FBA vs. FBM: Choosing the Right Fulfillment Method

Introduction

According to the Marketplace Pulse, there were about 1.5 million active sellers on Amazon, which might have crossed 2.5 million in 2023. Each seller wants to earn profits, increase sales and satisfy customers through quality products and services. However, the problem arises when the seller has to choose between FBA Fulfillment by Amazon or FBM Fulfillment by Merchant for fulfilling their E-commerce orders.

According to Jungle Scout, the American E-commerce software company, about 57% of sellers prefer FBA only compared to 9% of sellers who prefer FBM only, and the rest, 34%, use both methods to fulfill their orders.

Amazon FBA vs. FBM

FBA Fulfillment by Amazon is an inventory management, shipping, and warehouse service by Amazon that allows sellers to send their inventory to the Amazon warehouse. Amazon then stores the inventory in its warehouses and ships it directly to customers. It helps the seller provide high-quality customer service through Amazon and relieves him from shipping fulfillment headaches. The FBA Fulfillment by Amazon service is a boon for sellers who do not have much logistics experience.

FBM Fulfillment by Merchant

It is a method wherein the seller lists his products on Amazon to reach a wide audience. Still, the entire inventory management, warehousing, and shipping is done by himself or through a third party. The method is generally suitable for those products that are fragile, heavy-weight, and sold in small quantities.

However, knowing the difference between FBA Fulfillment by Amazon and FBM Fulfilled by Merchant is not enough; in this article, we will try to clarify and demystify the differences in detail so that you can choose the best possible solution for your business.

FBA Fulfillment by Amazon OR FBM Fulfilment by Merchant Pros and Cons

Pros of Amazon FBA

1. Covers customer service and returns related to the customer order.

Amazon charges monthly inventory storage and inventory management fees that covers the complete costs related to warehousing the products and related expenses.

It charges a fulfillment charge that covers picking, packing, shipping, and customer service costs. This, in turn, relieves the sellers from additional burdens.

2. Unlimited Storage and easy logistics

Amazon FBA fulfillment by Amazon covers a large part of logistics which is picking the product from the seller to final customer delivery and customer service support, thereby easing the logistics for the seller.

Also, FBA-using sellers get the added advantage of unlimited storage facilities at Amazon. As a global brand, Amazon has a huge network of warehouse services that allows sellers to store as many products as they want.

3. Buy Box precedence

Amazon gives greater priority to FBA users. Their items appear higher on the search page results, thus, are more likely to get the buy box.

4. Prime Eligibility

FBA sellers get the advantage of Prime eligibility shipping which means customers with a Prime subscription can receive your products within a day or two without any additional delivery cost, thus, increasing the sales of your product.

Cons of Amazon FBA Fulfillment by Amazon

1. Varying Costs

Under FBM, Fulfillment by Merchant method, the cost-effectiveness of Amazon FBA depends on the type of business and the kind of products you sell.

Lighting, small and fast-moving products are most cost-effective compared to heavy, bulky, and large products.

2. Warehouse merchant competition

Many merchants deal in the logistics sector and are willing to provide their warehousing, shipping, and handling services at a price cheaper than Amazon. The cost benefits analysis must be properly done to get the best option.

3. Huge lot of labeling requirements.

Amazon has its standard packaging and labeling requirements. The FBA seller needs to follow them up to the required standard before it is taken to the Amazon warehouse.

If not, you will risk Amazon rejecting your order, increasing your expenses of retrieving and repackaging your order.

Pros of FBM Fulfillment by Merchant

1. Fewer fees

There are third-party logistics service providers available in the market that are willing to ease out your logistics process at a price cheaper than Amazon.

2. Complete control over labeling and Packaging

Under the FBM fulfillment by merchant method, the seller has complete control over the labeling and packaging of the product as per his requirements and standards.

The seller can also add his marketing materials. This customized manner of packaging helps the product stand out from its competitors.

3. Freedom to manage and ship your inventory your way.

Under the FBM method, the seller can run the business his way. He can easily monitor and track his product. And if required, he can change the company if unsatisfied with its services.

Cons of FBM Fulfillment by Merchant

1. Competition from FBA sellers

As FBA sellers have an added advantage of prime eligibility and a greater chance for buy box winning, FBM sellers face tough competition from them.

2. Customer responsibilities and overhead costs

Most of the time, the seller must handle customer responsibilities, creating an additional burden.

Also, the seller will be required to pay for labeling and packaging materials which may increase the overhead costs for the sellers.

Conclusion

There is no one size fits all method, the seller must consider his expenses and the amount of time and money he is ready to invest. Proper cost-benefit analysis and comparison have to be done to choose which solution suits you the best, for which an online presence has to be built.

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