Amazon FBA vs. FBM: Which is Right for You?

When starting an Amazon business, many sellers need help choosing between Amazon FBA and FBM for order fulfillment methods. Both of these methods come with certain pros and cons.

In this guide, we will explore everything regarding Amazon FBA and FMB to help you make the perfect choice for your business. So, if you are ready, let’s dive into it. 

What is Amazon FBA? 

Amazon FBA is fulfillment by Amazon. Essentially, it is a fulfillment method by Amazon by choosing which seller is not responsible for order fulfillment anymore. The stock is stored at Amazon’s fulfillment centers, and when the order is placed, Amazon handles the picking, packing, and shipping processes. 

Pros 

– Prime shipping. With Amazon FBA, your items will become eligible for Prime shipping. 

– Increased chances of winning the Buy Box due to faster shipments. 

– Allows to focus on selling rather than fulfilments. Order fulfillment is a long and costly process; Amazon FBA allows sellers to focus on maximizing sales instead of handling fulfillment. 

– Amazon FBA also handles customer service, everything from order processing to returns. 

Cons 

– Costs. Depending on the type of items you sell, the costs can be included in both the con and pro lists. If you are selling heavy and slow-moving items, then Amazon FBA will be a costly fulfillment method for you. 

– Less control. With Amazon FBA, you have less control over your inventory; for instance, you cannot inspect it at any given moment. 

What is Amazon FBM? 

Amazon FBM stands for fulfillment by the merchant. By proceeding with this option, sellers are responsible for fulfilling the orders on their own. Thus, as a FBM seller, you’d be responsible for managing storage, shipping, and customer service. 

Pros 

– SFP (seller fulfilled prime). If you want and can offer a 2-day delivery, you can start offering SFP to your customers. To be eligible for this program, you must fulfill 99% of orders on time during the past 90 days and have an order cancellation rate of less than 0.5%. 

– Increases control over inventory. With Amazon FBM, you are responsible for storing the inventory, and you can access stock and warehouses anytime. 

– Fewer fees are associated with Amazon. 

Cons 

– Fewer chances to win the Buy Box. 

– FBA offers more boost on Amazon searches compared to FBM. 

– Customer service and refunds become entirely your responsibility. 

What is the Difference Between Amazon FBA and FBM? 

The main difference between Amazon FBA and FBM is who handles the order fulfillment process. In the case of Amazon, FBA Amazon is responsible for fulfilling orders placed by customers from your store. In the case of Amazon FBM, you are responsible for fulfilling customer orders.

What are the top factors to consider before choosing FBA or FBM? 

Before proceeding with one of the order fulfillment methods (FBA Vs. FBM), make sure to consider several factors, such as the size of the items, fees, turnover rates, and others. Let’s take a look at each of these in more detail. 

The Size/Weight of the Item 

Amazon FBA has a certain structure of fees and logistics. Based on the current pricing structure, this program is beneficial for sellers who sell small or lightweight products. 

To understand the fees associated with joining Amazon FBA for your specific case, you can use the Amazon FBA revenue calculator. 

The Amount of Control over Customer Service and Experience

FBM sellers have greater control over customer experience and service. As an FBM seller, you handle the fulfillment, shipment, and storage on your own. Thus, you are the one responsible for creating great customer experiences. FBM provides you with an opportunity to provide a more hands-on approach when it comes to customer service. 

However, as an FBA seller, Amazon handles everything regarding order fulfillment and customer service. If you want to save time, then FBA is the best option for you. 

Turnover Rates  

Also, when choosing between FBA and FBM, make sure to consider turnover rates. The turnover rate is the speed at which sellers sell and restock inventory. It is an essential metric for sellers as it can have multiple effects on your reputation and fees. 

If your items are getting sold quickly, then FBA is a perfect option. However, there are additional storage fees if your items stay in the Amazon fulfillment center for over 180 days. Thus, if you are selling products that tend to sell less quickly, FBM might be a better option. 

Key Differences Between Sellers Using Amazon FBA Vs. Amazon FBM 

To help you choose between the two fulfillment options, let’s also review the differences between Amazon FBA and FBM in several key areas, such as speed, time, profits, and initial capital investments required to get started. 

Speed 

When it comes to the speed of launching a business, sellers in both categories go extremely close to one another. 42% of FBM sellers and 41% of FBA sellers manage to launch their Amazon businesses in less than two months. 

There is no clear winner in this category. All widely depends on your strategy and execution. 

Profits 

When it comes to profitability, then FBM wins. In fact, Amazon FBM sellers have larger profit margins. 28% of FBM sellers earn over $25,000 every month; meanwhile, only 12% of FBA sellers earn over $25,000 per month. 

Time Management 

When it comes to speed, we can clearly state that Amazon FBA saves sellers more time. 

FBM sellers are responsible for picking, packing, and shipping products, which is not only costly but also incredibly time-consuming. 

Initial Capital Investments 

Initial capital investments also go hand in hand. If we look at the data, FBM is a slightly better choice, but the difference in percentage is quite low. 17% of FBM sellers needed capital of less than $5000 to get started. Meanwhile, 18% of FBA sellers needed less than $5000 to get started. 

However, 43% of FBA sellers got started with more than $5000 initial investment, and 46% of FBM sellers needed more than $5000 to get started. Here, the percentage difference is slightly higher, 3%, and FBA wins over FBM. 

Which Method Should You Choose? 

When it comes to making the final decision, it is entirely up to you. There is no clear answer to which one is better. However, most sellers prefer Amazon FBA over FBM due to FBA being more suitable for their business models. 

Thus, when making a choice, take into consideration all the benefits and drawbacks as well as how well the fulfillment method will work in your case. 

If you want to continue growing your Amazon store and reach seven figures with efficient management, from PPC ads to customer relationships, then you are in the right place. Enso Brands is a full-service Amazon Agency that will help you grow your business and maximize revenue.

Contact us to find out more about what we can offer for you.