When it comes to Amazon FBA vs. FBM… most entrepreneurs have to decide which is better. Both have their pros and cons, and there is a lot of debate over which one is the best – but it’s not clear-cut for everyone.
In this article, we will compare the two methods in order to help you make a decision, based on your specific needs. There’s FBA/FBM costs, logistics, cash flow dynamics, shipping times, and many more factors – so let’s dive in!
Use this outline to skip to any section of this page:
- What is Amazon FBA?
- What is Amazon FBM?
- Amazon FBA: Pros
- Amazon FBA: Cons
- Amazon FBM: Pros
- Amazon FBM: Cons
- Which is better?
What is Amazon FBA?
Amazon FBA stands for Fulfillment by Amazon. With this method, sellers ship their products to Amazon, who then store the products in their warehouses and fulfill orders on the seller’s behalf.
It’s a service that lets you store your products in Amazon’s fulfillment centers, where they handle storage, packing and shipping to your end customer. This allows you to focus on other aspects of your business without having to worry about fulfillment.
The primary appeal to selling on Amazon
Since its inception, Amazon has disrupted the traditional brick-and-mortar model of business – with one of the key reasons for its success being its use of FBA. It allows businesses to take advantage of Amazon’s world-class logistics and distribution network without needing to invest in their own infrastructure. This has opened up opportunities for businesses of all sizes, including those that might not have the resources to build and maintain their own warehouse.
As a result, Amazon FBA has been a game-changer for the ecommerce landscape. Not only does it level the playing field for small businesses, but it also saves consumers time and money by providing them with access to a vast array of products.
In addition, Amazon FBA provides customers with the same level of customer service and shipping speeds that they have come to expect from Amazon. As a result, many sellers find that using Amazon FBA can help them to boost their sales and grow their business. Ultimately, whether or not Amazon FBA is right for you will depend on your specific business needs.
What is Amazon FBM?
Amazon FBM stands for Fulfillment by Merchant. With this method, sellers ship their products directly to customers. Unlike FBA, the seller stores and handles all inventory – along with arranging shipping to the customer with USPS, FedEx or UPS (among a few other potential carriers).
This set-up gives sellers more control over their inventory and shipping, but it also comes with some responsibilities. For example, sellers must pack and ship their products correctly, without any of the benefits of FBA’s Amazon Prime status.
In addition, sellers must provide customer service for their products, and they are responsible for any returns or refunds. Overall, Amazon FBM is a great option for sellers who want more control over their business, but it’s important to be aware of the additional responsibilities that come with this arrangement.
Amazon FBA: Pros
Most Amazon sellers prefer to stick with Amazon FBA – and for good reason. Let’s start with the main benefits behind Fulfillment by Amazon:
Low rates
FBA rates are low enough to allow for plenty of profit margin – even after the storage, handling & shipping costs associated with the entire process. This makes it cost-effective for ecommerce businesses, as they can save on these expenses and avoid being stuck in the busywork of an online retail operation.
In addition, Amazon FBA businesses can take advantage of Amazon’s Prime shipping program, which offers free two-day shipping for Prime members. This can be a valuable selling point for businesses, as it can help to increase sales. Overall, Amazon FBA is a popular ecommerce business model that offers several advantages with perfectly-acceptable costs.
Amazon FBA fees are low for a number of reasons:
- Amazon is a highly efficient company with a well-developed infrastructure. This allows them to pass on savings to their customers in the form of lower rates.
- Amazon FBA involves using Amazon’s own warehouses and shipping network. This results in lower shipping costs, which are passed on to the customer in the form of lower rates.
- Amazon FBA is a volume-based business, which means that the more items you ship, the lower your rates will be. This makes it an ideal service for businesses that ship large quantities of products.
The EXACT costs heavily depend on your inventory size, dimensions and many other factors – and there are highly-strategic ways for how to lower Amazon FBA fees too. Overall, Amazon FBA is a cost-effective way to ship products, and its low rates make it an attractive option for businesses of all sizes.
No location needed
One of the many benefits of Amazon FBA is that you don’t need to have your own physical location or warehouse. Amazon has their own facilities, which means you can operate your business from anywhere in the world.
This is a huge advantage for entrepreneurs who want to be location-independent. And since Amazon handles all of the shipping and logistics, you can focus on other aspects of your business.
In fact, you can literally run your FBA business remotely from your laptop – without touching a single piece of inventory. It’s a great option for entrepreneurs who want to be free from the constraints of a traditional brick-and-mortar business.
Ease & simplicity
Amazon FBA is a system that lets you manage your inventory and fulfill orders with ease – providing you with a centralized system that is surprisingly simple to manage. You can use the Amazon FBA Dashboard to keep track of your inventory, and you can use the Amazon FBA calculator to determine how much you need to pay in fees.
In addition, you can use the Amazon FBA tutorial to learn how to set up your account and start using Amazon FBA. With Amazon FBA, you can focus on selling your products and leave the fulfillment and shipping to us. As a result, you can save time and money while still providing your customers with the best possible experience.
Amazon FBA: Cons
Requirements
When it comes to selling online, Amazon FBA is often seen as the gold standard. And it’s easy to see why: with Amazon’s widespread reach and huge customer base, it’s a great way to get your products in front of a large number of potential buyers. But there’s a downside to Amazon FBA: the large amount of strict requirements that sellers must meet in order to be successful.
