Are you seeking a suitable fulfillment method to help you run your Amazon eCommerce business? If yes, you probably have encountered these popular models – FBA and FBM. In this blog post, we’ll explore both options to help you decide the best fulfillment process suited for your Amazon store so you can start selling online.
We’ll discuss the main differences between FBA and FBM, the advantages and disadvantages of each model, the cost comparison between them, product categories that work well with either service, and what factors should be when choosing the exemplary shipping process specifically for your business. Finally, we will offer some tips on how to maximize your chosen business model.
FBA vs FBM: Overview of Amazon’s Business Model
FBA and FBM are the two popular Amazon e-commerce business models used by small and big online sellers on the Amazon platform.
With FBA, sellers send their products to Amazon’s fulfillment network and handle all aspects of the order fulfillment process.
With FBM, sellers store their products in their warehouses and manage all aspects of the order fulfillment process, or they can be of service to 3rd party fulfillment companies.
Introduction and difference between FBA and FBM
What is fulfillment by Amazon (FBA)?
Fulfillment by Amazon is a fulfillment service that enables eCommerce businesses to store their products in Amazon’s fulfillment centers. Amazon takes care of the rest when customers decide to purchase your product. This type of fulfillment takes the hassle out of the entire process, from packing and shipping products to customer service and returns.
Plus, FBA Sellers automatically get the Prime member badge, and customers get free two-day shipping to customers and shipping times on eligible products! With FBA, business owners also access Prime members’ buying power and top-notch fulfillment capabilities. This is a win-win situation for different kinds of consumers, whether they’re private or professional shoppers.
In addition, with fulfillment by Amazon, businesses can spend more time focusing on growing their brand without worrying about managing a fulfillment center.
What is fulfillment by Amazon (FBM)?
Fulfillment by Merchant is a fulfillment service popular among Amazon sellers that enables businesses to store, pick, pack, and ship their products. Business owners can do this by using their employees or third-party services or through full-service fulfillment companies. FBM allows merchants to control every aspect of the order process and any customization work that must be done before and after shipping.
Furthermore, with FBM, merchants can select their preferred carriers and convenient delivery options for their Amazon customers. The benefit of this model is that merchants have complete visibility and control of the order flow while still limiting overhead costs – making it an economical choice for businesses at all levels.
Advantages and Disadvantages of Fulfillment by Amazon
With Fulfillment by Amazon, businesses have the advantage of being able to focus on marketing and customer service while Amazon handles all the fulfillment tasks for them. In addition, fulfillment by Amazon offers many benefits over traditional fulfillment.
What are the advantages of being an FBA Seller?
- Amazon handles storage and shipping, allowing entrepreneurs to focus on more critical aspects of their businesses.
- Amazon’s FBA fess is cheaper compared to most third-party fulfillment centers.
- Amazon FBA is integrated with Amazon’s marketplace tools, making it easier for sellers to market, promote their products and use advertising programs.
- Amazon sellers can offer Prime membership benefits such as free two-day shipping, which gives them an edge over non-Prime competitors regarding customer satisfaction and loyalty.
- Amazon FBA provides access to Amazon’s customer service team that can handle product return requests quickly and efficiently.
- Products stored with Amazon will show up in search results faster than items stored elsewhere due to Amazon’s data centers being closer geographically.
- Amazon’s FBA program offers tools to help entrepreneurs and e-commerce businesses manage inventory efficiently and effectively and provide faster orders.
- Amazon FBA allows eCommerce brands to combine their online sales channels like Shopify with Amazon’s fulfillment network and provide fast delivery.
Fulfillment by Amazon may offer convenience to businesses with its storage and shipping services, but it also comes with some drawbacks and certain disadvantages.
What are the disadvantages of being an Amazon FBA Seller?
1. Amazon FBA involves costly setup, fulfillment center service, and other FBA fees.
2. Amazon’s customer service team may need help to provide personalized or specialized customer service compared to dedicated third-party fulfillment centers.
3. Amazon FBA requires businesses to adhere to strict rules and regulations regarding product labeling, packaging, storage, etc., which can be tedious and time-consuming.
4. Managing inventory can be difficult since the seller is not directly controlling the stock, especially if stored in multiple Amazon fulfillment centers.
5. Sellers can increase visibility on Amazon search results due to faster response time when items are sent out from Amazon’s fulfillment center.
