Do you know which is best for your business in 2024 — Amazon FBA vs FBM? Read on to find out!
Choosing between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) is a critical decision for anyone selling on Amazon. Understanding these two fulfillment methods can help you align your choice with your business goals, resources, and growth plans.
In this comprehensive guide, we’ll explore the key differences between FBA and FBM, discuss their advantages and drawbacks, and provide insights into which method might be the best fit for your business in 2024.
What Is Amazon FBA and How Does It Work?
Fulfillment by Amazon is a service that lets sellers store their products in Amazon fulfillment centers. When a customer places an order, Amazon takes care of the picking, packing, shipping, and even customer service for that order.
With FBA, sellers send their inventory to Amazon, and Amazon handles everything from there. This includes storing your products, managing the logistics of shipping them out to customers and dealing with returns or customer inquiries.
FBA offers an easier way for sellers to sell their products and focus on growing their business while Amazon handles the heavy lifting of order fulfillment.
What Is Amazon FBM and How Does It Work?
While FBA takes care of the heavy lifting for sellers, some prefer the control that comes with managing their own fulfillment process—this is where FBM comes in. Fulfillment by Merchant is an alternative fulfillment method offered by Amazon.
With FBM, sellers handle all aspects of the fulfillment process themselves, including storage, packaging, shipping, and customer service, without relying on Amazon’s fulfillment centers. FBM allows sellers to be responsible for managing their own inventory and shipping products directly to customers.
They also handle any customer inquiries, returns, and other service-related issues. This approach allows sellers to maintain full control over their operations and customer experience.
8 Major Differences Between Amazon FBA and FBM
Now that we understand both FBA and FBM, it’s important to know how these two fulfillment methods differ across several key areas. Each model offers unique advantages and challenges depending on your business needs, goals, and resources.
Factors like shipping logistics, scalability, costs, and control all play a role in choosing the best option for your business. In the next sections, we’ll explore these differences to help you make the right decision for 2024.
| FBA | FBM | |
|---|---|---|
|
Types of Sellers |
Best for new sellers, those without fulfillment infrastructure, high-volume, or international sellers. |
Suitable for experienced, niche, custom, or cost-conscious sellers. |
|
Shipping Logistics |
Provides fast, reliable shipping with Amazon’s network, including Prime eligibility and global reach. |
Offers control over shipping processes, flexible options, but may have slower delivery times |
|
Scalability & Expansion |
Highly scalable with Amazon handling logistics; ideal for rapid growth and international expansion. |
Limited scalability; more challenging for international shipping due to the need for specialized logistics management. |
|
Time Commitment |
Lower time commitment as Amazon manages fulfillment and customer service, allowing focus on business growth. |
Higher time commitment required to handle all aspects of fulfillment and customer service independently. |
|
Cost Structure |
Involves fixed and variable fees (fulfillment, storage, etc.); can be costly for bulky or slow-moving products. |
Lower direct fees but variable costs depending on self-managed shipping and storage expenses. |
|
Control |
Limited control over packaging, shipping, and customer service due to Amazon’s standardized processes. |
High level of control over packaging, shipping, branding, and direct customer interactions. |
|
Customer Service |
Amazon-managed customer service; consistent but less personalized interaction with customers. |
Seller-managed customer service; allows for personalized support and direct relationship building. |
|
Prime Eligibility |
Automatic Prime eligibility for all products, increasing visibility and potential sales among Prime members. |
Generally not Prime eligible, unless applying for Seller Fulfilled Prime (SFP), which has strict requirements. |
1. Amazon FBA vs FBM: Types of Sellers
When deciding between Amazon FBA and FBM, the type of seller you are plays a crucial role in determining which fulfillment method is most suitable for your business. Here’s an overview of which types of sellers benefit most from each option:
FBA
New Sellers: FBA is often the best choice for new sellers starting their e-commerce journey. It simplifies the fulfillment process, allowing sellers to focus on growing other aspects of their business, such as product sourcing, marketing, and customer acquisition.
Sellers Lacking Fulfillment Infrastructure: FBA is ideal for sellers without the infrastructure or resources to manage fulfillment themselves. By using Amazon’s fulfillment network, sellers can benefit from Amazon’s logistics expertise and customer service capabilities.
