When you sell on Amazon you have two options for order fulfillment – you can send all your stock to Amazon and let them handle the logistics (FBA) or you can manage order fulfillment from your end (FBM). Some sellers use a combination of both.
Let’s dive in and explain the ins and outs of selling Amazon FBA vs FBM!
Fulfilled by Merchant (FBM)
With FBM, you will be fulfilling orders yourself, and there are many advantages to this model – mostly connected to warehousing expenses. Chances are good that you’ll be able to find warehousing storage fees that are less expensive than Amazon. While you will still pay a selling commission fee to Amazon, it will be greatly reduced. As an FBM Merchant, you’re expected to meet several metrics on order fulfillment to keep your account healthy. In addition, you are responsible for:
- Picking, preparing, and packaging your inventory
- Finding a reliable shipping carrier and paying all fees
- Ensuring that all packages are delivered in a timely manner
- Using accurate tracking software to update orders
- Handling refunds and returns
(None of these metrics apply when using FBA)
Fulfilled by Amazon (FBA)
There are MANY upsides to using Amazon FBA. When you send merchandise to FBA, Amazon takes all the logistic headaches off of your shoulders (and that includes customer service and returns) but that doesn’t mean that everything is rosy. An important consideration and one of the biggest downsides is:
With FBA, you don’t have control over your inventory
- If Amazon decides to suspend a listing, you have to wait until you’ve successfully appealed to get an ASIN reinstated, or Amazon may even choose to discard that inventory
- Some items can’t be stored in Amazon warehouses year-round (meltable categories, for example), and you’re limited to the size of an item (no limits on FBM)
- Amazon has inventory limits and complicated inventory management systems
- For reasons beyond your control, shipping inventory to Amazon can sometimes be delayed, risking your inventory becoming out of stock
- Referral fees increase seasonally
Some HUGE benefits for FBA:
- Fast and cheap shipping for PRIME members – that means a higher conversation rate for your products
- Returns, refunds, and all claims are handled by Amazon
Referral Fees
Although Amazon does post a detailed referral fee explanation, the “commission” paid to Amazon for each item sold on FBA hovers around 15% of the sale price.
Here’s a snapshot of the PROS of FBA versus FBM:
PROS: Amazon FBA | PROS: Amazon FBM |
|
|
|
|
|
|
|
|
|
|
|
|
The final word:
When deciding if you’ll be opting for an Amazon FBA vs FBM model, it’s important to keep in mind that FBA is a convenient and relatively straightforward path for most sellers. Although your profit margins may be lower, if you have a high-volume product, it makes the most sense. FBM is generally good for smaller scale, small margin products or one-of-a-kind products. Because you take control of the fulfillment process, you may be able to save more money and increase your profit margin.
Ready to gain an advantage over your competition? Purchase an aged Amazon seller account that is already approved for Seller Fulfilled Prime! You’ll get the Buy-Box Advantage and save money on warehousing fees. Ask the team at AIA Assets how you can jump in!