Many sellers ask us Amazon FBA vs. FBM, which is better? The best Amazon model is an answer only achievable by looking at your situation.
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Fulfillment by Amazon (FBA)
Fulfillment by Amazon (FBA), you store products in Amazon’s fulfillment centers, and Amazon picks, packs, ships, and provides visibility and customer service for your products. Amazon FBA helps sellers scale their business and reach more buyers. Sellers send their products directly to Amazon, which warehouses everything and processes all of the orders. Sellers still manage the sales. As a result, if Amazon stocks your products, the rest is done automatically.
Amazon FBA vs Amazon FBM
FBA means Fulfilled by Amazon, you sell it and Amazon ships it. The seller sends bulk products to Amazon’s fulfillment centers for Amazon to pick, pack, and ship products once sold. FBM means Fulfilled by Merchant, and the seller lists the products on Amazon while handling storage and all aspects of order fulfillment. You sell it, and you ship it.
What should a seller evaluate for Amazon FBA vs. Amazon FBM
Can we ship at a low cost? Can increased shipping volume discounts translate into more profit?
How much per unit will it cost to ship units to Amazon? How popular is the item?
Will there be any additional monthly or long-term storage fees?
Can the increased price still compete with FBA to offset additional fees?
Understanding Amazon’s fulfillment fees can get tricky. Amazon will charge the greater of the dimensional weight or actual weight, so it is essential to know what size tier each product falls into before sending units to FBA. Amazon is constantly changing the pricing structure, and sellers must stay up to date with these announcements.
What are the benefits of Amazon FBM?
More control: Seller has more control over inventory and can access inventory anytime
Lower costs: Amazon’s fees are based on the size of the item. Large items with small margins might not be a great fit for FBA.
Opportunity for Prime: Seller-Fulfilled Prime allows Amazon sellers to access FBA benefits while avoiding Amazon fulfillment and storage fees. Amazon sellers with Professional Selling accounts can display the Amazon Prime badge on orders fulfilled via their own warehouse.
Lower costs outside Amazon: Greater discounts on shipping and supplies can be used with non-Amazon sales channels
As an FBM seller, you have greater control over your shipping rates. Since the seller is purchasing the shipping from UPS or FedEx directly, increased volumes and discounts can translate into more profit. Many shippers can utilize ground or home delivery services to deliver packages within 2 days, but buyers who live further distances will require shipment by express.
Using UPS published rates would not work for the smaller seller fulfilled prime shipper because shipping costs would eat up any profit. But if you have a larger volume discount with FedEx or UPS, this could work. With proper help and data, UPS and FedEx will lower your 2nd-day air discounts to make the rate more competitive with ground pricing. Amazon FBA vs. Amazon FBM decisions must heavily consider your shipping costs and efficiency.
What are the benefits of Amazon FBA?
- Access to Prime Customers: You have access to sell to Amazon Prime Customers when you enroll for FBA
- Effortless Shipping: Amazon does all the work for you. Keep track of your listings, ensure proper stock, and let the fulfillment be taken care of from start to finish.
- Decreased Shipping Rates: FBM sells will spend less on shipping costs through the FBA platform. Amazon utilizes other shipping carriers as well as its network.
- Fast Delivery: FBA products get the Prime badge and thus eligible for Prime free shipping
- Return Management: FBA handles returns and refunds as part of the fulfillment process. But this could also create other issues down the road.
- More Warehouse Space: Amazon FBA sellers have access to unlimited storage space. Amazon has warehouses all over the world and more planned.
- Customer Service Management: Amazon offers customer service 24/7 for FBA sellers and a platform to take care of your own customer service needs.
- Buy Box: This is the white box in the right of the product page. It prompts buyers to add the item to their shopping cart. With FBA, you get a higher chance to win the Buy Box.
FedEx, UPS, and Amazon FBA Auditing Services
If you are interested in exploring deeper discount rates with FedEx or UPS, contact Refund Retriever for a full contract rate analysis. Our experts can start a free deep-dive analysis of your yearly shipping spend and help with a full contract strategy.
Amazon measures products at the fulfillment center and remeasures the product every time replenishing inventory. Therefore, the slightest overmeasure on a product can result in major overcharges on fees. Refund Retriever monitors all of your inventory-related issues, such as lost/damaged, or missing inventory.