Learn about Amazon FBA vs Amazon FBM in this detailed guide to help you increase sales on Amazon. If you are planning to sell on Amazon, there are two options you can use. You can either go with FBA or you can choose to work with FBM.
We all want to increase the revenue and wish the best in our store, right? If that’s the case, we want to make sure that we choose the right method when we are selling on Amazon. The right method will allow you to make more money and you will get better benefits.
For that, we will have to compare both of them. Here, we will see all the factors and give you the final decision on Amazon FBA vs. Amazon FBM.
Let’s get started.
Overview of Amazon FBA vs. Amazon FBM
If you are a regular reader of our blog, you might be knowing that we always start with the most basic thing. SO, we will first see the overview of Amazon FBA vs. Amazon FBM.
Many people don’t even don’t know the full form of both terms. FBA stands for Fulfillment by Amazon and FBM stands for Fulfillment by Merchant.
FBA is a method where the seller (probably you) will send all the products they are selling to the Amazon warehouse. Amazon has various warehouses across the globe. You can find the nearest warehouse and send the product there.
When the product reaches the warehouse, Amazon will confirm it with you. Now, if someone orders an item from you. Amazon will pack and deliver the product to the customer from their warehouse. They will handle all the shipping and customer support. If the customer is eligible for Prime delivery, Amazon will send it to the customer fast.
In the same way, FBM is where the seller will handle all the shipping. When the customer orders an item from the seller, the seller will have to pack and ship the product to the person. The seller can do it by themselves or they can also partner up with any of the shipping providers to do so. This is surely the choice of the seller.
Please note that if you go with FBM, you will have to handle all the support and refunds too.
Therefore, you can clearly understand the difference between both of them. Both of them are different. Now, we will start with the actual comparison and see Amazon FBA vs. Amazon FBM. It was important to know the basics.
Which Method do most sellers use?
You surely might be thinking about which is the best popular method, right? Just like we see the “Bestseller” tag while buying something, we might want to know which is the “Best preferred” model when it comes to Amazon selling.
Let’s see which model does most sellers use.
There are roughly 57% of sellers who use FBA only. You surely might be thinking the rest 43% of the seller might be using FBM, right? However, it’s not so. There are only 9% of sellers using FBM only.
But what about the rest of the sellers? Which model they are using? Are there any other models except FBA and FBM? These are the common question that you might have in your mind.
Well, the rest of the sellers are using a combination of both. There are 34% of sellers on Amazon who are using both of these models. The numbers are from the seller report done by JungleScout. The number might change a bit depending on when you are reading this article.
So, the question is why they are using both of the methods instead of just using one. We will see more about it.
Before that, let’s know more about your business model.
Know your Business Model
Before you can make any choice on which is the best model you can use, you need to know your business model first.
There are many types of business models you can use. Here are some of them to consider Amazon FBA vs Amazon FBM:
One of the most popular models that people use is private label. This is where you have all the products that are under your brand name. You might be manufacturing this on your own or you might also have a third-party manufacturer that makes all the products for you. Either way, it’s under your private label.
Arbitrate has recently gained a lot of popularity due to various tools/services available. Here, you are finding discounted products from a retailer or arbitrate store and selling them at a higher price at Amazon.
Dropshipping is quite similar to Arbitrate. Here, you are ordering a complete lot of products from the drop-shipper or the manufacturer. The only difference is that the manufacturer will complete the order on your behalf while you count money.
You will have to decide which of these applies to you. Once you know about the model, you will have to know your product. As of now, this might not make much sense to know all these. However, when we connect the dots. You will surely know about all these.
Know your Product
You need to know which type of product you are selling. Here are some of the questions or things that you need to keep in mind. Create a small report where you have answers to all these questions.
- The size and weight of all the products.
- Are the products handmade or delicate?
- Which product is coming from which model?
- How many products I am planning to sell?
Once you have the answers to all these questions, you can head over to the next point.
We will see the basic comparison of cost. You will have to do it all by yourself.
Check your FMB Requirement
Let’s assume for a while that you are going with the FBM model here. That’s where you will have complete control over every single thing.
For that, you will have to spend some money, right? So, let’s see what are the approximate costs you will have to pay.