From correctly packaging and labeling your FBA products, to meeting their strict deadlines for shipping and delivery, there’s a lot that goes into being an Amazon FBA seller. And if you’re not careful, you can easily find yourself overwhelmed by all of the things that you need to do in order to meet their standards. So if you’re thinking about selling on Amazon FBA, just be aware of the time and effort that you’ll need to put in to make it work.
Extended storage fees
Another potential downside of Amazon FBA is extended storage fees for inventory that doesn’t move off the shelf in a reasonable timeframe. If you experience a slowdown in sales volume, or need to pause a certain batch of inventory, the storage fees are disproportionately high.
As a result, sellers who use Amazon FBA need to be aware of the potential storage costs before they list their products for sale – and have a solid gameplan for inventory replenishment & cash flow management.
No immediate access to inventory
While Amazon FBA has many advantages, there are also some disadvantages to be aware of. One of the biggest downsides is that you don’t have immediate access to inventory. Because it’s stored at Amazon’s warehouses, you have to rely on them to keep track of it and ship it out as needed – and if you ever need access to your products, you’ll need to pay for packaging and shipping fees to get it to you.
However, there aren’t many cases where this affects Amazon sellers in a significantly-negative way. Sure, you might need individual units for product photography or social media influencers, but the cost is minimal to ship a small order in this case.
Amazon FBM: Pros
More efficient margins
In recent years, Amazon has become a leading force in the e-commerce industry. A large part of Amazon’s success can be attributed to its Fulfillment by Merchant (FBM) program.
Under this program, Amazon allows third-party sellers to list their products on the Amazon marketplace. In return, Amazon takes a commission on each sale. While this may seem like a disadvantage for sellers compared to FBA, you can also save on storage and handling costs (since you’re managing this process in-house). These savings result in more efficient profit margins.
In addition, the FBM program still gives sellers access to Amazon’s vast customer base, which can lead to increased sales volume. Overall, the FBM program provides a number of advantages for sellers that can lead to the same profits & scale that FBA offers.
Faster to get started
There are many benefits to Amazon FBM, but one of the biggest is that you can get started faster and begin selling right away. With FBA, you need to wait for products to ship to Amazon warehouses, which can take weeks or even months. With FBM, you can list products immediately – which includes launching PPC campaigns and driving traffic to your listings on day one. This is a huge advantage if you’re looking to get your business off the ground quickly.
Immediate access to inventory
As we mentioned above, with FBM, you’ll have direct and instant access to your inventory when it’s held in your own warehouse(s). Should you need to run new product testing, ship out samples to photographers/influencers, or need a large batch of inventory for any reason… you’ll have inventory on-hand right away.
FBM also gives you more control over your inventory and shipping process. You can choose your own shipping provider and tailor the process to your specific needs. This flexibility can be a big advantage, particularly for businesses with complex shipping requirements. Overall, Amazon FBM is a great option for businesses that want to get started quickly and have more control over their inventory and shipping process.
Amazon FBM: Cons
Higher maintenance
When it comes to running an e-commerce business, Amazon FBM still has downsides that you should be aware of – especially before making a decision between FBA vs. FBM.
For one, Amazon FBM requires more time & dedication towards maintenance and managing the process. You need to handle inventory, packaging and shipping. This can be very time consuming, especially if you are selling a large number of products.
Additionally, Amazon FBM still takes a cut of your sales, so you will need to factor that into your pricing. Overall, Amazon FBM can be a great option for online retail businesses, but it is important to weigh the pros and cons before making a decision on which is better.
More difficult to scale
One of the biggest challenges associated with FBM is the amount of time and effort required to implement and maintain the program. In order to take advantage of FBM, businesses must first establish their own fulfillment infrastructure, which can be a costly and time-consuming process.
Additionally, businesses must carefully manage their inventory levels and shipping schedules in order to ensure that orders are fulfilled in a timely manner. As a result, businesses that use FBM may find it difficult to scale their operations quickly or efficiently.
As your business expands, you will need to invest more time and resources into fulfilling orders yourself. For many small businesses, this can be a difficult hurdle to overcome. Nevertheless, FBM remains a popular option for many sellers due to its flexibility and affordability.
No Prime benefits
Remember – Fulfillment by Amazon (FBA) allows third-party sellers to store their products in Amazon’s warehouses and fulfill orders through the Amazon Prime service. But sellers who use Fulfillment by Merchant (FBM) are NOT eligible to offer their products with Amazon Prime – since they’re not stored in Amazon warehouses with FBA.
This can be a major disadvantage, as Prime customers are some of the most loyal and valuable shoppers on the site. Without Prime shipping, sellers may find it difficult to compete with other vendors who are able to offer this perk. As a result, it is important to carefully weigh the pros and cons of Amazon FBA vs. FBM before making a decision about whether or not it is right for your business.
Which is better?
Any business that wants to be successful needs to grow and scale. There are many different ways to go about this, but most Amazon sellers agree that FBA is the far better choice to get started with.
Remember – Amazon FBA allows businesses to store their products in Amazon’s fulfillment centers. This gives businesses access to Amazon’s massive customer base, as well as its world-class fulfillment and customer service. In contrast, Amazon FBM requires you to fulfill orders yourself.
While this can be cheaper in the short-term, it quickly becomes prohibitively expensive as you attempt to scale. It also puts a strain on customer service, as you’re forced to deal with all of the issues that arise from fulfilling orders alone. As a result, Amazon FBA is clearly the better option for businesses that want to grow and scale successfully.