High-Volume or Growing Sellers: FBA is suited for sellers looking to scale quickly or who have high-volume sales. Amazon’s fulfillment centers can handle large order volumes, enabling sellers to expand their product catalog and reach more customers without worrying about the logistics.
International Sellers: For sellers planning to expand internationally, FBA provides access to Amazon’s global network, making it easier to reach customers in multiple countries without managing complex international shipping logistics.
FBM
Experienced Sellers: FBM is a great choice for experienced sellers with a well-established infrastructure for order fulfillment, including inventory management, packaging, and shipping. These sellers have the resources and expertise to manage all aspects of the fulfillment process independently.
Sellers with Unique or Custom Products: FBM works well for sellers with niche or custom products who have specific packaging requirements or want complete control over their customer experience. It allows them to maintain direct oversight of the fulfillment process.
Cost-Conscious Sellers: FBM offers more control over costs, as sellers can negotiate their own shipping rates and choose the most cost-effective fulfillment options. This method is ideal for sellers focused on minimizing expenses or implementing specific cost-saving strategies.
2. Amazon FBA vs FBM: Shipping Logistics
Shipping logistics is a key factor when choosing between Amazon FBA and FBM, as each fulfillment method offers distinct advantages and challenges in managing the storage, packing, and shipping of products to customers.
FBA
Fast and Reliable Shipping: FBA uses Amazon’s vast logistics network to provide fast and reliable shipping. Products fulfilled through FBA are eligible for Amazon Prime, which includes benefits like free two-day or next-day shipping. This can significantly increase visibility and appeal to customers who prioritize quick delivery.
Standardized Shipping and Handling: With FBA, Amazon handles all aspects of the shipping process, including picking, packing, and shipping orders. While this reduces the seller’s workload, it also means the seller has less control over how products are packaged and shipped. Amazon’s standardized processes ensure efficiency but may not meet specific branding or packaging preferences.
Global Reach: FBA allows sellers to reach a global audience through Amazon’s international fulfillment centers, simplifying cross-border shipping logistics and enabling international expansion without the need for complex shipping arrangements.
Suitability: FBA is suitable for businesses that need fast and consistent shipping, have products that benefit from Prime eligibility, or want to reach a wider audience, particularly those looking to expand internationally.
FBM
Direct Control Over Shipping: With FBM, sellers handle all aspects of shipping logistics themselves. This means they have full control over how products are packaged, the shipping carriers used, and the delivery times offered to customers. Sellers can choose to work with preferred shipping partners or negotiate better rates for their specific needs.
Flexible Shipping Options: FBM allows sellers to offer customized shipping options, such as expedited shipping or local delivery services, tailored to their customer base. This flexibility can be beneficial for businesses that need to meet specific customer demands or provide unique shipping experiences.
Potential for Slower Delivery Times: Because FBM relies on the seller’s ability to manage shipping logistics, delivery times may vary based on the seller’s location, shipping partners, and processes. This can affect customer satisfaction if shipping times are inconsistent or slower than expected.
Suitability: FBM is suitable for businesses with specific packaging needs, those that prioritize control over their shipping processes, or those that can manage logistics effectively, especially for products that may not require rapid delivery.
3. Amazon FBA vs FBM: Scalability and International Expansion
Scalability and international expansion are key considerations when choosing between Amazon FBA and FBM, as each method offers different capabilities for handling growth and reaching global markets. Understanding these differences can help sellers decide which approach aligns best with their business expansion goals.
FBA
High Scalability: FBA supports easy scalability by handling storage, packaging, and shipping, allowing sellers to focus on growth. It is well-suited for businesses that want to expand quickly without managing fulfillment capacity.
Seamless International Expansion: FBA simplifies reaching global customers through Amazon’s international fulfillment network, handling all logistics and compliance. This makes it an excellent choice for sellers looking to enter new markets with minimal hassle.
Suitability: FBA is ideal for businesses aiming to scale rapidly or expand internationally, using Amazon’s robust logistics capabilities.
FBM
Limited Scalability: FBM requires sellers to manage all aspects of fulfillment, which can be challenging as order volumes increase. Scaling up often means higher operational costs and more complexity in logistics.
