FBA vs FBM

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FBA vs FBM - A complete comparison

fba-vs-fbm

Most sellers are confused to choose between FBA and FBM services. Read on for a complete understanding the Amazon Fulfilment Services and the Merchant Fulfilment method; FBM vs FBA,including the pros and cons of both the fulfilment methods.

'You sell it. We ship it' is the tagline for Amazon Fulfillment. FBA or Fulfillment by Amazon is where Amazon picks your product, packs it and delivers the product to the customer for you. Amazon also manages the customer services and returns for you. It is our favorite way of delivering products and in many cases the only option for private labelers.

Pros of FBA

  • Prime Eligibility

    On listing your products with FBA, you make yourself eligible to about 80 million subscribers of Amazon Prime. Prime customers buy more frequently, spend more money yearly, and make-up half of Amazon's customer base. Your products are also eligible for free two-day shipping. With Amazon Prime, you are likely to sell more products and therefore make more profits.

  • Buybox advantages

    There are many factors that go into winning the Buy Box and fulfillment method is a big one. When there are multiple sellers for the same product, only one of them gets the buybox advantage directly and it’s obviously the FBA sellers. The rest of them are listed under the 'Other Sellers' section. When you’ve got the Buy Box advantage, you’ll likely get the purchase. Generally, an FBA seller can set a slightly higher price than an FBM seller and still win the Buy Box.

  • Amazon's Warehouse is your Inventory Store

    Amazon stores your inventory in its warehouses so that you’re not stuck with hundreds to thousands of units scattered across your living space. By choosing FBA, you can buy your product, list everything on Amazon and ship all of it to Amazon’s FBA warehouses.

  • Multi-channel Fulfillment

    Multi-Channel Fulfillment is when you list a product on Amazon FBA and sell the same product on another e-commerce site. With FBA, you can fulfill orders from other sales channels using your inventory stored in Amazon fulfillment centers. You manage your inventory through an online user interface and can direct Amazon to return your inventory in its fulfillment centers. This makes integrating FBA into other channels fairly effortless.

Cons of FBA

  • Complicated fees

    The FBA service will eat into your profits because it is an added expense at the point of sale. FBA fees include fulfillment fees, monthly inventory storage fees, closing fees, and order handling fees. Fees are calculated depending on the product’s category, size, and dimensions. You’ll also need to consider the cost to ship the product to Amazon’s fulfillment centers.

  • Long-term storage fees

    Amazon doesn’t store your items in their warehouse for free. Twice a year Amazon will charge long-term storage fees for inventory older than 6 and 12 months. If you are still shaky on predicted sales, FBA isn't the wisest decision for your product.

  • Inventory Maintenance

    It is easy to lose track of what you have, what you have left over to meet your customer demand. Moreover, products that aren’t selling well may end up taking up unnecessary space and cost you money. Amazon also penalizes you for low inventory.

  • Co-mingling of products

    Because your inventory is in Amazon’s fulfillment centers, you’ll have limited access to your products. Your product may get mixed up and co-mingle with other brands in the Amazon warehouse if it is not labeled properly.

Cons of FBA

  • Complicated fees

    The FBA service will eat into your profits because it is an added expense at the point of sale. FBA fees include fulfillment fees, monthly inventory storage fees, closing fees, and order handling fees. Fees are calculated depending on the product’s category, size, and dimensions. You’ll also need to consider the cost to ship the product to Amazon’s fulfillment centers.

  • Long-term storage fees

    Amazon doesn’t store your items in their warehouse for free. Twice a year Amazon will charge long-term storage fees for inventory older than 6 and 12 months. If you are still shaky on predicted sales, FBA isn't the wisest decision for your product.

  • Inventory Maintenance

    It is easy to lose track of what you have, what you have left over to meet your customer demand. Moreover, products that aren’t selling well may end up taking up unnecessary space and cost you money. Amazon also penalizes you for low inventory.

  • Co-mingling of products

    Because your inventory is in Amazon’s fulfillment centers, you’ll have limited access to your products. Your product may get mixed up and co-mingle with other brands in the Amazon warehouse if it is not labeled properly.

What is Amazon FBM?

  • FBM means Fulfillment by Merchant. The merchant takes care of the storage and handles all the other aspects of order fulfillment.

Pros of FBM

  • Hands-on fulfillment

    More control over your inventory. You store, pack, and ship products, so you can access your inventory whenever you need it. You’ll also know the exact status of your inventory stock. There are lesser chances of customer dissatisfaction too.

  • Lower costs

    Especially for large sized items with smaller margins. Since Amazon shipment fees are based on dimensions, you can get better profit margins out of such products. You can also save on fulfillment and storage fees.

  • Opportunity for Prime

    Though there is no direct Prime eligibility for FBM sellers, all Amazon sellers can get access to FBA benefits through Seller-Fulfilled Prime without paying the high FBA fees.

Cons of FBM

  • Requires discipline and responsibility

    Packaging, shipping, managing inventory is managed by you. You’ll have to constantly stay on top of your game to keep your customers and Amazon happy! Also, Amazon penalizes sellers for late or incorrect shipment.

  • You lose out Prime members

    Without being Prime, you’re missing out on many customers who may have purchased your product if it were Amazon Prime. While you can be Prime using Seller-Fulfilled Prime, Amazon requires you to have really high sales records and show exceptional records to accept you into Seller-Fulfilled Prime.

  • Buybox competition

    Since Amazon gives the buybox advantage is to FBA sellers, FBM sellers will have to lower their selling price to win the Buybox.

  • Other overheads

    Though you don’t pay the hefty FBA fulfillment fees, you’ll have to pay for the warehouse to store your products, manage the fulfillment fees, and handle shipment expenses.

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