So you’ve finally decided it’s time to start selling on Amazon, but first you have an important decision to make. Should you choose FBA (Fulfillment by Amazon) or FBM (Fulfillment by Merchant) to fulfill your customer’s orders?
Deciding on one can feel overwhelming at first, (especially if you’re running your business as a one man machine) but once you understand the pros and cons of both, it’s easy to identify which is best for your business. So, let’s dive in.
Before we dive into the nitty gritty behind FBA vs FBM, let’s take a look at the numbers. According to JungleScout’s 2021 State of the Amazon Seller Report, 91% of sellers on Amazon are using FBA, with 57% of them solely using FBA. 34% of sellers use a combination of both methods. These numbers are important to keep in mind as we dive into the differences between seller types.
With FBA, you store your product at Amazon’s warehouses and they fulfill each order for you. This takes much of the busywork of ecommerce out of your hands, and can be a huge benefit.
With FBA you don’t have to worry about customer service or logistics, Amazon will have those covered. This means all you have to do is essentially pack up your inventory, and ship it off to Amazon, where they will then fulfill each order. You also have some level of communication with your customers through Amazon, which can make managing customer service super simple.
FBA also earns your product that coveted Prime badge, which is huge. With over 100 million Prime accounts, many will choose an item with that Prime shipping label over one without it. Not only will it give people a reason to purchase your product over someone else’s, but it will also help your customers have a better purchase experience, by receiving their product faster, and cheaper than otherwise.
Overall, FBA provides sellers much more of an opportunity to focus on their products performance than FBM does. Taking away worries of fulfillment, customer satisfaction, and logistics gives you much more time to focus on getting sales.
Depending on the sort of business you are trying to run, the lack of customer contact with FBA can be a pretty big con. If you want 100% control over the customer experience, FBA can severely hinder that ability.
Cost is another con. Amazon charges storage fees, which is fine for small, light things that move quickly. If you’ve got larger products, or things that have lower turnover, the fees associated with FBA become much harder to stomach. If you choose to use FBA, be sure to factor the fees in when you are running profitability to ensure you will not lose money.
FBM is where you are in control of everything. You manage your logistics, your customer service, and your order fulfillment. The only thing Amazon does is display your listing. As with FBA, this comes with a host of pros and cons.
The biggest advantage for FBM is that you have control. When you handle everything you can bypass certain restrictions Amazon has, and provide an experience more in line with your brand. You control the customer experience and you control your fulfillment.
You also save a significant amount in Amazon fees when you aren’t using FBA. If you already have your own storage and logistics sorted out, (or have the room and are willing to figure it out) you don’t need Amazon to do it for you, and can save a few dollars instead.
You obviously are spending a substantial amount of time managing your logistics, which is time you could instead spend on optimizing your listing, and getting more sales. Managing your own logistics can also be more expensive than you think, making the difference between FBA and FBM slimmer than you’d expect.
You also should consider that you will be fighting an uphill battle to perform with some of your FBA competitors. They can offer things like (like free 2-day shipping) that will take a significant portion of your audience away almost immediately. If you go this route, be aware it will be harder to gain momentum early on.
FBA is clearly a popular choice among Amazon sellers, as 91% of them use it to some degree. The benefits of using FBA can’t be beaten, and as such, is our recommendation to new sellers.
If you want to create a (somewhat) passive ecommerce business, we recommend FBA for the reasons listed above.
And, if you’re looking to remove the headache all together, and create a fully passive ecommerce business, give us a call. We will create and manage everything you need to bring in substantial Amazon income.
