Published:
August 3, 2023
Amazon has emerged as the undisputed giant, offering a vast marketplace for sellers to reach millions of customers worldwide. For ambitious entrepreneurs and established businesses alike, tapping into Amazon's immense potential can be a game-changer.
However, when it comes to fulfilling orders, sellers are faced with a crucial decision: Amazon FBA (Fulfillment by Amazon) or FBM (Fulfillment by Merchant)? Each method has its merits and drawbacks, and making the right choice is essential for optimizing your business operations and customer experience. In this comprehensive guide, we delve into the key differences between Amazon FBA and FBM, empowering you to make an informed decision that aligns perfectly with your unique business needs, objectives, and success rate.
Fulfillment by Amazon is a service offered by the company, which allows sellers to store their products in Amazon fulfillment centers. This means that when a customer makes a purchase, Amazon takes care of the entire process, including picking, packing, and shipping the product on behalf of the seller. Here are some advantages and drawbacks of using Amazon FBA :
Here are the advantages of Fulfillment by Amazon FBA :
Products fulfilled by Amazon have a high success rate in attracting sales through Amazon Prime. Being eligible for Amazon Prime provides a significant advantage, as it allows products to tap into a vast customer base of Prime subscribers who are actively seeking fast and free shipping. This increased visibility and accessibility greatly enhance the success rate of products fulfilled by Amazon.
Amazon has a massive customer base, giving FBA sellers access to millions of potential buyers worldwide. This exposure can lead to increased sales and visibility for your products.
Amazon's efficient fulfillment process ensures quick and reliable shipping, which is crucial for customer satisfaction and can result in positive reviews, repeat business, and enhanced brand value.
Amazon handles customer inquiries, returns, and refunds, saving sellers time and effort on customer service tasks.
Multi-Channel Fulfillment by Amazon FBA also allows sellers to use the same inventory for fulfilling orders from other sales channels, making it easier to expand their business across various platforms.
With FBA, sellers no longer need to worry about storing and managing inventory, as Amazon takes care of all storage and warehouse logistics.
Here are the drawbacks of Fulfillment by Amazon FBA :
Fulfillment by Amazon FBA entails several charges, encompassing storage fees, fulfillment fees, and long-term storage fees. These expenses can eat into your profit margins, particularly for slow-moving or oversized products.
Amazon has certain restrictions on the types of products that can be stored in their fulfillment centers.
When utilizing FBA (Fulfillment by Amazon), sellers relinquish a degree of authority over the fulfillment process. Issues with packaging, labeling, or handling may occur, affecting the customer experience, and sellers must rely on Amazon to handle these aspects properly.
During peak seasons, Amazon may impose storage limitations, which can be problematic if you have a large inventory to store and need to plan your inventory levels carefully.
Fulfillment by Merchant (FBM) is an e-commerce fulfillment method where the seller or merchant is responsible for managing the entire order fulfillment process, including inventory storage, packing, shipping, and customer service.
Here are the advantages of Fulfillment by Merchant (FBM):
With FBM, the seller retains full control over how orders are handled, packaged, and shipped. This level of control can be crucial for sellers who have specific packaging requirements or want to provide a unique and branded unboxing experience for their customers.
FBM can be cost-effective, especially for smaller sellers or those with lower sales volumes. Since FBM doesn't involve third-party fulfillment fees, sellers may save on storage and handling costing, especially if they have lower inventory levels.
FBM allows sellers to directly interact with their customers throughout the order fulfillment process. This direct communication can foster better relationships and provide opportunities for personalized customer service, potentially leading to increased customer loyalty and positive reviews.
Sellers using FBM can manage their inventory more flexibly and easily switch between selling on multiple platforms without committing to Amazon's fulfillment requirements or fees.
Here are the drawback of Fulfillment by Amazon (FBA):
FBM requires the seller to handle every aspect of order fulfillment, which can be time-consuming, especially as the business scales. This may divert resources and time from other essential tasks like marketing and product development.
With FBA, products are eligible for Amazon Prime, which attracts millions of loyal customers. When using FBM, products may not have Prime eligibility, which could result in decreased visibility and potentially lower conversion rates.
FBM sellers might struggle to match Amazon's fast and cost-effective shipping options. Customers have come to expect quick and often free shipping, and if FBM sellers can't meet these expectations, it might lead to lost sales or dissatisfied customers.
As the business grows, managing inventory and order fulfillment in-house can become more complex and challenging. Scaling up may require investing in warehousing, hiring staff, and implementing efficient logistics, which can be expensive and demanding.
The factors to consider when deciding between Amazon FBA and FBM -
Ultimately, the choice between Amazon FBA and FBM depends on your business's specific needs, size, and resources. Evaluate these factors to make an informed decision.
If you decide to utilize Amazon FBA (Fulfillment by Amazon) for handling your order fulfillment, you have the option to seamlessly integrate your store with Amazon FBA using Amazon MCF by WebBee. This integration ensures a smooth and efficient process between your online store and Amazon fulfillment services.
Wherever you are on your automation journey, explore the scaling possibilities. Book a meeting today!