6. Increased competition due to more sellers opting for FBA services.
Advantages and Disadvantages of Fulfillment by Merchant
With Fulfillment by Merchant, businesses have complete control over the fulfillment process while saving time and resources compared to the FBA method.
What are the advantages of being an Amazon FBM Seller?
- Fulfillment by Merchant provides cost savings for eCommerce stores since there are no setup or FBA fees to pay and ship orders.
- Businesses have access to item tracking information, which helps manage inventory and customer service inquiries that can result in good customer feedback.
- Unlike Amazon’s customer service team, sellers can offer personalized customer care and specialized services.
- Sellers can easily comply with product labeling, packaging, and storage regulations as sellers ultimately control their products stored in Amazon’s fulfillment centers.
- Increased visibility on Amazon search results due to faster response time when items are sent out from Amazon’s fulfillment center.
- Fulfillment by Merchant provides low-cost, reliable satisfaction for your eCommerce business and sales channels.
FBM is essential because it offers many advantages over other fulfillment methods. However, Amazon FBM also comes with a few drawbacks and certain disadvantages.
What are the disadvantages of being an FBM Seller?
- Fulfillment by Merchant does not offer the same level of convenience as FBA due to sellers being in complete control of their products stored in the Amazon fulfillment centers.
- Businesses may incur additional costs such as warehousing, packaging, and shipping fees when opting for other fulfillment by merchant programs or other eCommerce fulfillment services.
- Managing inventory can be challenging since businesses can only access item tracking information if they ship out items from other fulfillment companies or warehouses.
- Sellers availed of other eCommerce fulfillment services must comply with all appropriate product labeling, packaging, and storage regulations before sending items out. This requires more effort than simply adhering to Amazon’s guidelines.
- Sellers will have less visibility on Amazon search results since packages take longer to reach customers who purchase through a seller in fulfillment by merchant program. This is due to a smaller fulfillment network than Amazon fulfillment centers.
- Having products in multiple fulfillment centers and a vast fulfillment network is vital to meet customer demand in different areas, but it comes with expensive costs.
Now that online sellers clearly understand the pros and cons of FBA and FBM, they can decide which eCommerce model best fits their business needs. So which is better for your business?
What are the Top Categories for Amazon FBA
Electronics and Accessories Category
The electronics and accessories category is one of the top categories for FBA due to its strong demand. It appeals to tech-savvy customers looking for the latest gadgets and innovative products in the Amazon marketplace.
Consumers have learned that they can find almost all Electronic wants and needs on Amazon, such as gadgets, appliances, and other devices that can be used for work, leisure, or entertainment from leading brands to cheaper alternatives.
Books / KDP Category
Books have become a popular product category as people continuously seek to expand their knowledge. This is an excellent category for sellers choosing the FBA services due to huge demand, their lightweight nature, and low cost. Furthermore, with the availability of e-books, more people can now access books without touching them.
Did you know that Amazon is considered the biggest bookstore in the English-speaking world?
Home and Kitchen Goods
The home and Kitchen Goods category has been consistently among the highest-selling categories due to the majority of people staying at home and getting greater use out of their kitchens. This product category also offers a variety of product offerings, such as cookware, small appliances, cutlery, and furniture. Because of its massive demand on Amazon, FBA can be the best option to meet customers’ expectations.
Clothing, Shoes, and Jewelry
The Clothing, Shoes, and Jewelry category is attractive for many Amazon sellers due to its vast demand, fragmented, ever-evolving nature, and wide variety of products it offers. Customers always look for the latest fashion trends, stylish clothing, trendy shoes, and unique jewelry pieces on the Amazon marketplace. Not only does this category offer a wide variety of products, but it also provides customers with convenience and fast delivery.
Health & Beauty Products
The health & beauty market is one of the most sought-after categories on Amazon and the best for FBA service. This is because these products provide customers with a convenient way to purchase items that can help improve their health and well-being. In addition, health & beauty products are often atsociated with personal care, hygiene, and nutritional supplements, which many people look for when shopping online.
Aside from this, online shoppers are looking for lower prices while avoiding shopping in-store. Additionally, customers can enjoy the convenience of having their health & beauty products delivered to their doorstep quickly.
What are the Top Categories for Amazon FBM?
