Selling on Amazon might seem like a straightforward endeavor. After all, the site’s unquestioned status as the most popular online retailer is a testament to the endless opportunity to establish and build a lucrative business as an Amazon seller.
But there’s a bit more to becoming an Amazon seller than just setting up an account and launching your store. The competition, as you might assume, is quite fierce, and you’ll need to develop your own unique approach to cultivating a loyal customer base.
One other fundamental decision you’ll need to face is fulfillment. Before you launch your Amazon store, you’ll need to evaluate how you plan to fulfill orders and manage your inventory. For the most part, you have two options to choose from: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM).
Being an Amazon FBA seller or Amazon FBM seller each bear their own benefits and drawbacks, and the fate of your Amazon store will hinge — at least in part — on what type of fulfillment you use and how.
Today, we’re going to take a closer look at the differences between these two, discuss the best products to sell on Amazon and uncover the truth behind how selling on Amazon works.
So, if you’re a relative newcomer to the world of selling on Amazon, this is the perfect time to develop your understanding of the different fulfillment options and how each might affect your store. If you’ve been at it for awhile, consider this a chance to reevaluate your current fulfillment setup. Amazon FBA vs FBM, here we come!
How Does Selling on Amazon Work?
Before we delve into the nuances between Amazon FBA and FBM, let’s hit the basics first. The main difference between the two is who handles the fulfillment. Whereas Amazon directly manages that side of things for Amazon FBA sellers, the merchant itself — that means you — tackles that directly in the case of FBM sellers.
The latter group then assumes responsibility for everything from order acceptance, storage, packaging and shipping of products. Take a moment to consider how much goes into the entire fulfillment process, and you can easily see why some sellers opt for the Amazon FBA route. Nevertheless, others take great pride in the fact that they are hands-on with every customer’s package, right up until it reaches their front door.
Amazon FBA rests easy knowing that the fulfillment side of things is in Amazon’s more than capable hands. In fact, sellers need only to pack up the products and ship them over to Amazon. The site’s fulfillment service takes it from there, and you’ll enjoy world-class customer support every step of the way. In the meantime, you’ll be able to turn your attention to optimizing your operation and setting your store up for future growth.
Naturally, either option is a trade-off in some way, depending on how much control you’re willing to give up and how much you’re willing to invest to streamline your Amazon store. So, to give you a broader picture of what FBA vs FBM truly entails, let’s dive into a more detailed description of their differences.
Amazon FBA vs FBM
The devil, as they say, is in the details. Such is the case with FBA and FBM fulfillment options. While one or the other may sound appealing at first, you need to understand exactly what occurs once you put this fulfillment into action. Let’s take a closer look at the various ways in which your fulfillment will affect your business.
This is the biggest distinction between the two primary types of fulfillment. We’ve already mentioned it above, but since it is so integral, it bears repeating here. Want to retain full control over your Amazon store? Then cling tight to your Amazon FBM ways. If you’re willing to streamline your operation and don’t have the need for product customizations or other complications regarding your fulfillment, then consider Amazon FBA.
If you need to introduce multi-channel fulfillment into the mix, then you definitely need to go for Amazon FBA. FBM just simply doesn’t offer the flexibility to bring several different sales channels to your store. Perhaps you want to be able to sell your product on your own website in addition to your Amazon store. In this case, FBA is your best option, especially since upselling, email marketing and other tools will be necessary additions as well.
Another major factor to consider in your fulfillment is the amount of fees you incur in the process. Amazon FBA sellers wind up paying out for storage and shipping fees, while FBM sellers can save money since they run the complete order cycle. In particular, sellers who deal in larger/heavier products with low profit margins would be better suited to just carry the responsibility of fulfillment themselves as FBM sellers.
We’ve mentioned how the size and weight of your products can weigh down your potential profitability. Like the fees above, Amazon FBA may prove to be a worthwhile route for sellers with the right kind of product if shipping fees are minimal. Take a closer look at how your products factor into your shipping costs before you decide what type of fulfillment best leverages the possibilities awaiting your business. Your overhead may just not be worth Amazon FBA.
This section is displayed on any Amazon product page, on which a specific product offering “wins” the buy box and is listed as the default option. As you may imagine, Amazon FBA sellers tend to have an edge here, thanks to their more intimate relationship with the site. So, if nailing a consistent presence in the buy box is a priority for your store, you’re definitely better positioned with Amazon FBA.
Because Amazon FBA sellers rely on Amazon to assist with the entire fulfillment process, the setup process can get complicated. Therefore, FBM may make more sense if you want to get started quickly. Remember, since Amazon only serves as a marketing partner for FBM sellers, it’s all on you to get your store up and running in a timely manner. On the one hand, this can be an asset, but it might also feel overwhelming if you’re new to selling on Amazon.
Today’s entrepreneurs often value location freedom to such a great extent that they are willing to let this thirst for independence from a single fixed location motivate their business decisions. Case in point, Amazon sellers who don’t want to get tied down to a fulfillment center of their own can retain their “digital nomad” status by deferring their fulfillment to Amazon FBA. There’s no need to establish the infrastructure you’d need for FBM purposes.
When you turn to Amazon FBA for your fulfillment, you’re liable to see a significant bump in your conversion rates. Thanks to the aforementioned buy-box advantage, Prime shipping eligibility and a tighter working relationship with the site, it’s so much easier for Amazon FBA sellers to maintain better numbers than with FBM. While FBM sellers may be able to gain traction and establish trust with customers, it may take more concerted effort than you really want to put in.
The Case for FBA vs FBM
Now that you have a better understanding of how Amazon FBA and FBM each affect your bottom line, the time has come to establish which fulfillment option you should choose. As we’ve discussed, either can benefit your store, but for the most part, Amazon FBA may prove to be the better long-term option for many sellers. However, you should never just rush into any such decision, especially one as critical as your store’s fulfillment. Here’s why you should (or should not) choose Amazon FBA for your fulfillment needs.
Why Amazon FBA?
If you deal with smaller, higher-end products, FBA is easily the wisest option for you, as these are the best products to sell on Amazon. Of course, you also want high profit margins to offset the cost of delegating your fulfillment process to Amazon. Moreover, if you just don’t want to deal with the hassle of tending to your product fulfillment or otherwise boast fast turnover, then Amazon FBA has a clear edge.
Since you won’t be having to run your own fulfillment center, you also enjoy the freedom that comes with operating independently of a single physical location. As always, consult your team to decide if this is the most cost-effective way to go.
Why Not Amazon FBA?
Conversely, sellers who deal mostly in larger and heavier products — particularly those that run at lower costs — would not be able to adequately leverage the benefits of Amazon FBA. Remember the fees that you’ll incur in the process, and account for any slow turnover you may encounter in the natural course of your business.
In some cases, you may even already have the resources to handle fulfillment without the need to recruit Amazon’s help for this aspect of your business. As we’ve touched on earlier, dropshipping can also complicate matters. Just be sure that you don’t put yourself in a position that overworks and/or strains your Amazon store.