Amazon FBA vs FBM: Which one is Right for Your Business?

Explore the pros and cons of Amazon FBA and Merchant Fulfilled Network (FBM), so you can make the best decision for your business.

When it comes to selling on Amazon, there are two main fulfillment methods: FBA and FBM. Both have pros and cons, so how do you decide which one is right for your business? In this blog post, we will compare and contrast FBA vs. FBM and help you decide which option is best for you.

 

What Is The Main Difference Between FBA And FBM Sellers?

The main difference between FBA and FBM is who handles the storage, shipping, and customer service for the products being sold.

 

Fulfillment by Amazon (FBA), sellers ship their products directly to Amazon's warehouses. Amazon then stores the inventory and ships it straight to the buyer (often through their Prime shipping). They're also in charge of customer service.

 

Fulfillment by Merchant (FBM), sellers display their products on Amazon but handle all storage, shipping, and customer service themselves (or through another third party).

Which One Is More Profitable: Amazon FBA Or FBM?

It depends on several factors, including your product type, the size of your business, and your budget. If you're selling large, heavy products or require special handling, FBM might be the more profitable option since you have more control over storage and shipping.

 

If you're starting or having a small business, FBA might be more profitable because you can take advantage of Amazon's warehousing and shipping infrastructure. As your business grows, you can always transition to FBM.

 

Finally, FBA might be the better option if you have a limited budget because it allows you to take advantage of Prime shipping, which often leads to increased sales.

Here are some statistics:

FBM sellers have more sales as compared to FBA, and FBA sellers have larger profit margins. In comparison to 26% of FBA sellers, 33% of FBM vendors generate more than $25,000 per month in revenue.

37% of FBA sellers make a profit over 20% vs 32% of FBM sellers

 

Related: Is Amazon FBA Worth It?

Which Seller Sells Faster: Amazon FBA Vs. FBM?

FBM vendors were quicker to establish their Amazon companies than FBA sellers. FBM vendors had a median time of one year from the date they started selling on Amazon to when they reached $100k in annual sales. In contrast, it took FBA sellers a median time of two years to achieve the same milestone.

 

54% of FBM merchants needed less than six weeks to get started on Amazon, compared to 34% of FBA sellers. It is likely because FBA requires more time to set up since you have to send your products to Amazon's warehouses and create listings for each product.

 

28% of FBM sellers had profit in fewer than three months vs. 20% of FBA sellers.

 

What Factors To Consider In Choosing Between Amazon FBA Vs. FBM?

There are a few factors you should consider when choosing between Amazon FBA and FBM

 

Your Product Type

Weighing all these factors will help you decide which fulfillment method is best for your business.

 

The Size Of Your Business

If you're starting or have a small business, FBA might be a good option because you can take advantage of Amazon's warehousing and shipping infrastructure.

 

Your Budget

FBA costs more upfront since you have to pay for storage and shipping fees. However, many sellers find that the increased sales from being eligible for Prime shipping make up for the additional costs.

 

When To Use FBA?

Generally, Amazon FBA is a good option if you want to take advantage of Prime shipping and increase your sales. However, there are some situations where FBM might be the better choice, such as selling products that are large or require special handling. 

  • You'd like more control over your clients.
  • You have established superb customer service procedures.
  • Your merchandise is oversized or heavy.
  • You've already set up the logistics.
  • You can reduce the costs associated with fulfilling your items.
  • Your inventory rotates at a leisurely pace.

Related: 6 Key Factors for Choosing the Best Amazon FBA Prep Services

When To Use FBM?

If any of the following are true, then you should consider using the Fulfillment by Merchant (FBM) model:

  • You have products that are large or require special handling.
  • You want more control over your clients.
  • You have established superb customer service procedures.
  • Your merchandise is oversized or heavy.
  • You don't want to deal with returns.

Pros and Cons of Amazon FBA and Amazon FBM

Fulfillment by Amazon (FBA) Pros

-You can take advantage of Amazon's Prime shipping, which leads to increased sales.

-Since Amazon is in charge of storage and shipping, you have less work to do.

-Amazon also handles customer service, so you don't have to worry about dealing with unhappy customers.

Fulfillment by Amazon (FBA) Cons: 

-It costs more upfront since you have to pay for storage and shipping fees.

-You have less control over how your products are stored and shipped.

-If Amazon makes a mistake with shipping or customer service, it's on you.

 

Fulfillment by Merchant (FBM) Pros

-You have more control over how your products are stored and shipped.

