Pros & Cons of Using FBA vs FBM on Amazon

Pros & Cons of Using FBA vs FBM on Amazon

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Fulfilled-by-Amazon (FBA) is a popular program on while selling on amazon Amazon, but with its fees being high, Fulfilled-by-Merchant (FBM) becomes a relevant alternative with its pros and cons.

FBA allows sellers to send their products directly to Amazon fulfillment centers. Amazon then takes care of shipping, storage, packaging and distribution. Sellers can focus on scaling their businesses by removing the burden of fulfillment.

Amazon introduced fulfilled-by Amazon on September 19, th 2006, to allow sellers to use Amazon’s order fulfillment infrastructure. FBA was first launched in 2006. It saw a significant increase in sales and attracted more sellers from third parties to Amazon.

Amazon has improved its fulfillment process over the years to make it more convenient for sellers and buyers. Amazon’s massive growth is attributed to FBA.

Fulfilled-by-Merchant is a self-fulfillment option whereby the seller handles the entire process, from purchasing to storage, packaging, shipping, and customer service.

FBM allows the seller to control the whole process, unlike FBA, which requires the seller to pay an Amazon fee. Sellers use their resources to store and pack orders.

You can choose the right fulfillment option for your company by understanding the differences between Amazon FBA and FBM and the pros/cons of each method.

If you don’t fully understand the pros and cons of each method, choosing the best fulfillment method can be difficult. Comparing the two options will help you make an informed decision and ensure that you select a profitable fulfillment method.

In this blog post, we’ll provide you with a full comparison between Amazon FBA and FBM. Read on to learn more.

FBA vs FBM: Getting To Know Each Program

FBA is the preferred method of selling on Amazon by most sellers, so it’s not surprising that FBA is more popular than FBM. FBA has many benefits.

  • Eligibility for the Amazon Buy Box: The Amazon Buy Box, also known as the “Add to Cart” (or “Buy Now”) white box located on the right-hand side of each product detail page, is Enrolling for Amazon FBA is one of the best ways to win the Buy Box. FBA sellers are usually more likely to be featured in the Buy Box. The Amazon Buy Box increases visibility and credibility, which can help you make more sales.
  • Amazon Prime Badge: Enrolling in FBA will give you access to Amazon Prime, which means that your product listings will display with the Prime logo. Amazon Prime provides free shipping on eligible orders, whether one-day or two-day. Prime sellers can attract customers looking for one- or two-day shipping. The badge places your products in front of a wider audience, with Prime having close to 112million members. This will increase your sales chances.
  • Brand Building is More Attainable: FBA sellers have higher chances of being ranked in Amazon’s search results. Therefore, using fulfillment-by-Amazon will make your products more visible. FBA sellers are trusted more by Amazon customers because Amazon handles the entire process. You can give your business credibility by enrolling in Amazon FBA.

Amazon wants to make money from every program its platform offers to customers and sellers. They charge a fee to sell their plans.

Amazon offers the professional selling program at $39.99 per month, regardless of how many items you sell. There is also a per-item referral charge. The individual selling plan is $0.99 per unit. This means that you will pay $0.99 for each sale, plus a percentage referral fee.

Amazon Prime membership, which costs $119 per year, is another way Amazon makes money.

FBA vs FBM: Which Should Catch?

FBA sellers must pay specific fees to be able to sell on Amazon. Fees will vary depending on the selling plan and product category. Amazon charges sellers a 15% nominal fee for each product they sell.

This is how Amazon makes money from FBA. Amazon also charges fulfillment fees based on the product’s size and weight. Also, Amazon charges inventory storage fees. This is the cost sellers pay to store their inventory at Amazon fulfillment centers.

Fulfillment fees cover the entire packing, shipping, and picking process for every order shipped. FBA inventory storage charges are calculated based on how much space your inventory takes up in fulfillment centers. A referral fee is charged for each item that is sold.

This will vary depending on the product category, but usually, it ranges between 8% and 15%. FBA sellers might also be charged product returns, inventory removal, and penalty fees.

FBM sellers on Amazon must pay specific fees to access the fulfillment process. There is a $39.99 monthly subscription fee, a $1.99 per item selling fee, and referral fees. These fees vary depending on the product category.

You will also have to pay storage and fulfillment costs if you work with third parties to manage Amazon FBM. FBM and FBA have different fees. FBA sellers must pay order fulfillment fees and monthly storage fees. FBM sellers do not pay these fees as they handle fulfillment and storage.

Knowing the costs of each fulfillment method can help you decide which option is best for you. To make informed decisions, it is important to understand their differences. We’ll compare the two in the next section.

Understanding Fulfilled-by-Amazon (FBA)

FBA’s principal feature lies in its title: You send your inventory directly through Amazon, and Amazon manages end-customer shipping on your behalf. Amazon staff will pack and ship your products as soon as they receive them. They can also assist customers with returns and refunds.

Amazon deposits the sales profit into sellers’ accounts every 2 weeks. Amazon FBA is perfect if you have small or costly items and a high turnover. FBA is recommended for sellers that don’t have the workforce or time to fulfill orders quickly.