Challenges in International Expansion: Sellers using FBM must handle international shipping logistics, including customs and taxes, which can be complex and time-consuming. This option is better suited for businesses focusing primarily on domestic markets.
Suitability: FBM is ideal for sellers who prefer control over their fulfillment processes and are prepared to invest in the resources needed to scale or manage global shipping.
4. Amazon FBA vs FBM: Time Commitment and Management
Time commitment and management are important factors when deciding between Amazon FBA and FBM, as each method demands a different level of involvement in the fulfillment process. Sellers must consider how much time they can dedicate to managing orders and logistics to choose FBA or FBM for their business.
FBA
Lower Time Commitment: FBA significantly reduces the time sellers spend on fulfillment by outsourcing storage, packing, shipping, and customer service to Amazon. This allows sellers to focus on other areas of their business, such as marketing and growth.
Less Management Involvement: With FBA, Amazon handles the day-to-day logistics, requiring minimal involvement from the seller in managing fulfillment tasks. This makes it a great option for sellers who want a more hands-off approach to order fulfillment.
Suitability: FBA is ideal for sellers who want to minimize their time investment in fulfillment and focus on other aspects of growing their business.
FBM
Higher Time Commitment: With FBM, sellers manage all aspects of fulfillment, from storage to shipping and customer service, which can be time-consuming. This method requires a significant investment of time, especially for smaller teams or solo entrepreneurs.
Greater Management Control: FBM provides sellers with complete control over their processes but demands consistent oversight and coordination to ensure smooth operations. It is ideal for sellers who prefer hands-on management and have the resources to handle fulfillment efficiently.
Suitability: FBM is suitable for businesses that have the capacity to manage fulfillment in-house and want to maintain full control over every aspect of the process.
5. Amazon FBA vs FBM: Cost Structure
Cost structure is a crucial consideration when choosing between Amazon FBA and FBM, as each method comes with its own set of fees and financial responsibilities. Understanding these cost differences can help sellers determine which fulfillment method aligns best with their budget and business model.
FBA
Fixed and Variable Fees: FBA involves various fees, including fulfillment fees, storage fees, and additional charges for long-term storage or special handling. While these costs can add up, they offer a predictable structure for sellers who prefer to outsource logistics and focus on other areas.
Potentially Higher Total Costs: Although FBA can simplify logistics, the fees may be higher for certain products, particularly bulky or slow-moving inventory. This method suits businesses that value the benefits of Amazon’s fulfillment network and are willing to pay for convenience and scalability.
Suitability: FBA is suitable for sellers who want to outsource fulfillment tasks and can accommodate the fee structure within their business model.
FBM
Lower Direct Fees: With FBM, sellers avoid FBA fees, such as fulfillment and storage charges, but are responsible for their own shipping costs and any expenses related to storage and handling. This can result in lower direct costs, especially for businesses with existing infrastructure and lower shipping volumes.
Variable Costs Based on Resources: Costs for FBM can vary depending on the seller’s ability to negotiate shipping rates, manage storage efficiently, and use their own resources. This model is suitable for businesses that want to control expenses directly and have the ability to keep their fulfillment costs low.
Suitability: FBM is ideal for sellers who already have warehousing and shipping capabilities or those who can negotiate favorable rates and prefer flexible cost management.
6. Amazon FBA vs FBM: Control
Control over the fulfillment process needs to be considered when choosing between Amazon FBA and FBM since each method offers different levels of control. From how products are packaged and shipped to how customer service is managed, the level of control affects the overall customer experience and brand identity.
FBA
Limited Control: With FBA, Amazon takes over most aspects of fulfillment, including packaging, shipping, and customer service, which means sellers have less control over how their products are presented to customers. While this can reduce the workload, it also limits the ability to create a unique brand experience.
Standardized Customer Service: Amazon handles all customer service and returns, providing a consistent experience but reducing the seller’s ability to interact directly with customers. This method is suitable for businesses that are comfortable with Amazon’s standardized processes and do not require a high degree of control over their customer interactions.
