionally, particularly on a large scale, a substantial amount of manual work is required and time.
A small group of human beings can only handle a certain number of orders without outsourcing the work to a third-party logistics company or employing internal staff.
c) Competitive Disadvantage of FBA Sellers
When it comes to being competitive for listing performance, FBM sellers are inherently somewhat at an advantage over sellers who use FBA.
This is mostly because of the availability of Prime shipping on all items sold by Amazon, which makes these offers more appealing to Prime members than an Amazon Buy Box.
If all else is the same, Amazon will favor an FBA deal over one offered by the merchant due to the time of shipping which is a significant aspect in determining who is the winner in the Buy Box.
d) You Handle Returns
Returns management can be positive and negative, but we have included it. Although FBM allows you to have greater control over returning inventory, you, as the retailer, still have to receive an account for it and keep it in a safe place.
This involves managing the inventory level while ensuring that returns are properly recorded and dedicating space for returned inventory since it will not go directly to the Amazon warehouses.
Chapter 3: How to Switch from FBA to FBM?
1. Choose a fulfillment partner
Before transferring your listing to FBM, You should decide on a new fulfillment provider. Select the 3PL company that is a good fit for your needs, and then make sure to send your shipment.
It’s crucial to ensure that you have enough stock at the new fulfillment company before switching to avoid an extended period where your product is not in stock.
2. Convert your listing to FBM
Log in to Your Amazon Seller Central account. Go to Inventoryand thenControl FBA Inventory(or manage inventory).
Choose the product you wish to switch to, then select Edit. Select and select the option to change it from Fulfilled by Merchant.
You can create a new product if you prefer to utilize both FBA and FBM. Create it the same way you have the FBA listing. However, you should select the Fulfilled By Merchant instead.
3. Create a removal order
If you’re changing from FBA to FBM, removing the Fulfillment by Amazon inventory is recommended so that you don’t have to pay long-term storage costs.
Create the removal request inside the Seller Central account. You can decide to have the rest of the products delivered to you and directly to the 3PL.
Chapter 4: Which one should you use from FBa and FBm?
1. You should use FBA if
You’re new to sales in general, or your shop is brand-new
For those who aren’t experienced or have technical expertise, the larger burden of managing an FBM store may be overwhelming. Without a solid operation plan, FBA is a much better choice.
There isn’t a lot of storage space available
In particular, if you’re a brand new shop, you’re not likely to have plenty of storage space. Companies participating in the FBA program should not be concerned about making space to store returns. If you’re working in a small area, choosing the FBA program may be more feasible.
You don’t want to deal with customer service or returns
Handling customer service and returns consume a significant amount of energy and time. This is time and energy that you could invest in growing your business or focusing on different aspects within your business.
If you’re not looking for this extra burden and stress, the Amazon FBA program is worth a look.
You wish to concentrate more on expanding your company
Because of how much time you save if you outsource the processing and shipping of your orders to Amazon, you can focus on growing your company and building it into the business you want.
2. You should use FBM if
You want a greater degree of control over your business
Because of the amount of time, you’ll save if outsourcing the process of processing and shipping the orders you place with Amazon, You can concentrate on growing your business and transforming it into the company you’d like it to be.
You have a suitable amount of storage space
While operating as an FBM store comes with more responsibility, it also gives you greater management over the business.
As long as you satisfy Amazon’s strict specifications, you’re free to manage your inventory and order processing as you’d like.
You want higher margins on product sales
You’ll need adequate space to store your inventory and returned items. If you own a large enough warehouse you can use, you could consider the FBM program one you might want to look into.
You have the means to deal with returns and customer service
While your store may not be likely to be able to sell as many products as the Prime store, however, you are likely to earn more money from your sales.
This is because you don’t have the expense of paying Amazon for processing and delivering your orders on your behalf.
Chapter 5: Determining which fulfillment service fits your business
1. Your resources
Handling customer service and returns will take significant energy and time.
If your store is established enough to ensure that you don’t believe it will affect your business and that you’re not worried about it, then FBM is a better option.
Do you own a huge company that can afford customer service and fulfilment capabilities? Are you a smaller eCommerce business with only a small amount of funds?
