Are you struggling while comparing FBA vs FBM. It is one of the most crucial early decisions when starting a business on Amazon. Both have pros and cons and they will affect costs, customer service, and business efficiency.
FBA Vs FBM – Which one is Best For You
Fulfillment by Amazon (FBA) is a fulfillment method Amazon handles storage and shipping
as well as customer service on behalf of the seller. All from packing and shipping to handling
of the return is done by Amazon in its warehouses for storage of products. Amazon charges
selling fees based on the services it provides and the storage that it is providing.
With FBM, the seller is solely responsible for the fulfillment process, which means storage,
packing, shipping and customer service. FBM can lower certain Amazon related fees, while it
also shifts all order fulfillment responsibility onto sellers.
Pros and Cons of FBA
| Advantages | Disadvantages |
|---|---|
| Prime Eligibility: Increases visibility to Prime members, appealing to customers who want immediate access. | Fees: Storage and fulfillment costs can rise significantly, especially during peak seasons. |
| Simplified Logistics: Amazon manages warehousing, customer service, and order fulfillment, allowing sellers to focus on growth. | Inventory Control: Limited control over inventory once stored in Amazon’s warehouses; damaged goods can be problematic. |
| Better Buy Box Potential: FBA listings are often favored in Amazon’s Buy Box algorithm, leading to increased visibility and sales. | Preparation and Labeling Requirements: Must comply with strict packaging and labeling guidelines; non-compliance can result in extra fees or product rejection. |
| Scalability: Provides a hands-off approach to scaling a business, minimizing logistical complexities. |
Pros and Cons of FBM
| Advantages | Disadvantages |
|---|---|
| Lower Fees: FBM sellers avoid many fees associated with FBA, leading to cost savings. | Limited Prime Eligibility: FBM products are not eligible for Amazon Prime, limiting their visibility to Prime members. |
| Full Inventory Control: Sellers handle their own inventory, allowing for better control over product handling and order fulfillment. | Reduced Buy Box Potential: Amazon’s algorithm often favors FBA listings for the Buy Box, making it challenging for FBM sellers to compete. |
| Personalized Customer Service: FBM allows for customized customer interactions, enhancing brand experience. | Operational Demands: Managing logistics requires significant attention and responsibility, which can be difficult without established processes. |
FBA vs. FBM Fee Structures
| FBA Fee Structure | FBM Fee Structure |
|---|---|
| – Storage fees based on space used | – No storage fees, seller handles warehousing |
| – Fulfillment fees per unit sold | – Shipping costs borne by the seller |
| – Long-term storage fees for unsold inventory | – No long-term storage fees |
| – Potential additional fees for returns or removals | – Costs depend on seller’s logistics setup |
| – Monthly subscription fee for professional sellers | – No monthly subscription fee |
B2B and B2C Fulfillment Using an FBA vs. FBM Calculator
A FBA vs. FBM calculator can be an invaluable tool for sellers to compare between the two.
With these calculators, one can determine costs, revenues and margins that account for FBA
and FBM fees, product selling price, shipping costs, or other related metrics. Using a
calculator, sellers can see just how good or bad of a profit margin a certain model will
provide for specific products.
When to Choose FBA vs. FBM
Most sellers say that when they get above a moderate level of sales as a business, and
specifically with engaging in high volume, small to medium products, and businesses
targeting against Prime customers and sellers who don’t want to worry about their logistics or
their customer services, they really, really benefit from selling through FBA.
For lower volume, large products, or specialty products, FBM is better for more sellers who want
more control over inventory, and businesses with their own shipping processes.
Conclusion
Each seller’s individual needs and goals decide if they choose to FBA or FBM. FBA gives
you the convenience and Amazon’s logistics and customer service, though, at the cost of
hefty fees and limited inventory control. FBM is a low-cost and flexible solution but does not
compete against Amazon unless logistics are really strong. Many sellers will find a hybrid
solution of FBA for certain products, and FBM for others to be the most profitable and
efficient way to run their operations. To decide if selling online via FBA or FBM is the best
choice, both FBA vs. FBM calculator and fee structure for each model can be used to make
an informed choice. Contact FBA Prep Services today!
