When deciding to sell on Amazon, one of the main choices you will have to make is which Amazon fulfillment method should you choose to sell your products? Should you sell your products via FBA (Fulfilled By Amazon) or FBM (Fulfilled By Merchant)?
If you are planning to sell on Amazon, this article is a guide to figuring out which Amazon fulfillment method is best for your business.
Fulfillment by Amazon (FBA)
Fulfillment by Amazon (FBA) allows third-party Amazon sellers to delegate their packing, shipping and customer service process to Amazon’s fulfillment centers, rather than handle logistics from their own home or office.
- Saves time
Using FBA, you will save time from packing items and mailing them to your customers. Every time a customer places an order, Amazon ships the item directly to them.
- The Amazon Prime Badge
Sellers using FBA receive access to Prime. This means their products are eligible for free, one-day Prime shipping. With more than 100 million people on Prime, this puts your products in front of a larger audience.
- Increases Buy Box Chances
As an FBA seller, you’ll also have an increased chance of winning the Buy Box, the most prominent listing for products available via Prime shipping. Buyers choose to purchase the item in the Buy Box most of the time, so it’s a big boost to sales if your product has a chance of appearing there. Most products that appear in the Buy Box are fulfilled by Amazon rather than the merchant. Your product has a much better chance of appearing in the Buy Box when you use FBA.
- High ratings:
You’re able to take advantage of Amazon’s extensive and efficient customer service network.
- Control: Amazon will store your inventory so it can be harder to keep track of sales and returns on a real-time basis. Depending on your product selection, you may be required to ship your inventory to multiple warehouses.
- Extra shipping costs: As well as Amazon’s fees, sellers need to ship products to Amazon’s fulfillment centers.
- Off-brand packaging: You can’t showcase your brand as Amazon has strict packaging guidelines and doesn’t allow marketing materials.
Fulfillment by Merchant (FBM)
FBM is when the seller is in control of storage, fulfillment and customer service. Instead of paying Amazon, they use their own resources to ship products directly to buyers.
- More control: You can control and access inventory, process returns and directly provide customer service allowing your brand to engage customers in a consistent way.
- Ability to Negotiate shipping rates: High volume retailers can get favorable discounts
- Marketing opportunities: Wrap products in branded packaging and include marketing materials inside.
- Less unexpected costs: No unavoidable losses due to changes in Amazon’s pricing.
- One inventory: Useful if you sell products on multiple marketplaces and platforms
- Less chance to appear in the Buy Box: Amazon favors sellers that are fulfilled by Amazon
- No access to Amazon Prime: unless you use Seller Fulfilled Prime you won’t have the benefits that come with Amazon prime
- Time-consuming logistics: you’ll have to take the time and effort to sort out your own end-to-end logistics rather than allowing Amazon to take care of it
When is FBA a good choice?
- Amazon FBA is a particularly good option if you sell high volume, large margin products. This type of fulfilment is for those sellers who can drop the selling price to the lowest possible price if need be. Meanwhile, Amazon FBM is better for smaller scale, small margin products or one-offs.
- If you don’t have the infrastructure to store your inventory in a house or warehouse, then FBM is not a good choice. Your workflow and layout need to be carefully planned to avoid the chaos that can come with storing hundreds or thousands of items.
- If your business doesn’t have the manpower to ship every day, don’t even consider taking fulfillment upon yourself. Amazon takes late and cancelled shipments seriously. One bad move can be the end of your business.
All in all, both Amazon FBA and Amazon FBM certainly have their own advantages and disadvantages, deciding on an Amazon fulfillment method may be challenging for new sellers. Actually, there is no perfect formula to make the decision easier and also, there is a load of factors you still have to consider, including the size and needs. As your Amazon business grows, continue to weigh your fulfillment options and make the best decision based on your bottom line.
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