2. Your priorities
You must consider the cost of both fulfilment methods and the amount you can put into them.
Are you content to pour your time and energy into customer service and Fulfillment? Or do you prefer to concentrate on growing your Amazon revenues?
3. Your products
Keep in mind that FBA and FBM both FBA and FBM offer advantages and disadvantages regarding the weight and size of your products.
Additionally, based on the rate of the product’s sales, you could have to pay more or fewer storage costs.
4. Control over the customer experience
Are you concerned about the presentation of your product and branding? Perhaps you’d like to engage with your customers and take care of their issues.
It could be a crucial aspect, particularly if you need to ensure a consistent customer experience throughout every stage of Fulfillment.
Chapter 6: How to use Amazon FBM to Drive E-commerce Sales
1. Limited SKU availability
With our new fulfilment partner, we’re confident that our customers will know the product comes from rather than Amazon.
We don’t make our entire SKU catalogue available on Amazon; therefore, when customers browse our site after testing our product first, they will discover that they can choose from many more flavours when they order directly through our online store.
2 .Deeper Discounts on Bulk Orders
With the economies of scale to delivery and fulfilment costs, we can offer more substantial discounts for bulk orders to encourage customers to add more items to their shopping carts, driving higher our average AOV.
3. Marketing New Products
FBA did not allow us to break into flavours to create varieties packs, so those who wanted to sample the latest flavour were required to take the risk of buying a whole pack.
The fulfilment company we have chosen to work with will create assortment packs for us so that customers can test a variety of flavours or even have new ones blended with their traditional flavours.
4. Present financing
This is only available on our e-commerce website. When we can redirect customers to HyVIDA.com, We provide financing upon a certain amount of money is spent through our Four applications available on Shopify. It’s completely risk-free for us.
Four takes a small portion from the sales, pay us right away, and then collects the payment from the client. We’ve used this method to increase our AOV and save money on fulfillment fees.
5. Seasonal Specials
With the help of flexible fulfilment service, we can design the perfect seasonal gift package by constructing the packs we require instead of pre-packaging them and shipping them off to Amazon and then hoping to sell them before the end of the season.
6. Build Customer Relationships
When a customer buys something on our website for e-commerce, We can establish an important connection with the customer in a manner that Amazon will not allow.
We can make our content available to them, ask for feedback, and even send out announcements about new products.
These are the kind of relationships that can transform into supporters for our brand. They will mention us via social networks and share with their friends how they are awed by our product.
Chapter 7: Frequently Ask Question About FBA VS FBM
1. Is Amazon FBM free?
One is Amazon’s taxation for Fulfillment, and the second is the plethora of paperwork.
An FBM seller is not subject to all of these problems. Make use of FBM to make your purchase.
Use the Amazon FBA Calculator to check the differences between FBA and FBM. Know the FBA costs of your Amazon product by using this Amazon FBA Calculator.
2. What percentage does Amazon FBM take?
The fee for referrals is proportional to your sales total. In most product categories, the amount is 15 percent; however, it can range between 6% and 45 percent, and you should check the details for the item you’re selling.
All fees for sellers are available through Amazon. It is also important to take into consideration the shipping costs.
3. Can I do both FBA and FBM?
Are you able to use both FBA as well as FBM? Yes. Jungle Scout’s statistics show that 34 percent of Amazon sellers offer FBA and FBM. If you sell a wide number of items that you want to sell, think about using both to reap the benefits of both.
4. Who pays for shipping on FBM?
A seller’s Fulfillment by Merchant (FBM) is where the seller has control of his handling and shipping processes. Instead of paying Amazon a fee for service and shipping the inventory for handling, the seller uses their resources and then delivers the merchandise directly to buyers.
The bottom line is that you do not need the luxury of letting Amazon Prime tell you how you should manage your business.
If you’re hoping to turn Amazon into your business’s toolbox, FBM could be the first step.
To bring FBM to perform for you, you need to choose a fulfilment service that is strategic-minded and dedicated to your success when searching for Amazon FBA alternatives.
You’ll need the ability to experiment, look at the new market and strategies, and change the SKU profile whenever required.
While Amazon fulfilment can offer efficiency and speed is a sacrifice in flexibility and scalability. It could end up hindering the next major step you take.