Amazon FBA vs. FBM: Which Fulfillment is Best Choice for Business?

Fulfillment is the key to a successful online business. It is the point of delivery, and actual customer experience is built here. Choosing the right fulfillment method can give business owners a hard time since different methods give different highs and downsides that directly impact either the service or the profits. There is no correct choice that fits every business’ requirement; one can only make the decision based on what fits the needs of one's business. Now, Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) are the most prominent options that create confusion in the minds of e-commerce business owners. This blog is going to ease out that tension for you today within 6 minutes of reading time.   

Basics of Amazon FBA vs FBM

To kick off this discussion, let’s first understand the meaning of both FBA and FBM. Here it goes:

1. Fulfillment by Amazon

FBA is a program by Amazon under which e-commerce sellers can outsource their fulfillment and get it done through Amazon's expert fulfillment network. It includes packing, shipping, customer service, and return logistics. It saves time and also lessens the operational costs borne by the sellers in fulfillment. Also, sellers get time to focus on other tasks like marketing, advertising, and product development which is very important for long term growth of the business. 

2. Fulfillment by Merchant

Fulfillment by Merchant is a fulfillment method under which merchants fulfill their orders on their own while listing their products on Amazon for sale. In this case, sellers manage the inventory, picking, packing, and shipping on their own as a part of their day to day activities. This method is suitable for sellers with low sales velocity and sufficient space to store inventory. Also, it requires sellers’ bandwidth to fulfill the fulfillment. 

Amazon FBA vs FBM: What Fits Best? 

As mentioned earlier, there is no right choice. It is all about what serves the needs of the business. Every business is unique and has its unique needs; hence, some factors have to be considered before selecting a fulfillment partner. Here’s the list: ‍

1. Product Type

The kind of products the seller wishes to sell will have a direct impact on fulfillment strategy. For instance, it might be simpler to immediately fulfill smaller products that need less packing, but it might be more challenging to pack larger products consistently. FBA can be a fantastic choice for making sure that goods are packed nicely for shipping.

Special considerations such as shelf life, necessary certifications, and safe transport measures may also apply to perishables, hazardous items, and other product kinds. 

2. Time Consumption and Customization

Fulfillment by Merchants can be the best choice for the company if the seller has the time and enjoys handling fulfillment activities as part of their daily routine or if some kind of personalization is required. For instance, if a certain kind of packaging or handwritten letter is used by the business, then FBM is the best choice.

On the other hand, FBA takes care of all the things for sellers if they prefer not to invest their time and effort in selecting, packing, and delivering client orders. In this manner, sellers can devote efforts to other facets to expand the company. 

3. Inventory Management 

Inventory Management is an important factor to consider. One needs to check if they have required space to store the stock, the cycle of sales, the expected turnover rate and also if there is some sort of special requirement for certain weather conditions. If the seller opts for FBM, they should have access to the inventory 24/7 for the fastest delivery. FBA, on the other hand, gives the sellers the facility of warehousing and inventory management so they are carefree about this very crucial aspect of fulfillment.  

4. Customer Service and Returns

Some FBM sellers take pleasure in having direct contact with clients. Others would rather have customer support deal with customers. With FBA, Amazon handles returns and customer service for sellers. Amazon also provides tools to monitor reviews, ratings, and comments from customers. To find out how the audience feels, look at Seller Central's Customer Review Insights. In order to use the Customer Reviews function, which compiles reviews in one location for effective analysis, sellers can also register a brand with the Amazon Brand Registry. 

5. Sales Quantum 

For products that sell consistently throughout the year, optimal fulfillment may appear different than for products that sell less often or have seasonal variations in sales. The products with consistent sales will need regular packing, shipping, and delivery. Also, the inventory turnover rate will be higher; hence, FBA will be a better fit in this case. FBM, on the other hand, is a better fit for businesses that have seasonal or inconsistent sales.  