-It costs less upfront since you don't have to pay for storage and shipping fees.

-If there are any problems with shipping or customer service, you can handle them yourself.

 

Fulfillment by Merchant (FBM) Cons

-You have to do your marketing to stand out from the competition since you're not eligible for Prime shipping.

-You have to handle storage, shipping, and customer service yourself (or through another third party).

-If you don't have a good system in place, fulfillment can be time-consuming and expensive.

 

Which One Should Sellers Use-FBA Or FBM?

Consider the sales strategy that will work better for your product.

  • Private Label: develop your own product /brand. 
  • White Label: re-sell products from other brands.
  • Wholesale: Buying products directly from the brand or distributors with excess inventory to sell on Amazon.
  • Retail Arbitrage: Buying products from retail stores to sell on Amazon.
  • Online Arbitrage: Buying inexpensive things online to sell on Amazon.
  • Dropshipping entails purchasing items directly from a manufacturer, who then fulfills and ships the order to the client. 
  • Consignment is an agreement between two parties where the seller agrees to let the consignee sell their products in their store.
  • Handmade: making and selling your things on Amazon. 

5 Main Variables to Examine Before Choosing an Amazon Fulfillment Option

1. Storage space. You need to have enough storage space for the products you intend to sell.

2. Number of SKUs. The number of SKUs is the number of unique products in your inventory.

3. Inventory turnover rate. This is the number of times your list turns over in a given period, per month or year.

4. Margin/Profitability. To make a profit, you need to ensure that your margins are high enough to cover the costs associated with storage, shipping, and customer service and leave you with a profit.

5. The type of product you are selling. You must also take into consideration what kind of product you are selling.

  • Selling products that are big or heavy. If you are selling big or heavy products, then the Fulfillment by Merchant (FBM) model is probably the best option for you. It would be too costly to ship these types of products via Amazon Prime. In addition, you would have more control over how these products are stored and shipped.

  • Selling products that require special handling. If your products require special handlings, such as fragile items or perishable food items, then the Fulfillment by Merchant (FBM) model is probably the best option. This is because you would have more control over how these items are stored and shipped.

  • Selling small products and light . If you are selling small and light products, then the Fulfillment by Amazon (FBA) model is probably the best option for you. It would be more cost-effective to ship these types of products via Amazon Prime. In addition, Amazon would handle storage and shipping for you.

Making The Decision

Use these questions as a guide to help you decide which Amazon fulfillment option is right for your business:

-What are my long-term goals for my business?

-Do I want to grow my business to the point where I can afford to hire staff or outsource fulfillment?

-Am I selling products that are large or heavy?

-Do I need my products delivered quickly?

-Am I selling products that require special handling or storage?

-Do I have the time and resources to handle fulfillment myself?

-How much can I afford to spend on fulfillment?

-Am I willing to give up some control over my product in exchange for increased sales?

 

If you answered yes to any of the following, then Fulfillment by Amazon is probably a good option for your business:

 

-You want to take advantage of Amazon's Prime shipping.

-You don't have the time or resources to handle fulfillment yourself.

-You're selling products that are large or heavy.

-You need your products delivered quickly.

-You're selling products that require special handling or storage.

If you answered yes to any of the following, then Fulfillment by Merchant is probably a good option for your business.

-You want more control over how your products are stored and shipped.

-You have the time and resources to handle fulfillment yourself (or through another third party).

-You're selling products that are small and lightweight.

-You can afford to wait a few extra days for your product to be delivered.

-You're selling products that don't require special handling or storage.

 

Both Fulfillment by Amazon and Fulfillment by Merchant have their pros and cons, so it's essential to decide which one is right for your business by examining your goals, needs, and resources. Use the questions above as a guide to help you make the best decision for your business.

 

Conclusion

So, what is the difference between Amazon FBA and FBM? In a nutshell, with Amazon FBA, you ship your products to an Amazon warehouse and let them take care of shipping orders to customers. With FBM, you handle all aspects of fulfillment yourself, from packing and shipping orders to handling customer service inquiries. Which option is right for your business depends on a variety of factors, including order volume, product weight and size, and delivery time restrictions.

If you’re not sure which option is best for you or need help getting started with fulfillment, Simpl Fulfillment can help. We offer both Amazon FBA and FBM services as well as a wide range of other fulfillment options so you can find the solution for your business.

Recommended: 9 Smart Ways to Make Money on Amazon in 2022

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