Almost 3 million sellers sell on Amazon marketplaces around the world. In Germany, over 240,000 sellers list their products. Each and every one of these sellers must ask themselves an elementary strategic question: Which shipping method do I choose for my product range? A seller has two options for this: Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM). The main difference here relates to the storage and delivery of the products that are sold on the Amazon marketplace. At FBM, the seller takes care of the storage and shipping of the products, while at FBA Amazon is responsible for logistics itself.
Important: As a seller, you can also choose a hybrid model, i.e. offer FBM and FBA at the same time.
FBM versus FBA:
FBA advantages:
· Prime Delivery: Products that are sent to the end customer via Amazon are suitable for Prime delivery and therefore arrive within a maximum of 2 days. FBA SKUs also have the Prime Seal, which is an additional conversion boost as end customers prefer products that can be delivered quickly.
· Advantage in the Buy Box battle: If the offered ASIN is sold by multiple retailers, the one who sells via FBA always has an advantage. Amazon usually awards the Buy Box to the retailer who is cheaper or delivers faster.
· Customer Service: Amazon covers all customer service and returns processing for each order at FBA.
· Amazon algorithm prefers FBA: Although not officially announced, in our opinion, the Amazon algorithm prefers FBA SKUs in both organic and paid playback
· Multi-channel fulfillment possible: The MCF program is an additional bonus for retailers who not only sell on the Amazon marketplace. You can use Amazon's fulfillment centers to ship orders from your own website or from another marketplace.
Disadvantages of FBA:
· Costs: In fact, Amazon is well paid for fulfillment, from warehousing to delivery. Here, the cost rate that you can expect as a seller depends on the size of your own product. Small, lightweight, and fast-selling items are less expensive in the FBA program than heavy, bulky, and slow-moving items. In addition, storage fees depend on the season and rise between October and December.
· Loss of control: As a rule, Amazon does not handle a seller's goods as carefully as the seller himself.
· Amazon is customer-oriented: It means that you are very generous with refunds and returns, which in the end falls back on the retailer.
· Return process: If a seller wants to order his goods because he does not sell them off, or the like, it is the case with FBA that Amazon occasionally sends the goods back to the seller, which does not exactly make inventory easier.
· Delivery to Amazon must be planned and financed by the retailer
FBM advantages:
· Lower costs: With FBM, there are no storage costs and no FBA fees for the retailer. Means that FBM sellers can expect better margins. In addition, retailers may be able to save money here, especially if they sell products that have a low sales rate or are particularly large/heavy.
· PBS program: With FBM shipping, there is an additional option that could be relevant for sellers. Prime by Seller shipping is basically the same as Prime shipping via Amazon with the difference that warehousing and shipping are handled by the merchant. In practice, this means that the respective seller can use their existing shipping network (DPD, Hermes, DHL and co.) to process the order. It is important to note that the seller must guarantee a fast delivery time (maximum 2 days).
Disadvantages of FBM:
· Worse chances of getting the Buy Box: As already mentioned, Amazon prefers the FBA SKU for the same product as far as the Buy Box is concerned. FBM SKUs that are not significantly cheaper than FB SKUs therefore do not win the Buy Box. In addition, with an FBM SKU, you don't get the Buy Box in the first 3 months of selling the product on Amazon.
· Shipping and customer service: At FBM, the retailer takes care of customer service and returns, which takes time and, above all, resources.
Conclusion:
In general, in our opinion, the FBA program is very advantageous compared to FBM. The main advantages are improved conversion, faster delivery and many benefits that are exclusively awarded to FBA retailers (the best example is the Prime Exclusive discount). However, FBM can be the better alternative in special cases if you want to consider points such as return rates, branding and oversize, for example.
