Is FBA or FBM Better for Your Business?

So, you have decided you would like to sell your products on Amazon. You start the process only to find out that there are a few too many similarly-named services that you need to choose between. Fulfilled by Amazon, Fulfilled by Merchant, Seller Fulfilled Prime, Multi-Channel Fulfillment. Many merchants often find themselves wondering what the difference is between all these terms and what difference each process will really make on the success of their business. This article dives into the nuances between FBA and FBM, two distinct yet still intertwined services, and which program, if any, could be best for you.  

When using Fulfilled by Amazon (FBA), sellers send their products directly to Amazon’s warehouses, where Amazon takes full responsibility for all logistics, including storing, packing and shipping the products to the end customer. Amazon also handles all customer service and returns, making for a seamless and easy experience for the seller. FBA can be a preferred method because products fulfilled by Amazon are often eligible for Amazon Prime, which can increase visibility and sales due to Prime’s fast shipping and other benefits.

However, there are also some drawbacks to using FBA, most notably the extra fees required for storage and fulfillment of orders. If you are not consistently shipping high quantities of items at a fast pace, using FBA could result in low profit margins for your business. For example, if you are storing 1,000 items in Amazon’s warehouses but only shipping 100 a month, the price of paying for FBA fees and aged inventory costs will eventually result in low profits. Additionally, packaging is limited to Amazon-branded materials, which offer no opportunities to strategically control the customer experience through branding.

What is Amazon FBM?

With Fulfilled by Merchant (FBM), Amazon lists the seller’s items for purchase, but the fulfillment process is done by the merchant. Sellers are responsible for inventory storage, as well as picking, packing, and shipping all orders. When using FBM, you are able to have more control over your customer’s experience with customized packaging options, as well as closer management of your own inventory. Because Amazon FBM is less expensive, fulfilling your own orders in a cheaper way could also result in a higher profit margin.

Nonetheless, you as a seller are still responsible for all other fees associated with storage, staff and utilities and must take these into account when calculating your bottom line. Another disadvantage is the competition from FBA sellers who are given better SEO by Amazon for using their Prime services. While it is possible for FBM sellers to offer Prime shipping through Seller Fulfilled Prime (SFP), it requires meeting Amazon’s strict shipping and service level requirements. If you would like to learn more about Seller Fulfilled Prime, visit https://blog.shiphawk.com/maximize-your-amazon-presence-with-seller-fulfilled-prime.

Which Program is Best for Your Business?

The choice between Amazon FBA and FBM depends on multiple factors, including your business model, inventory management capabilities, cost considerations and desired level of control over the fulfillment process. 

FBA could be the best for your business if:

You sell small, lightweight products
You don’t have significant logistics in place
You have a high inventory turnover rate

Alternatively, FBM could make the most sense if:

You sell bulky, heavy products
Your products don’t sell very fast/have a low inventory turnover rate
You have a secure fulfillment process in place
You have the space to store your products

Despite these aspects, there is also the consideration of cost. FBA is significantly more expensive than FBM, consisting of fulfillment costs, referral fees, monthly storage costs and aged inventory costs. Therefore, although FBA is an easy solution, a considerable amount of your profits may go towards logistics that could be controlled on your own. If you don’t have significant logistics in place, ShipHawk’s WMS and TMS can help you automate this process to make it significantly easier for you to store and fulfill your orders.

ShipHawk Can Help You Make the Right Decision

While FBA may be more convenient than FBM, it comes with a lot more expenses and less control over business logistics. ShipHawk can help you with these logistics with a more comprehensive software package that helps you keep control of your business and inventory. ShipHawk can also be used in conjunction with FBM by using Amazon to list your products but automating the fulfillment process with ShipHawk’s algorithms. This is a compelling way to reduce shipping costs while increasing your exposure and visibility. 

To learn more about how ShipHawk can help your organization save time and money by implementing automated shipping software, schedule a call today.