The fulfilment by Amazon (FBA) is a storage and shipping service that Amazon offers to help business owners sell their products. The Amazon fulfilment receives the goods when businesses ship their products, which are specifically designed for FBA services. Affecting the goods reach the Amazon Fulfillment centres, Amazon then handles the receiving, picking, and packaging of the products in the centre before shipping them to the customer.
The after-sales processes like the refunds, funds and customer services are also taken care of.
And the Fulfillment by Merchant (FBM) is when the seller is in control of the entire handling and the shipping process. Instead of paying a service fee and shipping inventory to Amazon to handle, the seller uses his or her own resources and sends the items directly to the buyer.
Choosing the FBM, a seller takes complete control of the entire process, from purchasing to shipping and receiving.
CONTRAST BETWEEN AMAZON FBA AND FBM.
The FBA, which is fulfilled by Amazon, is Amazon’s warehousing and fulfilment services that allow sellers to send inventory to an Amazon warehouse and have their orders shipped by Amazon. This is a fulfilment method in which the seller takes full responsibility for strong inventory and shipping orders.
But, if you are a user of FBA, Amazon charges a fulfilment fee and a monthly inventory storage fee. And with FBM, you can store and ship items yourself or outsource fulfilment to a third-party vendor.
Understanding the Advantages and Disadvantages of Amazon FBA:
With Amazon FBA, the sellers send inventory to an Amazon warehouse and when an order is placed for their items on Amazon, this order is automatically filled by Amazon. The returns as well as the customer service will also be taken off Amazon, which is related to the order.
While using FBA, Amazon charges a fulfilment fee as well as the monthly storage fee. The fulfilment fee covers costs related to picking and packing, shipping, and providing customer service. The monthly inventory storage fee covers the cost of storing items in Amazon’s fulfilment centres.
Items that are bought by the process of FBA are eligible for food Prime Shipping. This means that customers who have subscribed to amazon receive the items within 24 days of shipping at no additional cost. This leads to the increased sales potential of your items as prime subscribers wait for receiving the advantages of rapid delivery items.
Focus on Selling and Not on Fulfilling
Managing well-oiled shipping and warehousing operations is hard, but Amazon already has a state of art fulfilment infrastructure set up to process and ship your raiders on time. The FBA allows sellers to scale easily since they don’t need to add their stuff or warehouse capacity as order volume changes.
Most of the Amazon sellers prefer to focus on sourcing, developing great products, marketing as well as selling. These sellers are very satisfied with how Amazon manages the day-to-day fulfilment operations for them.
The Search Engine Optimization for Amazon
The FBA is a ranking factor that plays into the search engine algorithm. In search, FBA offers likely to have an advantage over FBM offers all else being equal.
The customer service
As mentioned already, using FBA, Amazon covers all the customer service and returns processing for that order.
While you will miss out on opportunities to speak to your customers directly, it does ease the support overhead that online merchants face.
The MCF program is an added bonus for multi-channel merchants. MCF works similarly to FBA, except Amazon will fulfil orders from any sales channel, not just the Amazon marketplace.
You can utilize Amazon’s fulfilment centres to ship orders from your own website or another marketplace. Inventory in Amazon’s fulfilment centres can serve both Amazon customers and your customers on other channels.
Understanding the Cons of FBA
If this is an advantage or a disadvantage, it depends on the types of items that are being sold and your business competence in fulfilment.
The smaller and the fast-selling goods are more cost-effective in the FBA program than heavy, bulky, and slow-moving items. While Amazon is exceptionally efficient at warehousing and fulfilment operations, there are merchants there who are very good at this too.
This could be a pro or a con depending on the types of items you sell and on your business’ competence in fulfilment. Small, light, and fast-selling items are more cost-effective in the FBA program than heavy, bulky, and slow-moving items. In addition, storage fees are seasonal and rise between October and
Also, while Amazon is very efficient at warehousing and fulfilment operations, there are many merchants out there who are very good at this too.
The merchants with a high level of expertise in logistics can do it cheaper than Amazon.
For these merchants, the benefits of FBA need to be weighed against the extra cost of using FBA.
Loss of Control
In the process of FBA, it is not very easy to visit the warehouse flooring and inspect your own products. And it’s not very easy for Amazon to facilitate these inspections. It is important to trust Amazon that it will not mishandle the inventory. While using FBA, it is important to be prepared with these.
Fulfilled by the Merchant model, you can store and ship items or outsource fulfilment to a third party. The seller is responsible for meeting the Amazone Service level related to shipping and order. In addition, the seller must provide customer service and returns processing for FBM orders.
What is FBM? Pros & Cons of Amazon FBM
With Fulfilled by Merchant model (previously referred to as MFN or the Merchant Fulfilled Network), you can store and ship items yourself or outsource fulfilment to a 3rd-party (that isn’t Amazon). Either way, the seller is responsible for meeting Amazon’s service levels related to shipping and orders. In addition, the seller must provide customer service and returns processing for FBM orders.
What is Seller Fulfilled Prime (SFP)?
Seller Fulfilled Prime (SFP): it allows sellers to participate in Prime Shipping without using FBA. There is some specific requirement of SFP like:
- Ship over 99% of orders on time
- Same-day handling for orders placed before order cut-off time
- Have an order cancellation rate of less than 0.5%
- Use Amazon Buy Shipping Services for at least 99% of orders
- Sellers must agree to the Amazon Returns Policy
- Allow for all customer service inquiries to be dealt with by Amazon
It is important to know that Seller provides some of the same benefits as FBA, like increased sales potential.
The basic advantages of FBM are:
- More control over inventory and fulfillment
- Lesser Amazon Fees.
There are some other fees as well like “ return processing fee” which belong to some categories, and then there is the long-term storage fee for stocks that remains unsold for longer than six months, and lastly, there is the stock removal fee for pulling inventory out of Amazon’s warehouses.
Some of the disadvantages would be:
Some of the disadvantages would be:
- Less Buy Box Power
- The lesser perk of Search Engine Optimization
- Customer Service and Returns Responsibilities
All the advantages and the disadvantages land us on the question, which is what is the right option to choose FBA or FBM
FBA vs FBM – what to choose?
To bring it to a full circle, there are clear benefits to both programs.
FBA offers perks for SEO and the Buy Box while making items automatically Prime eligible.
Merchants, especially Amazon-only sellers, may prefer a hands-off approach to fulfilment and the customer service that allows them to focus on selling. For an additional fee, Amazon will fulfil orders from other sales channels through the MCF program.
The results of FBA are great but they come with a host of fees!
On the other hand, FBM gives merchants greater control and predictability over their inventory and fulfilment operations. Sellers with expertise in logistics and efficient operations can improve their overall margins. In this case, the seller also has greater control over the customer experience when it comes to customer service.
While FBM sellers lose some SEO and Buy Box perks compared to FBA, it grants more control to merchants who are ready to take on the added responsibility.
According to experts, FBA is a better solution for brands selling on Amazon. Customer satisfaction, cost-effectiveness, and customer service are the top reasons seller should be choosing FBA!
As far as cost efficiency, it’s significantly cheaper (in most situations) than using FBM because Amazon has the best freight rates in the country and passes them on to the seller. Lastly, the customer service benefits – Amazon handles the returns and customer service included in the price.
Now here’s the 1% of times where FBM is the best decision for sellers. FBM is the right choice for you if you are selling larger or heavy products like furniture because FBA is not made for most larger products.