FBM vs FBA: What’s the Difference?
As an Amazon seller, it’s important to understand two main acronyms: FBA and FBM.
FBA stands for “Fulfillment by Amazon”. With the FBA model, Amazon takes care of all the order fulfillment logistics. Amazon's fulfillment centers are responsible for picking, packing, and shipping orders for your Amazon sales. So, what is FBM? FBM stands for “Fulfillment by Merchant”. Unlike an FBA seller, an FBM seller is responsible for all order fulfillment tasks.
Each fulfillment process has its own pros and cons. Below we will explore the intricacies of FBM vs FBA, and which businesses would benefit from each!
FBM: Pros and Cons
When choosing the FBM fulfillment option, the Amazon seller is responsible for all parts of the customer journey and fulfillment process. When an Amazon customer purchases from your store, you are not only responsible for the fulfillment method, shipping cost, and customer service, but you also need to consider storage fees that may be required if you have a lot of inventory. As a smaller business with less inventory, this may not be a factor as you have adequate storage space, but that could change as you grow.
However, operating as an FBM seller does allow you to have a greater understanding of your business operations. You have full control over your inventory, how your products are packaged, and how you handle customer interactions.
Another pro of operating as an Amazon FBM store is fewer Amazon fees. As an FBM seller, you’re responsible for setting up a sales account and paying a referral fee to Amazon, just like you would through a FBA. However, an FBA seller must consider the FBA fee, which includes Amazon warehouse shipping and storage fees, to name a few.
If you are a smaller business with a lower volume of monthly sales, the fees may not be cost effective or result in the best profit margin. However, as you grow, many sellers agree the fees are well worth the convenience, speed, and quality that Amazon FBA provides.
FBA: Pros and Cons
One of the biggest advantages of Amazon FBA compared to FBM is that products are eligible for free, two-day Amazon Prime shipping. Shipping is one of the key deciding factors buyers consider when ultimately purchasing an item. Being eligible for Prime shipping will help you attract more customers and grow your Amazon sales.
Another pro of Amazon FBA is customer service. As an FBM seller, you have full control over your operation, but with great power comes great responsibility. Handling customer requests and problems can fill an entire day and put you behind in other areas. With Amazon FBA, the platform’s customer service network handles all returns and customer inquiries.
With customer service outsourced to Amazon, you are free to focus on other operational strategies to grow and expand your business. It also ensures that customers are satisfied, which is crucial for a successful e-commerce operation. The drawback here is you don’t have direct engagement with your audience, making it challenging to reach them through marketing efforts, such as newsletters or social media.
Which Is Better: FBM or FBA?
In the battle of FBM vs FBA, it’s less about which method is better and more about which program is right for your business. Internal logistics management through the FBM model is better suited for businesses that sell a small volume of products or sell products with complicated packaging and shipping requirements. It gives new sellers a chance to learn the Amazon platform without the additional fees. Then, once orders begin to increase, turning to a third-party solution for order fulfillment purposes can help your company grow and scale.
Between 2019 and 2020, Amazon invested more than $30 billion in logistics, tools, services, and programs to help elevate small- and medium-sized e-commerce brands. In short, it’s a good place for business growth. The FBA model is a smart option that allows you to take advantage of the comprehensive network of Amazon warehouse storage, shipping, and return processes all in one place. It allows you to attract Prime customers and saves you time as you scale your business.
Building a Lasting Brand
Building a brand that consumers love takes time and effort. Although there are fees that can add up as a FBA seller, it lifts the huge weight of logistics off your shoulders so you can focus your time on other areas of business growth. By prioritizing tasks in this way, you’ll be able to build a business that, one day, may be in a position to sell.
At Forum, we offer fast and efficient payouts worth years of profits in one day. This opportunity is for outstanding e-commerce brands with a differentiated set of products that uniquely serve the everyday customer. Other qualifications include a majority of sales through Amazon FBA and a demonstrated financial success of at least $200K in net profit in the last year.
Whether selling your e-commerce brand is an ultimate goal or you’re just getting started in the market, it’s always good to know what possibilities there are and how each will best benefit you. What may work for you now may not be the solution you need in the future. Even if you begin as an FBM seller, it’s likely you’ll end up as an FBA seller in the future.
Looking to learn more about further inventory options? Check out our blog on FBA vs Drop Shipping.