- Inventory charges
- Shipping cost
- Packaging cost
- Refund cost
- Customer service charges
These are some of the charges that you will have to keep in mind. You can take the estimation of all of them and write them down to get started with it. In this way, you will have an estimation of what it will cost you to get started with Amazon FBM.
There are many other factors that you might have to check along with these depending on where you live and how you are planning to ship the products.
If you can’t handle all the things all by yourself, you can count the cost of the salaries of the people you are hiring to do so.
Make a complete report based on the above-given factors.
Know your Amazon FBA Requirements
The next thing you need to do is check the same thing for the Amazon FBA.
Here, the concept is simple. You don’t have to check a lot of things. Instead, you need to check a couple of things. This will include the following.
- Whether the products you are selling are eligible for FBA?
- FBA Fees. There are two types of fees. Monthly inventory fee and fulfillment fee.
- Costs to send the items to Amazon warehouse
These are the only things that you need to see. You can find the fee details on the official website itself.
Amazon has two plans here. If you are just starting, you can surely start with an identical plan. The individual plan will cost you very little. Therefore, you can choose the best plan that is suitable for you.
Once you check both of these, you can create a detailed report on all the things. Luckily, Amazon has a comparison bulletin where you can compare the cost of the product. On one side, they have got FBA, and on the other side, they have FBM. You can compare both of them and then make your decision based on that.
This is quite useful and worth doing. When you check out the complete list and know which is going to cost you less, you can keep it in the result section.
Features, Pros, and Cons
Now, comes the man part. Cost is not the only thing that you need to keep in mind. There are many other things that you need to see when it comes to FBA and FBM. With that being said, here we will compare it with features. Instead of seeing all the features and then repeating them in the pros section. We will count the features in the pros section itself. This will save your time and give you a proper idea of which is better and which you should prefer.
Let’s start with FBA.
Fulfillment by Amazon is where Amazon will handle all the things.
- You don’t have to worry about anything. Amazon will handle all the things. This means that you have very few responsibilities.
- All your products are eligible for Prime delivery. Prime products have more orders.
- Amazon algorithm will increase the visibility of FBA products.
- Better chances of “Buy box”. Buy box is the box shown in the sidebar from which the users can buy the products.
- Multi-channel shipping is available.
- Packaging, refunds, and customer services are also handled by Amazon
- No control over inventory. You will still have to pay for it.
- Cost is extremely huge for big-size products.
- You will still have to spend some money on packaging as you will have to pack the products as per Amazon standard before you send them to inventory.
- Keeping a close eye on Amazon FBA policy and send the products accordingly.
This is where the seller handles the shipping
- Cost can be less or more depending on your researching skills and your logistics.
- Full control over inventory and all the products.
- For heavy items, you can easily cut the costs.
- You can save tax.
- No proper Amazon FBA policies to follow.
- More responsibility.
- Cost is more for smaller items.
- You will not get the advantage of Prime delivery or buy a box quickly.
- Amazon SEO won’t show your results as likely as FBA products.
- Customer service can be a big deal for some sellers.
Which one Should I Choose?
Now that you know the difference between Amazon FBA vs Amazon FBM, you’re probably thinking which is the best for me, right?
So, the main question is which one you should use.
We are going to be crystal clear here.
You can choose Amazon FBA in Amazon FBA vs. Amazon FBM if:
- You want Amazon to handle all the things for you.
- Don’t want to take more responsibilities.
- Want to grow fast.
- You want to focus on business rather than shipping.
- The products you are selling are lightweight. (This will cost you less if you choose FBA).
- Want to scale up fast.
In the same way, you can choose FBM in the Amazon FBA vs. Amazon FBM comparison if:
- You already have a logistics or a shipping partner who will handle things for you.
- Dropshipping is your business and the drop shipper is handling the shipping for you.
- Cost-cutting is easier for you.
- You are selling heavy items (this will cost you less).
- You want control over your inventory.
Now that you know the difference of Amazon FBA vs FBM, you need to make a choice, right? The answer is choose BOTH.
Like we have already mentioned. Most of the sellers are using both of these methods. You can use the same thing. Like you have seen, heavy products can be easily sold by you and you can save some money. Therefore, you can use FBM for some products, and for the rest of the lightweight products, you can surely go with the FBA.
In this way, you can know what to do.
Want a small piece of advice? Get Amazon Consulting service if you want to grow fast. This will surely help you in growing your business at a much faster scale and on the right path.