Whether you are a newbie entrepreneur or experienced business owner, eCommerce is a largely profitable industry if you know how to navigate it. Over the past years, the eCommerce industry has been on the uptrend. As an online selling platform, Amazon has become the top destination for online sellers. Those wanting to maximize their earning capacity have to make a decision as to which fulfillment method to use, either Amazon FBA, FBM, or both.
FBA vs FBM: A Better Understanding
The Amazon FBA and FBM fulfillment programs are the two primary selling options for third-party merchants aiming to participate in the booming Amazon industry.
What is Amazon FBM?
Amazon Fulfilled By Merchant or simply Amazon FBM is a fulfillment method in which the Amazon seller is responsible for storing their Amazon inventory, as well as picking, packing, and shipping customer orders. FBM sellers are responsible for the entire order fulfillment.
However, if undertaking the entire responsibilities involved in the FBM program is not for you, Amazon sellers have the option to outsource logistic services to third-party logistics or 3PL.
How Does Amazon FBM Work?
Listing of Product
After creating an account within Amazon Seller Central, FBM sellers can begin listing their inventory items. In order to improve sales conversion rate, proper listing and pricing optimization is recommended. Concerning the latter, the use of an Amazon repricer will be helpful.
As mentioned above, sellers involved in the FBM program have to store and maintain their own inventory, preferably in a warehouse, depending on the size of the business. With this in mind, sellers generally set this up before-hand for convenient shipping once orders are received.
After listing and securing your items in your warehouse, you should be prepared to ship items upon order. Try to avoid any eCommerce shipping delays – Amazon is strict when it comes to handling and transit times of packages.
What is Amazon FBA?
FBA or Fulfillment By Amazon is more widely used by Amazon sellers than the Amazon FBM program. As its name suggests, FBA entails sellers to list their products on Amazon, and Amazon then takes care of all tasks in relation to order fulfillment, including, but not limited to picking, packing, and shipping.
Logistically, Amazon FBA is much easier to set-up and navigate as the majority of the responsibility falls on Amazon.
Before listing any of your products using Amazon FBA, here are important things to note, especially concerning FBA policies and requirements.
How Does Amazon FBA Work?
Since you rely solely on Amazon to fulfill orders on your behalf, there is no need for sellers to set-up warehouse infrastructure.
One of the most important things sellers should remember is to ensure that inventory items are packed properly and shipped carefully to the Amazon warehouses to save time and additional cost required should Amazon have to redo this process.
From thereon, it is up to Amazon to store and ship your items to customers both nationally and internationally. Of course, this service comes at a cost and all sellers have to pay Amazon FBA fees, on-top of Amazon referral fees.
Points for Evaluation
When dealing with FBA vs FBM, it is crucial to understand key factors for consideration. Before deciding on which selling fulfillment program to choose, here are some things to take into account.
- Your Personal Expectations
- Stress Level Threshold
- Logistics Availability
- Inventory Turnover
- Other Sellers’ Experiences
- Size, Weight, & Dimension of Inventory Items
- Fees and Expenses to Be Incurred (Long Term & Short Term storage fees)
What Is the Best Fulfilment Method?
In terms of FBA vs FBM, each has its own advantages and disadvantages. If you wish to automate the storing and shipping process, Amazon FBA is recommended. On the other hand, if you desire more control over your inventory, then Amazon FBM is the best choice.
Amazon sellers take factors into account such as weight, size, and quantity of inventory as this of course has a major impact on fees payable to Amazon. For sellers with much larger operations and whose inventory takes up more warehouse space and/or is not fast-moving, often Amazon FBM is the desired method.
However, the good thing about Amazon is that its fulfillment methods are highly flexible and can be used in unison.