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Apr 9, 2024

Amazon FBA versus FBM: Which one is right for your business?

By Cassie Stang Business Development at King Solutions

As the e-commerce landscape continues to evolve, Amazon stands out as the ultimate destination for businesses looking to expand their online presence. With its massive global reach and iconic Prime badge, Amazon offers unmatched opportunities for merchants worldwide. However, navigating the logistics of fulfillment can be challenging, especially when considering the choice between Fulfillment By Amazon (FBA) and Fulfillment By Merchant (FBM) services.

Let’s dive into the comparison of FBA versus FBM across key factors such as fees, customer service, and returns. These elements play a crucial role in shaping the success of an Amazon merchant’s venture, making it essential to weigh the differences between these fulfillment options and determine which best suits your online store.

 

Understanding Fulfillment By Amazon

Fulfillment By Amazon (FBA) is a service provided by Amazon, allowing sellers to store and ship their products using Amazon’s vast network of fulfillment centers. FBA stands as an indispensable asset for sellers seeking to unlock the full potential of Prime-exclusive programs. Through FBA, brands gain entry into the esteemed Amazon FBA Network, enabling them to extend to their customers the unparalleled convenience of nationwide 1-Day Prime Delivery, setting the standard for swift and seamless fulfillment in the eCommerce sphere.

How does Amazon FBA work?

With FBA, sellers entrust Amazon with storing, packing, and shipping their inventory, as well as handling order-related customer service. Here’s a breakdown of the process:

  • Merchants Sign Up for FBA: Sellers create a seller account on Amazon and enroll in the FBA program, deciding which products to sell through FBA and preparing them for shipment to Amazon’s fulfillment centers.
  • Inventory is Shipped to Amazon: Sellers prepare their products according to Amazon’s guidelines before shipping them to Amazon’s fulfillment centers, ensuring safe storage and efficient processing for orders.
  • Orders Are Fulfilled by Amazon: Once inventory is stored at an Amazon fulfillment center, Amazon takes care of order fulfillment, including storage, picking, packing, and shipping, often with the added benefit of Prime shipping eligibility.
  • Merchant Manages Product Listing and Pricing: While Amazon handles fulfillment, sellers retain control over product listings, pricing, and inventory management.

 

Exploring Fulfillment By Merchant

Fulfillment By Merchant (FBM) involves sellers taking full responsibility for storing, packaging, and shipping their products to customers, bypassing Amazon’s fulfillment centers. FBM emerges as the optimal choice for sellers grappling with the logistical challenges posed by sizable, cumbersome inventory and items characterized by low turnover rates. This offers a strategic edge for Brands flaunting extensive product assortments, catering to a diverse array of items spanning varying sizes and shapes that have higher average order values but lower sales demand.

How does Amazon FBM Work?

  • FBM gives sellers more control over the fulfillment process: Merchants receive and store inventory. Sellers receive and organize inventory, list products on Amazon, and manage their prices, shipping, and customer service.
  • Customer Places an Order: Sellers fulfill orders themselves, picking, packing, and shipping products directly to customers, maintaining oversight of shipping times and customer interactions.

 

FBA versus FBM

When deciding between FBA and FBM, several factors come into play:

  • Fulfillment Process: FBA streamlines fulfillment by leveraging Amazon’s infrastructure, while FBM offers greater control over inventory management but requires more hands-on involvement from sellers.
  • Fees and Cost Structure: FBA entails monthly storage and fulfillment fees, which can vary based on product characteristics, potentially impacting profit margins. FBM allows for more flexibility in cost management but requires sellers to handle logistics independently.
  • Performance: FBA provides automated order processing but may lack personalized attention, while FBM allows for more control over quality and customer experience.
  • Customer Service: FBA relies on Amazon for post-sale support, while FBM allows sellers to manage customer inquiries directly, potentially enhancing brand engagement.
  • Return Management: FBA handles returns on behalf of sellers, but sellers may have limited control over the process. FBM requires sellers to manage returns themselves, offering more control but requiring additional resources.

 

So which one is right for your business?

Ultimately, the choice between FBA and FBM depends on factors such as cost, control, and flexibility. While FBA offers convenience and scalability, FBM provides greater control and potentially lower costs. Outsourcing fulfillment to a third-party logistics provider (3PL) can offer a balance between these options, providing tailored solutions for Amazon and other sales channels.

At King Solutions, we specialize in both FBA and FBM, offering customized fulfillment solutions tailored to your business needs. With dedicated customer care and cutting-edge technology, we ensure faster delivery times, accurate inventory management, and seamless integration with e-commerce platforms like Amazon and more niche marketplaces.

Ready to position your organization for growth in the e-commerce sector? Give us a call today to talk about fulfillment solutions that can support your business’s growth.

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