After sellers set up the seller account on Amazon and creating the listings, they have two ways to deliver their products- FBA and FBM. FBA is Fulfillment by Amazon. FBM is Fulfillment by Merchant. Do you know the difference between the two options? And do you know which is the best option for your products? Today Let’s know all things about FBA and FBM to help you decide what fulfillment option should you use to sell on Amazon.
What is Fulfillment by Amazon (FBA)?
FBA stands for Fulfillment By Amazon. Sellers ship the products to Amazon, Amazon will help you store your products in Amazon’s fulfillment centers, in addition, they pick, pack, ship, and provide customer service for these products.
How FBA works
With FBA, Amazon will pick, pack, and ship your orders.
Firstly, you have to send the product to FBA.
Of course, if you want to FBA process your orders, the first step you have to do is send your products to them. Amazon has about 100 warehouses across the U.S.
Secondly, Amazon stores your products.
Once Amazon receives your products, they will sort your products and store products for you. However, sometimes they make mistakes, in this way, they will reimburse you.
Thirdly, Amazon ship your products to customers.
Once customers buy your products, Amazon will update the inventory for you. Also, they will pack products into a box and ship it to the customer.
Lastly, Amazon provide the customer service.
After your customer receives the product, Amazon will follow up customer’s experience with the shipment. And they provide service for returns or questions from customers.
Advantages to FBA
- Enjoy free delivery service: With FBA, your products will be eligible for Amazon Prime free next-day or next-day delivery services. Besides, orders that meet the requirements can enjoy free delivery services, which will shorten delivery time and improve customer experience.
- Shipping Standardization: Amazon process All FBA orders in exactly the same way Amazon handles its own merchandise.
- 7×24 professional customer service: Amazon uses the local language to provide 7×24 professional customer service for FBA products and handles the return of FBA orders. Even if you are on vacation, the products can maintain normal sales. Amazon takes care of all of the heavy lifting.
- Multi-Channel Fulfillment: Amazon can ship and handle inventory that is being sold on multiple channels, and not just through the Amazon marketplace.
- increase exposure and win the buy box: After using FBA, Amazon’s fast delivery service and 7×24 professional customer service will help your products obtain higher customer satisfaction and product evaluation, thereby helping to increase the chances of your products to win the buy box. FBA products marked with Prime. When buyers search for products, they are often more accustomed to filtering products with Prime. In addition, higher customer satisfaction and product evaluation will lead to higher search rankings, which will help increase exposure.
Disadvantages to FBA
- Costly Fees: Amazon help you to restore and ship products, Absolutely they charge for you. Amazon charges both fulfillment fees and storage fees including long-term storage fees. You’d better take care of your inventory.
- Product Handling Issues by Amazon: Sometimes inventory can get lost or damaged in the fulfillment process. Although Amazon will reimburse you, it is still difficult for the seller to manage. If there are many products, you are not clear about how much Amazon should reimburse you. In this way, some powerful tools can help you.
- More Returns: Customers are more likely to make returns with an easy returns process, it is not a good thing.
Products not suitable for FBA
- The product price is too low: Generally, if your product retails for less than $7, still ship it yourself. Because product profit will be weak if you use FBA.
- Products that are too large and heavy: As we all know, Amazon charges the FBA fee by the product size. If your products are very large and heavy, it is not suitable for FBA.
- Unpopular products: Amazon is not the warehouse, it is the fulfillment center. So if your products store in the Amazon warehouse for too long, you have to pay a lot for the long-term storage fees.
- Products that are too seasonal: If a product is a seasonal product, it can only sell at some specific time, it will be difficult to predict sales.
- Dangerous products: Certain products may be eligible for sale on Amazon, but not eligible for FBA. Such as alcoholic beverages, car tires, and others.
FBA is better for
- High-volume sellers.
- Retailers prepared to drop the cost to the lowest possible profit point.
What is Fulfillment by Merchant (FBM)?
FBM stands for Fulfilled By Merchant. Sellers are responsible for fulfilling their orders and do not rely on Amazon for the same. FBM is rather overlooked owing to easy shipping, handling, and other benefits that come with Amazon FBA. However, FBM is a rather advantageous method for products with lower margins.
How FBM works
The sellers are responsible for shipping the orders to the customer. Also, sellers are responsible for handling returns and providing customer service.
In general, Amazon sellers need to find shipping/delivery partners who are reliable and most importantly, cost-effective. If FBM shipping charges are higher than the fees incurred with FBA, then it doesn’t make sense for merchants to fulfill the orders by themselves as it will only impact their margins negatively.
Advantages to FBA
- Seller maintains a sense of control over the business.
- Margins are greater.
- The opportunity to build an independent brand is more feasible.
- Less unavoidable losses due to changes in Amazon policies.
- Less paperwork, particularly when dealing with non-sales-tax states.
- Freedom to run the business exactly as the seller chooses.
- More control over your inventory.
- No unexpected costs.
- Easier to maintain both online and offline retail activity with one inventory.
Disadvantages to FBM
- product packaging, labeling, and contacting logistics companies are cumbersome.
- The delivery time is relatively long.
- Compared with FBA sellers, buy box competition is difficult.
- The trouble with returns and exchanges, the cost of returns is too high.
FBM is better for
- Exclusive products.
- Small volume or one-offs.
- Sellers who want to use it.
Which one is better for new sellers?
If you are a novice with little capital and no operational experience, you can do FBM first, with low investment, low risk, and high profit. When the operating capacity is improved and the funds are sufficient, it can be transferred to FBA or the two methods can be carried out simultaneously.
If you have the supply, capital, and experience from the beginning, it is no problem to get started directly with FBA. Because from the perspective of long-term development, FBA is necessary, and many activities of Amazon are more inclined to sellers who ship FBA.
Use FBA and FBM at the same time
Whether you choose FBA or FBM, you need to make a decision based on your business and your product. Of course, you can also take these two fulfillment methods at the same time. All is for increasing sales and profit.
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