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What Is The Difference Between FBA and FBM?

  • 6 min read

Last updated on December 11th, 2023 at 03:46 am

One of the most common questions in e-commerce is whether to use FBA or FBM. There are a number of differences between these two shipping methods, but one major difference is that FBA will store your inventory and you pay them per item sold while with FBM, you are the one responsible for storing your own items. Another difference is that Amazon does all the fulfilment work with Prime only items when using FBA so it’s easy to ship out orders quicker than if you were using FBM.

What is Amazon “FBA”?

FBA stands for “fulfilment by Amazon”. FBA is a service offered to sellers on the Amazon Marketplace, which means that when you sell your products through the Amazon platform, they will store and ship your items to customers on your behalf.

How does it work? 

FBA is for any online small business or individual looking to save time and energy. In a world where many people are “always on,” it can be hard balancing work, socialising and other commitments with running an ecommerce business from home or some sort of similar space that’s not conducive to storing your products in bulk quantities. Amazon has taken care of all those complications by providing storage solutions while you focus on what matters – growing your company!

Amazon FBA has many advantages over traditional commerce.

Pros

  • No need for expensive warehouse space or equipment : The best part about using FBA is that you don’t need expensive warehouse space or equipment.
  • Allows sellers to focus on marketing their own brand instead of being an fulfilment company themselves : The FBA service allows sellers to focus on marketing their own brand instead of being an fulfilment company themselves.
  • When you sign up for Fulfilment by Amazon, you’ll get access to their suite of services designed specifically for small business owners like yourself : You’ll get access to their suite of services designed specifically for small business owners such as yourself. They offer services like inventory management, order processing, packaging and labelling assistance. Their storage space is great for those who need to have their goods housed indoors or outside while they wait on orders – it just costs a fee!
  • Buy Box Advantages : The Buy Box is a small box that appears on the right side of search results and at the top of product listings on Amazon.com. It’s like a crown jewel for sellers because it means your products are showing up in front of consumers who are ready to buy!

Cons

  • Additional Fees : All Amazon sellers need to be aware of the fees that come with fulfilling orders. Some are straightforward, such as those for storage and shipping; others can add up quickly if you don’t plan ahead! Let’s take a closer look at some of these: FBA Fees include fulfillment fees, monthly inventory storage fee costs, closing cost charges and order handling charges – depending on your product category there may also be high volume listing overhead expenses incurred during set-up or ongoing listings. You’ll have long term storage expense needs in addition to annual Q4 warehouse space rental rates so it is important not only keep track but budget accordingly from day one!
  • Limited Inventory Access : Without inventory on-site, sellers have less control over their products. In the case of problems with your product or shipping mistakes, you will be reliant upon Amazon to verify details and ship back any problematic items if they are in stock at all.
  • Long-term Storage Fees : You may be wondering what is the best way to store your inventory for Amazon in order to avoid paying a fee? Well, if you have slow moving products or more than 6 months of inventory it might make sense to take a look at their long-term storage fees.

What is Amazon “FBM”?

Fulfilled by Merchant, or FBM for short. This is the type of Amazon selling that gives you a ton more control over your fulfilment process! Sellers sign up to handle all aspects of order management, storage, packing and shipping – as well any customer service if needed.

How does it work? 

As a seller, you’ll set up an account with your business’s information along with listing product listings in categories like clothing or electronics for example. You will take responsibility for any late, missing or damaged arrivals as well as packing items before sending them to customers directly from your warehouse location!

By not doing FBA, sellers agree to handle storage and all facets of order fulfilment themselves whilst utilising Amazon to help you sell.

Pros

  • Hands on fulfilment : You get to take control of inventory with FBM, you’re the one packing up your products when you use it!
  • More Inventory Control : Selling using FBM means you have complete control when complications arise. The inventory is in your hands, so if there’s any incorrect shipping or product quality issues then all it takes for the delays of going through Amazon are handled with ease and speed by just fixing what needs to be fixed on your end instead of dealing with their bureaucracy behind seller service phone lines!
  • Lower costs : Amazon bases their fee structure on the size of an item being sold, so you’ll need to analyse this aspect for your products. If you have a larger product with a small profit margin or slower turn rate, fulfilling it yourself may be worth thinking about in order to save money on shipping and storage fees.
  • Better Sell Through : Amazon customers must spend $25 or more to be eligible for the add-on program, which means that items under this threshold aren’t worth it for Amazon FBA. For less expensive products, use FBM instead so your turn rates don’t decrease.

Cons

  • Shipping Mistakes : Amazon hates to disappoint their customers. If you make a mistake in your shipment and send the wrong item or don’t ship it fast enough, they can suspend your account until the problem is fixed! It takes discipline on both ends of shipping–on sending out packages quickly with accurate tracking information and receiving them promptly too.
  • Lower prices : Amazon favours FBA sellers to win the Buy Box, so you may have to price products marginally lower than them. You’ll see a reduction in your profit margin and be less likely to win the Buy Box for certain items – which can end up costing more in the long run as they’re not eligible for Prime shipping immediately through FBA!

Conclusion

Amazon sellers often have to choose between fulfilment methods in order to optimize their business. For some, the best option is a diversified strategy that utilizes FBA for certain products and FBM for others; however, it’s always worth considering all of your options before making this decision.

Considerations like cost are important when deciding which method will be most beneficial – you want to make sure there is no unnecessary investment or expense involved with whatever choice you end up going with!

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