Automotive Parts & Accessories
Automotive Parts & Accessories category offers various items ranging from car parts, equipment, accessories, car care products, diagnostic tools, etc., to shoppers. These types of products are usually heavy items and prone to replacements. That’s why the FBM fulfillment service is suitable for this category.
Handmade items are one of the top categories for FBM since it allows sellers to showcase Artisan’s creativity and skills. Customers also love handmade products because they can be customized or personalized according to their likeness. This product category also offers variety, including jewelry, accessories, home decor, clothing, and more.
Computers & Office products are ideal for FBM sellers as it offers a wide array of office items that customers need for their businesses, such as software, laptops, network components, ink cartridges and toners, paper products, and other supplies. In addition, FBM can allow sellers to offer customers specialized items such as computer repair-related items.
CDs & Vinyl
CDs & Vinyl products are also an excellent category for FBM sellers due to their size and weight, making sellers quickly ship the product orders. Additionally, customers can find music from different genres in the category, allowing sellers to offer variety in their selection of items.
With tons of categories to choose from, it can take time to decide which product category to focus on, considering the budget and business needs.
No matter what product category you’re selling, FBA and FBM provide advantages and disadvantages. Therefore, evaluating your business needs is essential to determine which option is best for you before deciding. Once you understand the benefits of each solution, you can make an informed choice that will help you succeed on Amazon.
Comparison of Costs: Amazon FBA vs FBM
The business costs of FBA and FBM have almost similar fees. The main difference between them is where and when you make payments.
What are these fees for Amazon FBA Sellers?
- With FBA, you must pay a fee for each item sold, referred to as the Referral Fee. The referral fee covers the cost of processing orders and shipping products to customers.
- FBA also has additional fees for storage that can add up if your inventory exceeds Amazon’s recommended thresholds.
What are these fees for Amazon FBM Sellers?
- With FBM, you pay a fulfillment fee for each item shipped, which covers the cost of packaging, shipping, and handling.
- On the other hand, FBM does not have any extra storage fees beyond its standard fulfillment fees.
The fees will still vary depending on your business’s size, volume, margin, and nature. As a result, one model may be more cost-effective than the other.
4 Factors To Take into Consideration When Choosing The Right Fulfillment Service for your Amazon Store
When selecting between Amazon FBA and FBM for your eCommerce business, there are several factors to consider to choose the suitable fulfillment method.
What are these 4 factors?
1. Order Fulfillment Speed
FBA Sellers can offer quick processing and shipping speeds to their customers than FBM. With FBA, orders are processed and shipped within two days because of Amazon prime program. On the other hand, FBM typically takes longer to process and ship orders due to a lack of automation technology by other fulfillment companies and eCommerce logistics.
2. Customer Service Competence
Customer service is one of the most important aspects of any eCommerce business. FBA Sellers offer more customized customer service options than FBM, including on-site customer support and 24/7 access to an Amazon Seller Central account. On the other hand, FBM Sellers provides limited customer service options to their customers and must rely on their resources for customer service assistance.
3. Scalability of Services
The scalability of services is essential to eCommerce businesses when selecting a fulfillment partner. FBA Sellers can scale their operations quickly and easily. Unlike FBM, Seller businesses must manage their inventory and may require additional software, staff, or equipment to handle vast orders.
The cost is crucial when selecting a suitable fulfillment method for your business. Although FBA is known to be more expensive than FBM, this is only sometimes the case. The cost will still depend on your business’s product category and size. One model may offer better cost savings than the other.
After considering all these factors, you can make a more informed decision about which eCommerce model best suits your business needs.
Essential Tips for Making the Most out of your Chosen Business Model
Once you’ve decided which fulfillment solution is best for your store, it’s time to make the most out of your chosen business model. Here are a few essential tips to help you get started in your Amazon business:
• Make use of Amazon’s tools and services
Use Amazon’s analytics, automation, marketing, and tracking features to your advantage and enhance your business operations.
• Create a competitive shipping system
Offer competitive shipping rates and times to attract more customers and encourage repeat purchases.
• Apply different pricing strategies
Experiment with price points to determine which will generate the most profits for your store and your brand’s reputation.
• Invest in the quality and design of the packaging
Ensure your products are secured by investing in high-quality packaging and making them look attractive to customers.
