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How FBA (Fulfillment By Amazon) And FBM (Fulfillment by Merchant) Works?

November 03, 2017

Amazon has become one of the leading e-commerce platforms in the world, and it is easy to see why. It has successfully connected with various sellers and buyers from all parts of the globe, and has just about everything you would need.

Its success has built its empire, which is now divided into two: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). They both work very well, but are meant for different purposes.

What is Fulfillment by Amazon?

  • Simply put, it is guided by Amazon’s principle: “You sell it, we ship it.” If you sell in Amazon under FBA, you are required to do your own listings and optimize it. When someone finally places an order, Amazon will be the one to pack and ship it to the buyer.
  • One of its main advantages is being under the Prime perks. Amazon Prime usually attract more buyers since it guarantees faster shipping and delivery. It is like getting a VIP treatment, which most people would even pay extra for.
  • Another advantage is being able to enjoy lower shipping rates. Not only will your customers find satisfaction in faster fulfillment, the low shipping rates will also entice them into buying more items from you for sure.
  • On the other hand, one disadvantage of being under FBA is having limited access to inventory and having to pay additional charges, such as storage fees. This is because Amazon will be the one to store your items in the warehouse, which contributes to faster shipping.
  • Because multi-channel fulfillment is required, you are also expected and obligated to pay even more additional charges that do not come cheap at all.

What is Fulfillment by Merchant?

  • In this option, a seller will list in Amazon, and will also be the one to store, pack and ship the products as they are ordered. A seller is mostly hands on, which could be both a good and a bad thing, depending on your personal preferences.
  • Its main advantage, apart from being personally hands on to your products and inventory, is that you get to enjoy a slightly higher profit margin as compared to those under FBA. This is simply because you don’t have to pay for the extra fees charged by Amazon for storage and packing.
  • While FBM sellers can also be under the Prime perks, the requirements are a little tighter. Apart from paying extra fees, you also need to maintain a great rating to qualify.
  • Its main disadvantage is having a larger responsibility. Fulfilling the orders yourself means you are responsible for late deliveries and missing items. You also should be more mindful with every order fulfillment step to make sure everything is in proper order.

Choosing which way to go depends on your needs and preferences, as well as your products. Try to calculate the costs and see which one fits your budget the most. Your product line should also be applicable to the path you choose. Both has its own share of pits and perks, it is always up to you to make the choice.