You’ve decided it’s time to start selling on Amazon. The reasons for your decision are likely numerous, but all boil down to the simple fact that you would like to be making more money. The first steps are obvious, things like: What do you want to sell? What are you familiar with and comfortable with? Do those first two questions actually matter? After you’ve figured those things out, however, comes a question you may not even be aware you need to ask. That is, how are you going to fulfill your orders when it comes time to take them? That’s where I’m hoping to come in. The differences between FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant) are crucial to you having the most success possible with your Amazon business. It can all seem overwhelming, but it’s actually pretty simple in the end, so let’s break it down.
Before we dive into the nitty gritty behind FBA vs FBM let’s take a look at the numbers. According to JungleScout’s 2021 State of the Amazon Seller Report 91% of sellers on Amazon are using FBA, with 57% of them using only FBA, 9% of sellers use only FBM. Leaving 34% of sellers using a combination of both methods. These numbers are important to keep in mind as we dive into the differences between seller types.
What is FBA, exactly?
With FBA you store your product at Amazon’s warehouses and they fulfill the order for you. This takes much of the busywork of ecommerce out of your hands, which may be a good thing or a bad thing depending on how you want to run your ecommerce business.
Pros for FBA
FBA products are drastically more likely to end up in the Buy Box, which is the box on every Amazon page where you add the item to your cart, or buy it outright. If there are multiple sellers for a single item Amazon will choose which seller is the “default” merchant and theirs will be the item that gets placed in the cart from the main listing for that item. The vast majority of sales for an item are those that get the Buy Box.
With FBA you don’t have to worry about customer service or logistics, Amazon will have those covered.
FBA gets Prime shipping, which is huge with over 100 million Prime accounts, many of whom will choose an item with that Prime shipping label over one without it.
Finally, with FBA you can focus more of your energy on selling instead of fulfilling orders.
Cons for FBA
Depending on the sort of business you are trying to run, the lack of customer contact with FBA can end up being a pretty big con. If you want more control over the customer experience FBA severely hinders the ability to interact with your customers.
Cost is another con for Amazon in some cases. Amazon charges storage fees, which is fine for small, light things that move quickly. If you’ve got larger products, or things that have lower turnover then the fees associated with FBA become much harder to stomach. Another issue with Amazon’s fees is the drastic hike that comes in October and lasts through December.
What is FBM, exactly?
FBM is where you are in control of everything. You handle your inventory, your logistics, your customer service, and your order fulfillment. The only thing Amazon does is display your listing. Like with FBA, this comes with a host of pros and cons.
Pros for FBM
The biggest pro for FBM is that you have control. If you handle everything you don’t have to play by Amazon’s rules. You control the customer experience and you control your fulfillment. You can control the packaging. You can drop marketing materials in with your products.
You pay significantly less in Amazon fees when they aren’t holding things for you. If you have your own storage and logistics already sorted out, you don’t need Amazon to do it for you.
Cons for FBM
You don’t get that SEO bump without FBA. This can lead to fewer sales and less product moved. This may not be a big deal if you’re selling antique books or other, slower moving products, but it certainly isn’t ideal if you’re trying to sell spatulas or something that you want moved in high volume.
You also don’t get that Buy Box as easily. In order to get the buy box with FBM you generally have to be priced significantly lower than the competitors that are using FBA.
There is obviously a reason that 91% of Amazon sellers are using FBA in some capacity. It is incredibly difficult to beat the perks that come from using FBA. If you aren’t getting that SEO bump you’re less likely to get your product in front of potential customers. This may not be true for every product, but for a lot of things it is. It’s possible you’re an SEO wizard with a logistics network available to you. You may be selling large, awkward items like canoes where you move low volume and they take up a ton of space. Each option has its pros and cons, and it’s important to weigh your options before deciding which method works best for your business.