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If you’re scratching your head when you read this question, you’re not the only one. At its heart, the question seems to come down to one simple question: Do you want to pack and ship your products, or do you want Amazon to?
However, deciding between Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM) isn’t as simple as it looks at first glance. There are nuances involved in both options that aren’t immediately obvious. Miss them, and you could risk major issues down the road.
The key is choosing the option that best matches your brand's seasonality, inventory management needs, and growth plans.
Fulfillment by Amazon (FBA)
As its name implies, FBA is a service that Amazon offers, where it stores your products in its fulfillment centers. When a customer places an order, Amazon handles the packing, shipping, customer service, and returns for those orders.
Amazon generally favors its FBA sellers, giving them preferred ranking in search, and automatically making your products prime-eligible. While this may make it seem like the obvious choice, it will not make sense for all products.
Pros:
Prime Eligibility: Products fulfilled by Amazon are eligible for Amazon Prime, which can significantly increase your sales potential due to the vast number of Prime members looking for quick shipping options.
Ease and Protection: FBA simplifies the shipping process and offers protection against issues like lost shipments and negative service-related feedback, making it a more comfortable choice for sellers.
Customer Service and Returns: Amazon handles customer service and returns, which can be a relief for sellers who prefer to focus on other aspects of their business.
It's crucial you dive deep into your business metrics to understand the full scope of FBA's costs and requirements. Amazon's interest may not always align with yours, and it will often charge high storage fees when your inventory gets low, underlining the importance of managing your stock efficiently.
Cons:
Costs: FBA can be expensive, with fees for storage, fulfillment, and additional long-term storage fees. These costs can cut into your margins, especially for low-margin or bulky items.
Less Control: Using FBA means you have less control over the packing and shipping process. If Amazon makes a mistake, it can reflect poorly on your brand.
Fulfillment by Merchant (FBM)
With FBM, you, the seller, are in charge of storing your products, packing, shipping, and handling your customer service and returns. This model gives you complete control over the inventory and shipping process, allowing for personalized packaging and careful handling of products. However, without automatic prime-eligibility,
Pros:
Control: FBM gives you complete control over the inventory and shipping process. You can personalize your packaging and ensure products are handled exactly as you want.
Cost-Effective for Certain Products: For sellers with low-volume sales or larger items that would incur high storage fees in FBA, FBM can be more cost-effective.
Flexibility: FBM sellers can adjust their strategy quickly without needing to retrieve inventory from Amazon's fulfillment centers.
Cons:
No Prime Badge (Typically): FBM products are not automatically eligible for Prime, which may reduce their visibility and attractiveness to Prime subscribers. However, it’s possible for an FBM seller to become eligible for the Prime badge through Amazon's Seller Fulfilled Prime (SFP) program.
Time and Resource Intensive: FBM requires you to invest time and resources into fulfillment and customer service. This can be a significant commitment, especially if your business scales up.
Which Should You Choose?
Still unsure whether to choose FBA or FBM for your fulfillment needs? Let’s ask yourself a few questions to decide…
What Are Your Sales Volume and Margins? If you sell high-volume, lightweight items with good margins, FBA might be your answer for its convenience and automatic Prime eligibility. For low-volume, bulky, or higher-value items with lower margins, consider FBM to avoid high fees and maintain control over your margins.
Do You Have the Resources for the Option You Choose? If you can’t handle shipping and customer service in-house, FBA can relieve that burden. But that can come at a steep cost, especially if you haven’t carefully considered possible costs and aren’t managing your inventory carefully.
Is Your Product in a Category That Matches One Better Than the Other? Certain categories, like electronics, books, and small home appliances, fit better with FBA due to their typically higher sales volume, standardized shipping, and the importance customers place on quick shipping. On the other hand, large furniture items, handmade goods, or highly customizable products likely align better with FBM.
In the end, it may be best for you to experiment. Amazon lets sellers use both FBA and FBM, meaning this isn’t a black or white option. We suggest you test both options with some of your inventory to find out what works best for you.
In the end, there isn’t always a one-size-fits-all answer. The best choice depends on how your business runs, your seasonality and selling frequency, and what types of products you sell.
Take your time to weigh the pros and cons of both options before you decide. It may make sense to go product by product, tailoring your strategy to work in various scenarios.
Need help choosing? It can take time, money, and precious brain cells to go through your product catalog and choose FBM or FBA. Our team does that for you when you work with us! Your dedicated Growth Manager will manage that whole process, case by case. All your products will be prime-eligible, and you won’t have to deal with returns or headaches. Want our help?
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