FBA or FBM: what to choose?

FBA FBM Pros&Cons The Amazon e-commerce platform offers sellers two options for order fulfillment: Amazon FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant). Let's look at the pros and cons of each.

For those selling goods on Amazon, one of the fundamental decisions is how to fulfill orders. Amazon offers two main options for order fulfillment: Amazon FBA (Fulfillment by Amazon) and Amazon FBM (Fulfillment by Merchant). To understand which to choose, it is necessary to highlight the pros and cons of each of these order fulfillment options, which in turn will help you choose the right strategy for your business. Understanding the differences between FBA and FBM, businesses can make an informed decision that will maximize efficiency, profitability, and customer satisfaction.

Amazon FBA or FBM?

Fulfillment by Amazon (FBA)

FBA is the most popular option, allowing companies and individual sellers to store their products in Amazon's warehouses. Amazon takes care of all aspects of delivery, processing, and customer service, including returns and refunds.

One of the main drawbacks of FBA is the cost. The fees for using FBA can be significant, especially for small businesses or those with low profit margins. Amazon charges for storage, order fulfillment, and various other fees that can vary depending on different factors (size and weight of the product, time of year, and others).

Pros of FBA:

Convenience: For example, if you are a seller trading pet products on Amazon but do not have space or resources to store and ship all your orders, using FBA allows you to simply send your inventory to an Amazon warehouse where everything else will be taken care of. You can focus on creating new products, marketing, and growing your business.

Scalability: Imagine you are a fast-growing business and as your sales grow, so does the volume of inventory and order fulfillment work. FBA allows you to increase your business without having to worry about hiring additional staff, finding additional warehouse space, or investing in logistics. Amazon is ready to handle the volume and complexity of your orders, providing you with resources for further growth and development of your business.

Access to Prime program: When using FBA, your products become available for Amazon Prime. This service provides free two-day delivery for Prime members. This option helps increase sales, improve customer loyalty, and give you a competitive advantage over other sellers who do not offer Prime service.

Cons of FBA:

Cost: For example, if you are just starting out on Amazon and your profit margin is already low, the cost of FBA can eat up all your profit and more. For instance, Amazon charges a fee for long-term storage of goods that have been in the warehouse for more than 365 days. If you are not careful and knowledgeable about this, these fees can quickly add up and cause irreversible damage to your business.

Control limitations: Using FBA, you cannot personally inspect every item before shipping it to the buyer. You must fully trust Amazon warehouse workers to handle your products carefully when preparing them for shipment. Additionally, FBA may limit your ability to customize packaging or inserts, which may be important for branding and customer service.

Communication: If a customer receives a damaged item and wants to return it or receive a refund, FBA Amazon handles all issues. While this saves you time, it also means you may not have direct communication with customers. This can prevent you from building relationships with your customers and resolving any issues if you want to do so on your own without involving Amazon.

Fulfillment by Merchant (FBM)

FBM refers to direct management of the execution and delivery process, either by the seller's own resources or with the help of a third-party logistics provider. This option gives sellers more control over the order fulfillment process, including packaging, delivery, and customer service.

However, FBM requires more work and resources from the seller, including inventory management, packaging, and order shipping.

Pros of FBM:

More control over order fulfillment: With FBM, sellers have more control over the entire order fulfillment process, from packaging and labeling to delivery and processing. This can be particularly important for sellers who want to maintain a certain level of quality control or branding.

Lower costs: For businesses with low profit margins or small inventories, FBM may be a more cost-effective option. Without the fees associated with FBA, sellers can save on storage and order fulfillment.

Flexibility: FBM offers greater flexibility than FBA, as sellers can choose their own carriers and delivery methods. This can be useful for sellers with unique delivery requirements or who want to offer faster or more personalized delivery options.

Cons of FBM:

Requires more time and resources: When using FBM, sellers are responsible for managing the entire order fulfillment process, which can be time-consuming and require more resources. This can be particularly challenging for small businesses or those with limited staff.

Limited scalability: FBM may not be as scalable as FBA, as sellers are responsible for managing their own inventory and do not have access to the same level of resources and infrastructure as FBA sellers.

Handling returns and refunds: FBM sellers are responsible for processing returns and refunds, which can complicate and add cost to the process. This may also require additional resources to manage customer support.

In conclusion, when choosing between FBA and FBM, it is important to consider the specific needs and goals of your business. Factors such as the size and weight of your products, the level of control over order fulfillment, and your target customer base all play a role in determining the best strategy for your business. Large companies or those with high sales volume may benefit more from the scalability and convenience of FBA, while smaller companies or those with lower profit margins may prefer the lower costs and greater control of FBM.

It is also important to carefully evaluate the costs and fees associated with each option. The fees for FBA can quickly add up and eat into your profits, while FBM requires more resources and time from the seller. Sellers should also consider the potential impact on customer satisfaction and sales. Access to Amazon's Prime program can be a significant factor in attracting customers and increasing sales, and direct control over the order fulfillment process can help ensure that customers receive high-quality products and service. Ultimately, the choice between FBA and FBM depends on your specific business needs and goals, and weighing the pros and cons of each option will help you make an informed decision.

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