Fulfillment by Amazon (FBA) vs. Fulfillment by Merchant (FBM): Pros and Cons of Each
When it comes to selling on Amazon, choosing between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) can feel like deciding whether to cook at home or order takeout—both approach has its unique benefits and drawbacks, depending on your business model, budget, and operational capabilities. Let’s dive in and unravel these options, exploring their pros and cons in detail.
What is Fulfillment by Amazon (FBA)?
FBA is Amazon's fulfillment service, where sellers send their inventory to Amazon's warehouses, and Amazon handles storage, packaging, shipping, customer service, and returns. All you need to do is keep the inventory flowing.
Pros of FBA:
Prime Eligibility: FBA products are automatically eligible for Amazon Prime, meaning they qualify for the fast, free shipping that millions of Prime members adore. This can significantly boost your product’s visibility and sales potential because customers often filter searches to display only Prime-eligible items.
Effortless Logistics: Amazon takes over the heavy lifting (literally) when it comes to storing, packing, and shipping products. They even handle customer service and returns, saving you from logistical headaches and letting you focus on scaling your business or launching new products.
Improved Customer Trust: Customers trust Amazon’s fulfillment process because it’s fast, reliable, and hassle-free. Seeing "Fulfilled by Amazon" assures buyers that they’ll receive their items on time, with easy return options if needed. This can lead to higher conversion rates and better reviews. Scalability: With FBA, you can scale your business without worrying about storage or fulfillment bottlenecks. This is especially helpful during high-demand seasons like Black Friday or Christmas when order volumes skyrocket.
Cons of FBA
Fees - FBA isn’t cheap. Amazon charges fees for storage, fulfillment, and optional services like labeling. If your products are large, heavy, or slow-moving, these fees can eat into your profits quickly. Inventory control - Once your inventory is in Amazon’s warehouses, you lose direct control over it. Tracking your stock levels, preventing overstock, or addressing misplaced items can be challenging. for example, You send 500 units of a seasonal product (e.g., Halloween costumes) to Amazon. If they don’t sell quickly, you’re stuck paying long-term storage fees.
Strict labelling requirements - Amazon requires your products to be labeled and packaged according to their guidelines. Failing to meet these requirements can lead to delays or additional fees. Example: A seller sends a batch of items without proper barcodes. Amazon rejects the shipment, delaying the availability of the product. This can hurt sales, especially if it’s during a peak season.
Storage cost for slow selling items - Amazon charges long-term storage fees for items that sit in their warehouses for extended periods. If you overestimate demand, these fees can pile up and hurt profitability.
What is Fulfillment by Merchant (FBM)?
With FBM, sellers list their products on Amazon but handle storage, packaging, shipping, and customer service independently.
Pros of FBM
Cost Control - By managing logistics yourself, you avoid Amazon’s FBA fees, which can be substantial for storage, fulfillment, and long-term inventory. This is especially beneficial for businesses that already have a cost-effective in-house fulfillment system or access to cheaper alternatives like third-party logistics (3PL).
Greater inventory management - With FBM, you have complete control over your inventory. You know exactly how much stock you have, where it’s located, and can prevent costly issues like overstocking or inventory loss.
Flexibility - FBM allows you to offer personalized packaging, unique shipping methods, or customization options that Amazon’s FBA system cannot accommodate. This is ideal for businesses with niche products or a strong focus on branding.
Lower risk for low-volume sellers - If your sales volume is modest, FBM can save you from paying Amazon’s high storage and fulfillment fees for slow-moving inventory.
Cons of FBM
Limited prime access - FBM products are typically not eligible for Amazon Prime, which can limit your visibility and reduce sales. Prime members often prioritize products with the “Prime” badge for faster, reliable shipping.
Higher workload - With FBM, you’re responsible for all aspects of fulfillment—storing, packing, shipping, and managing returns. This can be overwhelming for small teams or solo entrepreneurs.
Shipping costs - Without Amazon’s discounted shipping rates, FBM sellers must optimize their shipping processes to avoid excessive costs. Poorly managed shipping can erode profit margins.
Customer service pressure - FBM sellers must handle all customer inquiries, complaints, and returns. This can be time-consuming and requires excellent communication skills to maintain customer satisfaction and avoid negative reviews.
FBA vs. FBM: A Quick Comparison
1. Prime Eligibility:
FBA: Products are Prime-eligible, boosting visibility and sales.
FBM: Usually not Prime-eligible, reducing potential customer reach.
2. Fees:
FBA: High fees, including storage, fulfillment, and long-term storage costs.
FBM: Lower fees, but sellers bear shipping and operational expenses.
3. Workload:
FBA: Amazon manages logistics, shipping, and customer service.
FBM: Sellers handle all fulfillment tasks, including shipping and returns.
4. Scalability:
FBA: Easily scalable, especially during peak seasons like holidays.
FBM: Requires a robust infrastructure and resources to handle scaling.
5. Control:
FBA: Limited control over inventory management and packaging customization.
FBM: Full control over operations, inventory, and customer experience.
Which One is Right for You?
The choice between FBA and FBM depends on your business needs:
FBA is ideal if you’re aiming for Prime visibility, high-volume sales, or want to offload logistical tasks. FBM works best for sellers who want more control, have low-volume or niche products, or want to minimize fees. Ultimately, many sellers find success by combining both strategies, using FBA for fast-moving products and FBM for items that require customization or have lower turnover.
Final Thoughts: Optimize and Thrive!
Optimizing your Amazon listing might seem overwhelming at first, but once you make these tweaks, you’ll see the payoff. A strong listing that’s easy to read, informative, and visually appealing can double your conversions in no time.
Join Our Webinar: "How to Sell Popular Brands on Amazon"
To further enhance your Amazon FBA journey, we invite you to join our exclusive webinar on "How to Sell Popular Brands on Amazon." This webinar is designed to provide you with in-depth knowledge and practical tips on:
- Identifying and sourcing popular brands
- Negotiating with brand owners and distributors
- Creating compelling listings and optimizing for conversions
- Implementing advanced marketing strategies to boost sales
Why Attend Our Webinar?
- Expert Insights: Learn from experienced Amazon FBA sellers who have successfully built and scaled their businesses.
- Actionable Strategies: Get step-by-step guidance on how to sell popular brands and stand out in the competitive Amazon marketplace.
- Q&A Session: Have your questions answered by experts during the live Q&A session.
- Exclusive Resources: Access valuable resources, templates, and checklists to kickstart your journey.
Get access to a live webinar on Amazon FBA
from our e-commerce expert
Mr. Amar Bedi
About the Author:-
Amar Bedi initiated his E-commerce venture 7 years back after receiving 6 months of comprehensive training in New York, New Jersey, and Los Angeles (LA). During this time, he gained valuable insights into the operations of E-commerce businesses centered around Amazon, working with top-tier companies.
He possesses over 16 years of industry experience, including 8 years of national and international E-commerce exposure. In 2015, he successfully relocated their E-commerce operations to India. Throughout his E-commerce journey, he has successfully facilitated over $70 million (Rs 500 Cr+) in domestic and international sales through the Amazon platform for his clients and his company. He has collaborated with prominent international brands and established partnerships with leading brands in India. Now, after accumulating 8 years of extensive E-commerce expertise, he is eager to share his journey and give back to the community.