• Focus on customer service
Create a customer-centric business model and provide an excellent online shopping experience to help increase sales and build brand loyalty and customer retention.
By following these crucial tips, you can ensure that your store’s fulfillment solution is effective and maximize the potential of your chosen business model.
Final thoughts on which is better – Amazon FBA vs FBM
Overall, both Fulfillment by Amazon and Fulfillment by Merchant have advantages and disadvantages. Each fulfillment solution, FBA, and FBM have cost, convenience, product visibility, and customer service advantages and disadvantages.
By understanding the factors and following the tips, you can effectively evaluate which fulfillment solution is the best fit for your eCommerce business to achieve success in your chosen eCommerce model. Also, it is essential to be updated with the top trends in the industry and leverage Amazon’s tools and services to ensure optimal customer satisfaction.
Sellers should also take advantage of resources such as Amazon FBA calculators, which help determine estimated fees and profits, and Amazon FBA Seller Central tips which provide valuable insights on maximizing your online sales.
Choosing a suitable business model for your store can be challenging. Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) are two popular models that offer unique advantages depending on the size and type of product you sell. When deciding which solution is best for you, consider factors such as type of products, budget, control over shipping, customer service needs, and storage location.
Additionally, stay up-to-date with industry trends and leverage Amazon’s tools and services to ensure optimal customer satisfaction. With the right strategy in place, eCommerce businesses can maximize their potential no matter which fulfillment option they choose.
Frequently Asked Questions
What does Fulfillment by Amazon mean?
Fulfillment by Amazon (FBA) is a solution provided by Amazon that allows independent sellers to store their products in the company’s fulfillment centers, where they are then packaged and shipped to customers on behalf of the seller.
What does Fulfillment by Merchant mean?
Fulfillment by Merchant (FBM) is an eCommerce fulfillment model where the seller handles all order processing and shipping aspects, including storage, packaging, and delivery.
What are the advantages and disadvantages of using FBA or FBM for my business?
FBA offers convenience, cost savings, and access to Amazon’s vast customer base but requires payment of fees and relinquishing control over product packaging, shipping, and customer service. On the other hand, FBM gives businesses more flexibility in order fulfillment but requires more effort.
Is it cheaper to use fulfillment services like Amazon’s than if I fulfill orders myself?
Depending on the size and type of product sold, it could be cheaper to use Amazon’s fulfillment services than to fulfill orders yourself.
Which type of customer service do I need to provide with each model?
For FBA, Amazon will provide customer service on behalf of the seller, while for FBM, businesses must provide their customer service.
How long will delivery take when using either option?
Delivery time will depend on the chosen shipping method (e.g., standard or expedited), product availability, and logistical factors such as weather conditions.
Can I switch between the models depending on a particular sales season or product category?
Sellers can switch between fulfillment models depending on sales seasons or product categories.
What is a fulfillment company?
A fulfillment company is a third-party logistics provider specializing in the end-to-end management of online orders, such as storage, packaging, and delivery. Businesses can outsource their order fulfillment processes to these companies if they need more resources or capacity to fulfill orders independently.
How much do shipping costs usually cost when using a fulfillment company?
Shipping costs may vary depending on the dimensions and weight of the product as well as the chosen shipping method (e.g., standard or express). Therefore, businesses should research different fulfillment companies to compare their rates.
What is the entire process of working with a fulfillment company?
Working with a fulfillment company typically involves signing a contract to determine your needed services and agreeing on fees. The fulfillment company will then set up processes for receiving, storing, packaging, and delivering your products and providing customer service support. Additionally, they may offer tools or insights to help streamline operations and improve performance.
How does working with a fulfillment company benefit my online store?
Working with a fulfillment company can have several benefits, such as improved order accuracy and timeliness, decreased shipping costs, more efficient customer service processes, scalability to meet seasonal demand, and access to advanced analytics to help businesses make informed decisions.
What are the benefits for sellers using FBM who become Seller Fulfilled Prime (SFP) qualified on Amazon?
Seller Fulfilled Prime (SFP) is a program Amazon offers for FBM Sellers who meet specific criteria. Benefits of becoming SFP qualified include access to Amazon Prime customers, increased visibility on Amazon search results, and improved customer satisfaction ratings. Additionally, FBM sellers can benefit from faster shipping times and lower costs.