Your Complete Guide to Amazon FBA vs. FBM

You've got options when it comes to Amazon fulfillment. Let's discuss them!

Welcome to the second part in our Amazon series (see part 1: Listing Optimization, here.) You may not sell your products on Amazon yet, but trust us: if you are in eCommerce, sooner or later you will have to decide if you want to get involved with Amazon. Therefore, understanding how Amazon operates will give you a big advantage when it comes to making that decision.

We will say that again, because it is kind of counterintuitive and really, really important: Even if you don’t currently sell on Amazon, being aware of how they do business is incredibly useful to every eCommerce merchant.

By the time you are done with our Amazon series, you will understand much better what makes the behemoth tick, and then you can decide for yourself whether you would like to start selling there, or how to take advantage of their blind spots to differentiate your products on other platforms. In short: knowing Amazon’s playbook will allow you to become a better merchant.

When it comes to Amazon fulfillment you have two options: FMA and FBM. We tapped Amazon expert, Josh with Amplisell (formally eSpark), to help us break these terms down and give us insights on the best option to garner more sales. Let's get into it:

What is Fulfillment by Amazon (FBA)?

Through FBA, Amazon will totally hook you up. They'll handle the picking, packing, shipping, order returns, and customer service on your behalf.

All hail lord Bezos!

FBA PROS:

1. Hands-off Fulfillment: Amazon will store your inventory, and pack and ship the products to customers. Even product returns are shipped back by Amazon, not you. Any fulfillment question from the buyers is also handled by Amazon.

2. Eligibility for Prime Shipping: Your items will be automatically enrolled in Amazon’s Prime Program. This will give Prime members free same-day or two days delivery (depending on the item).

Survey by Statista

3. Buy Box Perks: The Buy Box is a critical “Call to Action” add-on, which leads Amazon customers to purchase products on the platform’s product listings. Generally, when determining who gets the Buyer Box, Amazon favors products listed under FBA over those listed under FBM.

4. Lower Shipping Costs: Depending on factors such as weight and size of products, the shipping fees associated with FBA products are typically lower than FBM products. FBA sellers get to take advantage of Amazon’s discounted rates to ship their goods to the Amazon fulfillment centers.

5. Multi-Channel Fulfillment: Amazon is ready to handle the shipping and product fulfillment, even if you sell them in other e-commerce sites. You can utilize Amazon’s massive fulfillment network to store and ship products to customers from any of your e-commerce sites.

FBA CONS

1. Additional Fees: Some of the fees that you are likely to incur with FBA option include fulfillment fees, prep and labeling fees, monthly inventory fees, and long-term storage fees.

2. Less Control Over Inventory: You will have limited access to your inventory, because they are in Amazon fulfillment centers.

3. Stringent Prep and Labeling Requirements: When sending your products to Amazon’s fulfillment centers, you have to prepare them to meet the strict standards set by Amazon. If you do this incorrectly, your products may be rejected, forcing you to pay to have them shipped back, re-label them, and go through the process again.

Amazon fulfillment robot in action. Glorious and terrifying, all at once.

What is Fulfillment by Merchant (FBM)?

If you choose to do FBM, then you (the seller) will be responsible for handling, shipping, and customer service. You’ll also have to handle your own storage, and all other aspects of fulfillment.

FBM PROS

1. Faster Product Listing on Amazon: Amazon has stringent requirements for accepting products into their fulfillment centers and it can also take time to ship all your products to their warehouses. With FBM, you can get your product listing up and start selling your products immediately.

2. More Control Over Inventory: With FBM, you pack, store and ship the products to your customers, which means that you can access your inventory whenever, and you have a better understanding of the numbers.

3. Less Amazon Fees: When selling via FBM you don’t have to pay the storage and fulfillment fees that come with FBA. However, you will still incur closing and referral fees.

4. Personalized Packaging: If you believe in going the extra mile to give your clients excellent customer service, you can include personalized messages with each shipment — a great way to build relationships with your clients.

5. New Opportunities for Existing Business: If you have a business that already handles shipping and packaging, opting for FBM can quickly open your business up to Amazon sales.

With FBM, you are responsible for this entire journey.

FBM CONS

1. Additional Responsibility: You must stay on top of everything — every day. You are responsible for processing returns and customer service.

2. Limits Your Prime Eligibility: Without the Prime program, you’ll be missing thousands of customers who prefer shopping with Prime shipping.

3. Lower Chance to Win the Buy Box: Since FBA sellers are favored when it comes to who makes it to the Buy Box, as an FBM seller, you’ll have a hard time winning and keeping the Buy Box.

4. Overhead Costs: Although you won’t pay storage and fulfillment fees, you will still incur certain overhead costs such as your own storage, fulfillment logistics, and shipment expenses.

5. Lower Selling Price: To increase your chances of winning the Buy Box and compete effectively with other FBA sellers, you may be forced to lower your sales price, which could negatively impact your margins.

6. Lower Conversation Rates: The combination of these shortcomings leads to lower conversation rates and sales. Amazon also claims that almost half of its customers are not ready to buy from sellers who don’t use the FBA program.

What is the Nice Recommendation?

In most cases, FBA will be better for you. Mostly because it is more profitable in the long term — which, quite frankly, is the only term that matters. If that is not enough to convince you of going with the FBA, then check out this quote from Josh, the Amazon whisperer:

“When we convert clients from FBM to FBA, we see traffic and sales double. It's a no-brainer. Either sell it yourself with prime, or make sure one of your third-party sellers is selling with prime.”

The Final Word:

Just because FBA is our recommendation, that does not mean that it is in your best interest to deal directly with Amazon, and try to figure it all out on your own. After all, they are bigger than you and will do everything to maximize THEIR profits, not yours. That is where Nice Commerce can help!

We've gone the extra mile to create fool-proof processess that are optimized for Amazon-compliant shipments. We can handle handle the nitty gritty for you, and our prep fees are around ONE THIRD of the cost of Amazon. Too good to be true? Nope, it is just the Nice way.

Besides, if you fulfill with a 3PL partner (like us!) that really knows their way around Amazon logistics, you will be well-protected from stockouts. At Nice, we can set your central seller account to automatically use FBM if FBA stock runs out, so your products keep moving. Win-Win!

Here is how Josh puts it:

“Making mistakes with FBA prep will cost you THOUSANDS in expenses. Amazon has strict requirements for FBA inventory and the wrong label could have you returning truckloads of pallets to your warehouse. That's why we use Nice Commerce. Their team knows exactly how to prep FBA shipments, and does so consistently and reliably. Their expertise saves our clients both TIME and MONEY”

So, if you want Nice Commerce to help you set up your FBA — and who are we kidding, of course you do! — then just CLICK HERE.

Looking for an expert to help you up your Amazon game? Reach out to Josh at Amplisell . Need a TL;DR version? Subscribe to our YouTube channel! Need a fulfillment partner for your e-commerce business? Reach out to Nice Commerce!