Amazon charges a fulfillment fee when you use FBA. The monthly storage fee is calculated based on a variety of factors.

Understanding Fulfilled-by-Merchant (FBM)

FBM is a different story. It puts all responsibility on the seller for inventory management and customer shipping. FBM allows you to list your products on Amazon, but you manage the shipping process.

Instead of paying Amazon for shipping, you will use your resources to store and package orders. Amazon provides you with a platform for listing your products. You handle all other aspects.

Fulfilled-by-Merchant is recommended for sellers who sell large or heavy items or products that don’t have a fast turnover.

You will need to create a product listing for FBM and select “I will ship it myself” under the Fulfillment Channel section.

You can’t choose one program over another, which leads to totally different business models. So you need to consider FBA vs FBM carefully.

FBA vs FBM: Full Comparison [Pros & Cons]

We will focus on three key areas to illustrate the benefits of FBA over FBM and vice versa.

Order Fulfillment

FBA order fulfillment works very quickly. Amazon FBA stores your inventory. Amazon picks up and packs the item, then ships it to the customer when a customer orders one of your products.

Amazon FBA takes complete responsibility for all aspects of storage, shipping, packaging, customer service, and shipping. FBA sellers are responsible for selecting products, keeping inventory current, and creating compelling product listings.

On the other hand, Fulfillment-by-Merchant puts the seller in control of their entire handling and shipping process. FBM sellers list on Amazon but handle all other aspects of the transaction.

Price

FBM and FBA differ in fulfillment costs. FBA sellers must pay order fulfillment fees and monthly storage fees. Long-term storage fees are also payable for inventory stored in fulfillment centers for over 365 days.

FBM sellers don’t have to pay Amazon this fee because they manage their fulfillment and storage. FBA sellers and FBM sellers will have to pay a monthly subscription fee and a referral fee. Additionally, each item sold will incur a fee.

When to Use Each Fulfillment Option

FBA is recommended for sellers that don’t have the skills or experience to fulfill orders and provide excellent customer service efficiently. They will prefer to pay a fee to Amazon to manage the entire process on their behalf. This is ideal for expensive, lightweight and fast-turning items.

FBA is an excellent option for sellers who want to increase sales and build credibility. FBM is better if the seller has sufficient workforce and storage space to manage their inventory and provide customer support efficiently. Sellers dealing with large, heavy, expensive items prefer this fulfillment method.

You should be able to compare these areas and determine which program is best for your business development on Amazon.

Comparison 1: Order Fulfillment

FBM and FBA have different order fulfillment methods, but each has pros and cons. FBA fulfills orders for customers on Amazon’s behalf, while FBM allows sellers to handle everything themselves.

Advantages Of Amazon FBA In Terms Of Order Fulfillment Include:

  • Sellers are relieved of the responsibility
  • This helps build trust by ensuring customers receive their orders on time.
  • This allows you to concentrate on your business’ growth.

Cons:

  • Charges for use
  • Fees are not under your control
  • Packaging that the brand does not manufacture

Comparison 2: Cost

Based on various factors, the cost of fulfilling orders varies between the two options.

Amazon FBA Advantages in Terms of Cost:

  • You will be eligible for Prime status automatically, which can help you save money
  • Monthly subscription costs are affordable
  • The cost of overheads is significantly lower

Cons:

  • Extra shipping costs
  • Storage fees for long-term storage

Comparison 3: When To Use Each Fulfillment Option

The nature of your products will determine the time you use each fulfillment option.

Amazon FBA Advantages in Terms of the Fulfillment Option To Use

  • You have the freedom to choose what is most effective for you
  • Sellers who don’t have storage can use Amazon fulfillment centers

Cons:

  • Forfeiting control
  • Amazon has issues handling product returns

Each industry will be different in how it handles these issues. Here is a list of industries that use FBA and FBM uniquely.

Lifestyle FBA
Consumer electronics FBM
Beauty and personal care FBA
Fashion FBA
Sports and outdoors FBM
Toys and games FBM

Lifestyle, fashion, beauty and personal care use FBA to deliver fast. Sports and outdoor toys and games prefer FBM to reduce shipping costs and save money on storage fees.

Selecting the Right Program for Your Brand

FBA is the default option for many Amazon brands, but FBM can be used in some cases. It all comes down to how you use the programs.

Every Amazon brand is different in many ways. This means that you need to make an effort to distinguish your brand. You’ll be able to attract more customers and sell more products if you set your brand apart from other Amazon sellers.

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FAQs On Pros & Cons of Using FBA vs FBM on Amazon

Here you can check FAQs On Pros & Cons of Using FBA vs FBM on Amazon.

Is Amazon FBA worth it in 2022?

Amazon FBA will be a good investment in 2022. It’s worth taking the time to compare the costs and the potential profits of Amazon FBA.

Can You Do FBA and FBM?

Yes, FBA and FBM can be done together. It is enough to list the same product for FBA and FBM.

What Is Better FBA or FBM?

FBA is best for items with a high turnover and large margin products, while FBM is more suitable for items with a low turnover or are one-offs.

Is FBA Cheaper Than FBM?

It will all depend on how much storage you have with FBM. FBM will save you money if you can find storage at a lower rate.

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