What Is Amazon FBA?
If you want Amazon to store your inventory in Amazon’s warehouses, pick, pack and ship the items when an order is placed, then you need to use Fulfillment by Amazon or Amazon FBA business. By using Fulfillment by Amazon, you don’t need to deal with shipping and packing and usually, the items are sent to Amazon’s warehouses from your provider.
Pros & Cons of FBA
Pros of FBA
Let’s have a look at the advantages and disadvantages of Fulfillment by Amazon:
- Easy Shipping And Storing Inventory
Storing hundreds of items needs a large space and can make your rooms, garage, and attic filled. Also, shipping is time-consuming. Imagine you need to pack the items based on strict Amazon packing policies and send the boxes to the post office. You always have to have many boxes of different sizes ready.
Using Fulfilment by Amazon, you pay a small fee and Amazon does everything from start to finish and you have more time to focus on the more important aspects of your business.
- Cheap Shipping And Logistic
Using Fulfillment by Amazon means that you are using a large network of warehouses and shipping facilities. So, the fees for the picking, packing, and shipping of your items are less than what you would pay if you buy suitable boxes, labels and ship them using different post services. The costs depend on the size and type of your item. For more details click here.
- Using Amazon Prime
Listings of Amazon sellers using FBA are eligible for prim shipping automatically. It means that Amazon Prime subscriptions can get their orders within 1-2 days, without any costs. So, the customers trust you as a verified seller. In addition, your items will have more sale potential due to free fast delivery.
Over 110 million Prime customers will be more eager to buy from Amazon Prime Sellers to use Prime benefits.
- Winning the Buy Box
Usually, several people are selling the same product on Amazon. The Buy Box is where the “Add to Cart” and “Buy Now” buttons are located on a product page and it means a higher chance of selling the items.
Using Fulfillment by Amazon is an important parameter for Amazon to give a seller Buy Box.
- Return, Refund, And Customer Service Management
Amazon offers its customer service for FBA sellers. So, you have the support of global high-quality customer service. In addition, Amazon sellers who are using Fulfilment by Amazon, assign all return and refund processes to Amazon.
Cons of FBA
For making the right decision you need to balance costs and benefits and here are the disadvantages of Fulfillment by Amazon:
- Losing Control on Inventory
Storing and shipping your items through Amazon means that you don’t have control over them. You can not enter Amazon’s warehouses to check your item and have to trust Amazon.
- More Returns
Because Amazon’s return process is really easy, more customers will return the items.
- Difficult Shipping Preparation to Amazon
Amazon has a strict ASIN/UPC system and the products that are sent to Amazon warehouses should be packed individually with individual labels. If your items don’t satisfy Amazon’s standards, there’s always the risk of rejection. To solve this problem, you can use prep centers that know the Amazon policies very well and can meet the requirements in preparing products and send them to the warehouses. You need to add prep center fees to your costs too.
- Paying FBA Fees
Fees are not the cons always, sometimes this fee is cheaper than what you would pay if you do it yourself. It depends on the size of your business and what you sell.
Know More: Amazon FBA Fees & Costs for Sellers
What Is Amazon FBM?
In the Fulfillment by Merchant program, Amazon seller (or another third party that is not Amazon) is responsible for storing, packing, and shipping the items. Also, Amazon sellers should manage returns, refunds, and customer service. All the services that are provided by the seller should meet Amazon’s standards.
Pros & Cons of FBM
Pros of FBM
The advantages of Fulfillment by Amazon are:
- More Control on Inventory And Customers
When you are storing and selling hundreds of products, finding the items that are not sold as fast as you expected is important. Also restocking items can need a schedule. Paying for the items that are not attractive for the customers instead of recharging the attractive items can make Amazon sellers failed.
If you store your products, you can find out everything by looking at the shelves. Also, during packing the items, you can drop marketing inserts to introduce your other products to the customers. In Fulfilment by Merchant, you can control the customer experience.
- Less Amazon Fees
When you are not using Fulfillment by Amazon, it means that you don’t need to pay for it. Also, some hidden fees that happen in some situations, like “long term storage fee” or “return processing fee” will be removed. Notice that based on what you sell and the size of your business, paying to Amazon instead of doing everything by yourself can be profitable or unprofitable.
Cons of FBM
Here is a list of disadvantages of Fulfilment by Amazon:
- Less Chance For Winning the Buy Box
In the same condition, the chance of an FBA seller is always more than the FBM seller to win the Buy Box. If the Buy Box of your product is very competitive so maybe FBA is a better option.
- Return, Refund, And Customer Service Responsibilities
Handling all of them can be time-consuming but it allows you to identify your problems better. When you interact with the customers directly, you can have an insight into customers’ problems and needs.
- Losing the Benefit of Prim Shipping
Your items are no longer eligible for free and fast shipping and your customer might hesitate on buying your item.
How Much Does FBA Cost?
Fees depend on what you are selling, the size of the items, and the time.
Generally, small items are most cost-effective than heavy and bulky items. Also, the storage fees are increased during Q4 (from October to December). To check more details about Fulfillment by Amazon fees, click here.
What Is the Difference Between FBA and FBM?
To outline what we have discussed briefly we can say, Fulfillment by Amazon is hassle-free. You assign everything to Amazon and only focus on your business. But you have less control over your customer and inventory. You can take advantage of Amazon prime and a higher chance of winning Buy Box.
In Fulfillment by Merchant, you have full control over everything but you need to prepare your facilities to meet Amazon’s standards and refrain from the power of Amazon Prime.
Read More: How Much Do Amazon Sellers Make?
Is FBA Better Than FBM?
In most situations, Fulfillment by Amazon is the better choice because it is a weight off your shoulders. Amazon will be responsible for storing, packing, return and refund processing, and customer service. You can only focus on improving your business while Amazon is doing the rest. In addition, usually, FBA is more cost-effective than what you should pay if you do it yourself. Qualifying for the Buy Box and using Prime shipping are other two important factors.
But if you are selling heavy and bulky items, you should notice FBA isn’t designed for that and it costs a lot for you. Now using Fulfillment by Merchant makes sense.
Can I Do FBA and FBM at the Same Time?
Definitely yes! If some of your customers don’t have Prime membership, FBM programs might attract them and you can encourage them to buy from you by offering them free shipping. Your FBA service can win the Prime customers too.
In addition, you can use another service as plan B. If you run out of the product on FBM and you get an order, you can send the item using your FBA account and vice versa.
Fulfillment by Amazon and Fulfillment by Merchant are two programs that are offered by Amazon to help the Amazon sellers to handle the orders by themselves or assign them to Amazon. Each has its cons and pros. The good news is that you can use both simultaneously and take advantage of each one. If you wanna know more about online arbitrage deals, follow our blog.