The goal of just about every Amazon seller is to increase sales and earn profits. And to do that, sellers have to pay close attention to all aspects of their business when making decisions. One of these decisions has to do with fulfillment.
Amazon offers two main fulfillment options: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Each method has its pros and cons and one isn’t necessarily better than the other. What may work well for one seller may not work well for another. Before deciding on a prefered method, it’s important to understand the differences between each one.
Fulfillment by Amazon
As an FBA seller, you send your desired inventory to an Amazon Fulfillment Center. Once it gets there Amazon handles the picking, packing, shipping, customer service and even returns on your behalf.
FBA is a time-saver when it comes to fulfillment. Instead of focusing on shipping items to customers on time and handling the process of returns, you can focus on other aspects of your business. This is especially useful for those who do not have extensive resources to store inventory and handle the fulfillment process.
Another potential time-saver when it comes to FBA is the Multi-Channel Fulfillment option. With this option, you send inventory to an Amazon fulfillment center and when a customer purchases an item from a non-Amazon sales channel, Amazon will handle the fulfillment.
FBA items are eligible for Prime free 2-day shipping as well as free shipping on eligible orders. And having that Prime badge next to an offer can do wonders for business. It can get you in front of customers who normally wouldn’t have considered a non-Prime item and increase product exposure.
Shoppers know that Prime is associated with Amazon. Having the Prime badge next to your offer will give the shopper a sense of trust in your item and may increase the likelihood that they proceed with the purchase.
Increase Buy Box Chances
FBA offers are more likely to win the Buy Box. And since the competition can be tough, it’s a great way to increase your odds.
FBA is a time-saver. But saving time ain’t free. Amazon charges fulfillment fees along with monthly storage fees. And it doesn’t stop there. There’s also long-term storage fees for items sitting at a fulfillment center longer than 180 days. You’ll want to consider how much these fees will cut into your margins before opting for FBA.
Inventory for FBA is stored at an Amazon Fulfillment Center where you’ll no longer have access to it. This gives you less control over certain aspects of your inventory such as how the packaging will appear for the customer.
Amazon has two options for tracking inventory. Either you can use Amazon’s barcode or you can choose to go the stickerless route and not label your products. If you decide to not label your products with the Amazon barcode, Amazon will use the manufacturer barcode to group your items with products of other sellers also using the manufacturer barcodes for those items.
When a customer orders your product, Amazon will choose a product from the group (that isn’t necessarily yours) to send out to the customer.
The issue here is that you are no longer in control of the product quality and there could even be potential counterfeit issues. While Amazon does have policies to protect against this, it is still something to be aware of.
Fulfillment by Merchant (FBM)
With FBM, you handle all aspects of fulfillment. This includes packing, shipping, returns and customer service.
FBM gives you control over all parts of fulfillment. Unlike with FBA, you don’t have to worry about what happens to your product once it gets to the Amazon Fulfillment Centers. You can also choose how you want to package your product and even include personalized touches like a handwritten note.
No FBA Fees
FBA fees won’t eat into your profit margins. While you still have other Amazon fees, you won’t have to take as much of a hit.
However, while your fees may be lower without FBA, you may not sell as much volume of product.
With FBM, comes more control. And with that control comes more responsibility. You’ll have to make sure you are on your game when it comes to shipping on time and replying to customers. If you’re not, your seller metrics may suffer.
Even though you can avoid FBA fees, there are still other costs associated with fulfilling your own products. One of these being potentially pricey warehouse costs.
Harder to Win Buy Box
FBA offers are more likely to win the Buy Box. Without FBA, you’ll have to work extra hard to earn the space.
All hope isn’t lost though. There is another option for sellers who want to fulfill their own inventory and still have a fair shot at the Buy Box. That option is Seller Fulfilled Prime (SFP).
SFP allows you to fulfill your own orders while gaining access to Prime customers. There are still certain eligibility requirements that need to be met. For more information on SFP, click here.
FBA vs. FBM
Now it's decision time... FBA or FBM?
FBA is good for products that sell in high volume and have a quick turnover so they don’t incur those long-term storage fees. Large margin products are also good for FBA so the fees won’t eat up all of the profits. Also, if your product is struggling with a low Buy Box share, FBA may help.
FBM may work better for merchants who already have a solid fulfillment and storage process in place. If that’s the case, then Amazon’s fulfillment services may be unnecessary.
FBM is also good if you sell items with small margins since you wouldn’t have to worry about FBA fees cutting those margins down further.
Deciding on a fulfillment strategy is challenging. There are a lot of factors to consider. In the end, it doesn’t have to be one or the other. You could use FBA for some items and FBM for others, depending on what works best for your business.