If you’re an e-commerce merchant looking to sell on Amazon, one of the first decisions you’ll encounter is the choice between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Both systems have their pros & cons, and your choice could significantly impact your business. So, in the landscape of 2023, which is the better option? Let’s dive in.
Amazon FBA: The Basics
With Amazon FBA, sellers store their products in Amazon’s fulfillment centers. Amazon handles storage, packaging & shipping, and even provides customer service. This strategy allows sellers to tap into Amazon’s extensive logistics network & free up time to focus on other aspects of their business.
Amazon FBM: The Basics
On the flip side, FBM requires sellers to handle the logistics themselves. From storage and packaging to shipping & customer service, all responsibilities lie with the seller. While it might sound overwhelming, it gives sellers greater control over their business operations.
Amazon FBA vs. FBM: A Comparative Analysis
1. Cost Analysis
One of the most critical considerations for any business is cost. FBA requires sellers to pay storage fees & fulfillment fees, which can add up, particularly for slow-moving or oversized items. In contrast, FBM may save on these costs, but it necessitates investing in storage, packaging, and shipping logistics.
Elite Tip: Always factor in the costs related to both options and work out the numbers before choosing the one that aligns with your profit margin.
2. Customer Service & Returns
Amazon’s top-notch customer service is a significant benefit of using FBA. With FBA, Amazon handles customer inquiries, returns & refunds, ensuring your customers have a seamless shopping experience. Conversely, with FBM, you’re in charge of all these elements.
Actionable Insight: If customer service isn’t your strength or you don’t have the resources to handle it effectively, FBA could be a better option.
3. Prime Eligibility and Buy Box
FBA automatically qualifies your products for Amazon Prime, giving you access to a vast customer base willing to pay for faster delivery. FBM sellers can qualify for Prime through Amazon’s Seller Fulfilled Prime (SFP) program, but it comes with stringent requirements.
The Buy Box, the holy grail of Amazon selling, is also more easily attainable with FBA. Winning the Buy Box means your product is the default choice for customers clicking the ‘Buy Now’ button, a massive advantage considering 82% of Amazon sales occur through it.
Elite Tip: If reaching Prime customers and winning the Buy Box are key to your business strategy, Amazon FBA might be the way to go.
4. Inventory Control and Lead Time
FBM gives sellers complete control over their inventory, which can be beneficial in managing stock levels and lead times. You control when and how your items are shipped and can manage your inventory based on real-time sales data.
With FBA, the control is less, and you need to account for shipping times to Amazon’s warehouses, processing times, and potential delays.
Actionable Insight: If real-time inventory control & shorter lead times are critical for your business, FBM might be your preferred choice.
5. Scalability
FBA can be an excellent choice for businesses looking to scale quickly. Amazon’s extensive infrastructure can handle high order volumes, allowing your business to grow without worrying about logistics.
On the other hand, while FBM provides more control, it requires a more significant investment in logistics as your business grows.
Tip: If rapid scalability is your endgame, consider FBA.
Third Party Logistics Overview
If you choose to utilize Fulfillment by Merchant (FBM), a viable option is partnering with a third-party logistics (3PL) provider. This can offer a valuable middle ground between handling everything yourself & passing all control to Amazon through FBA.
3PL providers, such as ShipMonk, ShipBob, and others, can handle your product storage, packaging, and shipping. They provide a range of services from pick-and-pack, warehousing, inventory management, to returns handling, thus allowing you to maintain more control over your business operations without getting overwhelmed by logistics.
ShipMonk, for instance, prides itself on offering a scalable solution for eCommerce businesses, promising stress-free logistics management. ShipBob, on the other hand, emphasizes its two-day express shipping program & distributed inventory model, which allows you to strategically place your inventory in their network of fulfillment centers for fast & cost-effective shipping.
Moreover, companies like RedStag Fulfillment and FulfillmentCompanies.net also provide similar services with their own unique offerings. RedStag Fulfillment is particularly ideal for businesses dealing with heavy or large items, while FulfillmentCompanies.net works as a matchmaking service, connecting businesses with suitable fulfillment providers.
In essence, utilizing a 3PL provider for your FBM strategy can provide you with the logistics support you need, while still maintaining a high degree of control over your inventory & operations. And with the array of options available, you can choose a partner that fits perfectly with your specific business needs.
The Verdict
So, Amazon FBA or FBM – which is better in 2023? It ultimately boils down to your specific business model, product type, and resources.
If you’re selling high-volume, fast-moving items, and want to leverage Amazon’s customer service & Prime program, FBA could be the right choice. If, however, you sell unique, low-volume items & want control over your operations, FBM might be your best bet.
In the end, remember that this decision isn’t set in stone. Many successful sellers employ a hybrid approach, using FBA for some items & FBM for others. Experiment with both and make data-driven decisions based on what works best for your business.
Here’s to making the best decision for your Amazon venture in 2023 and beyond. Happy selling!
