What do FBA and FBM Mean?
If you are an Amazon seller, these methods are something you probably understand. Depending on your preferences, you probably have chosen one or both. We are here to explain the pros and cons of both methods.
What Does FBA Stand for?
FBA or Fulfilment-by-Amazon is a popular Amazon program that takes care of the seller’s shipping to the customers. Amazon storage, pack and ship the item to your customers on behalf of the seller.
By this, the seller can focus on scaling their business. Amazon introduced its method in 2006, becoming one of its most popular shipping methods. In the last years, they improved it, and it added to the fast growth of the Amazon platform.
However, this method is not free of charge, and the seller has to pay additional fees for storage and shipping.
What does FBM stand for?
FBM or Fulfilment-by-Merchant is an option when the seller takes care of storage and the shipping of the products. It is without additional fees but is more time-consuming, and you have to have extra human resources to do it so.
FBA vs. FBM: Which is better?
To be quite honest, both methods are good options, and both methods have their pros and cons. So let’s dive deeper into them.
FBA Pros and Cons
Buy Box Eligibility: The Amazon “buy Box” allows the sellers to be more visible in the search. An “Add to Cart” or “Buy Now” white box is displayed on the product’s detailed page’s right side. Of course, the easiest way to win the box is being part of FBA, and it is one of the ways to boost your sales.
The Amazon Prime Badge. Enrolling in Amazon FBA will give you access to Amazon Prime, and your product listing will be displayed with the Prime logo. Amazon Prime Membership has about 112 million people, and you get the chance to display your product to a greater audience and a way to increase your sales. Amazon Prime offers free 0ne-day or two-day shipping for eligible customers.
Brand Building – Amazon shoppers trust FBA sellers more because Amazon takes care of the shipping. It is a way to build your brand more accessible than shipping your products yourself.
However, as mentioned before, the FBA program is not free of charge. Apart from regular selling fees and your seller fees, you will have to pay additional fees for FBA.
Amazon charges fulfillment fees that depend on the size and the weight of the product. Also, Amazon charges inventory storage fees for the sellers storing their inventory in Amazon Fulfillment Centers.
FBA inventory storage fees are based on the space that items occupy in the fulfillment Center. There is also a referral fee for each item sold. It depends on the product category, and it usually ranges from 8% to 15%.
The other fees include product return fees, inventory removal fees, penalty fees, and package preparation fees.
FBM Pros and Cons
With FBA, the whole responsibility is on the seller. Inventory management, customer shipment, and customer service. With FBM, you use Amazon as a selling platform to list your products, and everything else is up to you.
So instead of paying additional fees to Amazon, the whole process is up to you. You will have to manage your inventory, contact the customers, and package and ship the items from your warehouse. It is manageable if you have additional human resources to do it for you.
However, if you do not have a quick turnaround on your products, you will save on storage fees. If your products are big and heavy, FBM is a better option maybe.
Sellers on Amazon can choose the option that suits them most. Understanding both methods will help you decide on the best option for you. However, you will have to weigh the pros and cons of both options. To make it more simple for you, we will give you the overall of both.
- You can Gain the Buy Box Easier
- Your product will be displayed with the Prime Logo
- You can build trust with your customers because Amazon is taking care of your Shipment
- You won’t need storage space because Amazon will store your products
- It will cost you some additional fees
- You will have to pay for the storage that your products occupy.
- There are no additional fees
- If your products are heavy and sizeable, you will avoid paying the storage
- If you don’t have a quick turnaround, you will avoid paying long-term storage fees
- You will need your own storage space
- You will have to handle packing and shipping yourself.
Hopefully, this will help you decide which method is better for you. However, some of the sellers use both methods.
According to the latest statistics, about 29% of the sellers use both methods. FBA is only used by 6% of the sellers, and FBA is a popular method used by 66% of the Amazon sellers.