Suitability: FBA is best for sellers who are willing to sacrifice some control in exchange for convenience, scalability, and access to Amazon’s trusted logistics and customer service.
FBM
High Level of Control: FBM gives sellers complete control over every aspect of the fulfillment process, including packaging, shipping, and customer service. This allows for a personalized customer experience, including unique branding, customized packaging, and flexible shipping options.
Direct Customer Interaction: With FBM, sellers can handle customer inquiries and returns directly, which allows them to build stronger relationships with their customers and maintain control over the customer service experience. This approach is suitable for businesses that prioritize maintaining their brand identity and direct customer engagement.
Suitability: FBM is ideal for sellers who want to have full control over their operations and prefer a personalized approach to customer service and fulfillment.
7. Amazon FBA vs FBM: Customer Service
Customer service can help determine whether Amazon FBA or FBM is the right choice for your business. Each method offers a different approach to managing customer interactions, returns, and inquiries, which can significantly impact the customer experience and brand loyalty.
FBA
Amazon-Managed Customer Service: FBA offloads all customer service tasks to Amazon, including handling inquiries, returns, and refunds. This reduces the seller’s workload and ensures customers receive consistent, reliable service from a trusted provider.
Standardized Service Experience: While Amazon’s customer service is efficient and widely trusted, it may lack the personal touch that some brands want to provide. FBA is best suited for sellers who prefer a hands-off approach to customer service and are comfortable with Amazon’s standardized support.
Suitability: FBA is suitable for sellers who want to simplify their operations by outsourcing customer service responsibilities to Amazon.
FBM
Direct Customer Service Management: With FBM, sellers handle all customer service inquiries, returns, and complaints directly, giving them full control over the customer experience. This allows sellers to provide personalized support and address customer concerns in a way that aligns with their brand values.
Higher Customer Service Responsibility: While FBM provides greater control, it also requires more time and resources to manage customer interactions effectively. This method is suitable for businesses that prioritize maintaining direct contact with customers and have the capacity to handle customer service demands.
Suitability: FBM is ideal for sellers who want to build strong customer relationships through direct communication and personalized service.
8. Amazon FBA vs FBM: Prime Eligibility
Prime eligibility is a key factor in deciding between Amazon FBA and FBM, as it affects product visibility, customer reach, and sales potential. FBA and FBM offers different opportunities and challenges for gaining access to Amazon’s large base of Prime members.
FBA
Automatic Prime Eligibility: All products fulfilled through FBA automatically qualify for Amazon Prime, offering customers fast, free shipping options. This can lead to increased visibility, higher sales, and greater trust among Prime members.
Broader Customer Reach: Prime eligibility is a significant advantage for FBA sellers, as it allows them to tap into a large and loyal customer base that prioritizes speed and convenience. FBA is best for businesses that want to maximize their product exposure and sales by using Amazon’s Prime program.
Suitability: FBA is ideal for sellers looking to expand their reach and benefit from the increased visibility and trust that comes with Prime eligibility.
FBM
Limited Prime Eligibility: Products fulfilled by FBM are generally not automatically eligible for Amazon Prime, which can limit visibility and appeal to Prime members looking for fast, free shipping. Sellers can apply for Seller Fulfilled Prime (SFP), but it requires meeting strict performance standards and managing shipping logistics effectively.
Greater Flexibility but Lower Reach: Without Prime eligibility, FBM sellers may miss out on the increased sales that come from appealing to Prime customers. FBM is suitable for businesses that prioritize control over logistics and are less concerned with the reach that comes from Prime membership.
Suitability: FBM is ideal for sellers who value control and flexibility over automatically reaching Amazon Prime customers but are willing to meet SFP standards for Prime benefits.
FAQs About Amazon FBA and FBM
What is Better for Amazon Sellers: FBA or FBM?
Choosing between Amazon FBA and FBM depends on your business needs and priorities. FBA is ideal for sellers looking to scale quickly, benefit from Prime eligibility, and minimize fulfillment responsibilities. In contrast, FBM is suited for those who want greater control over logistics, cost management, and customer service.
Consider your goals, resources, and desired level of control to decide which method is right for your business strategy on Amazon in 2024.
Do you need help with your Amazon business? Contact our Amazon agency today!