Amazon FBA vs FBM: Understanding Pros and Cons 

After considering the factors mentioned above, sellers just have to look at the highs and lows of both Fulfillment by Amazon and Fulfillment by Merchant to get a clear picture of picking the right one for the business. For that, this section will lay out the pros and cons of FBA and FBM for Amazon Sellers: 

Amazon FBA

Advantages

• ‍Prime Eligibility: When sellers list the products with FBA, they become eligible to make sales to 80 million Amazon Prime members. Additionally, the goods qualify for free two-day shipping with Amazon Prime. Because listings are linked to Amazon, sellers will probably sell more things with Amazon Prime and earn more money.‍
• Buy Box Advantages: Winning the Buy Box is determined by a number of factors, one of which is the fulfillment method. FBA sellers are more likely than non-FBA sellers to win the Buy Box. As you may be aware, Amazon sellers that use Buy Box have a higher chance of making sales than other merchants. 

• Fulfillment Expertise: Amazon processes and ships goods on time by utilizing its cutting-edge fulfillment and logistics network. Its warehouses and fulfillment centers are used to keep your merchandise in an organized manner. 
• Consumer Satisfaction and Reverse Logistics: Apart from managing the fulfillment process, Amazon will also offer customer support for the products and handle any potentially problematic returns.
• Better Positioning in Search Results: The listings of sellers who use FBA will appear higher in the search results. Although it is not explicitly mentioned, it is widely known that one of the main components of Amazon SEO is fulfillment. 

Disadvantages

• Expensive: High fees are one of the main drawbacks of using Amazon FBA. It will lower your profits because it must be taken into account when calculating your margins. Additionally, you must take inventory storage fees and taxation into account. You pay Amazon these fees in order to have your items stored in their fulfillment facilities. However, the costs to be incurred by the business for in-house fulfillment add up to be a huge sum as well while adding to the tasks list. 
• Zero compromise Packaging and Shipping: According to Amazon, sellers that choose FBA must adhere to strict packaging guidelines. If the guidelines are not followed, the product might not even be sent to the consumer. Therefore, preparing the items in accordance with the requirements is a must.

Amazon FBM

Advantages

• Better Margins: FBM will spare sellers from unforeseen expenses that would otherwise reduce your profit margins. Sellers are not even required to pay long-term storage fees or other associated costs. You can acquire a clear picture of your anticipated profits by negotiating a quote with your shipping partner in advance. This is largely the case with businesses of small scale and huge items. 
• Packaging Control: Sellers may package products in a way that works best for both clients and sellers themselves on using FBM. In order to differentiate your products from those of your rivals on Amazon, you can also choose personalized packaging solutions.

Disadvantages

• Cut-throat Competition: Customers frequently choose to purchase goods that are fulfilled by Amazon and bear the Prime badge. Hence, customers are generally lost by sellers in the case of in-house fulfillment. 
• Scope of Errors: Amazon has experts and technology that have better fulfillment quality and less scope of errors. Fulfillment by Merchants has a wider scope of errors due to a lack of expertise and specialized technology.   
• Overhead Expenses: Sellers still have additional overheads to take into account, such as personnel costs, warehouse rent, utilities, etc., even though they are not paying FBA fees. Therefore, it is highly advised that sellers perform accurate calculations before proceeding down this path. 

The Right Fulfillment Strategy Discovered

This is the final step of this Amazon FBA vs. FBM debate, and the arguments are clearly in favor of Amazon Fulfillment. Fulfillment by Amazon gives the sellers the freedom to focus more on their business and leave the regular tasks of fulfillment in Amazon's expert hands. Amazon FBA Sellers also get a better conversion rate and inventory turnover since the fulfillment part is settled with the Prime badge. 

Now, every seller wants Amazon to handle all their fulfillment. This can actually happen with MapMyChannel. Sellers can benefit from the multi-channel fulfillment feature of MapMyChannel, which integrates multiple sales platforms with Amazon FBA for fulfillment, so sellers don't just benefit from sales on Amazon platform but also through different sales channels. FBA will act as a third-party logistics partner with MapMyChannel.