FYI – this topic is for those using Seller Central (3P), not Vendor Central (1P), to sell through Amazon To survive in the Amazon ecosystem, sellers must use any advantage they have at their disposal. Perhaps you are a fast-moving, solitary seller whose edge rests in his ability to adapt quickly, change territory and ship nimbly. Or, maybe you are a larger organization whose success relies heavily on group effort— sharing responsibilities across multiple disciplines to grow and maintain brand identity and autonomy. Perhaps you are somewhere in between— managing a lean, multi-channel operation. On Amazon, products of all shapes and sizes compete for a top spot in the food chain. Despite each sellers’ unique traits, strengths and weaknesses, one of the many challenges facing all merchants in the choice of how to best handle fulfillment. In the world of Amazon fulfillment, it’s ship or be shipped— FBA or FBM. FBA, or fulfillment by Amazon, is the option to pay Amazon to handle all areas of fulfillment, including storage, shipping, returns and fulfillment-related customer service. FBA also qualifies many products for Amazon Prime, except in cases where the product is deemed unprofitable. In these cases, Amazon will instead qualify the product as an add-on item. FBM or fulfillment by merchant (also sometimes referred to as merchant fulfilled network or MFN) is a process by which all fulfillment and customer service is handled by the merchant themselves. Each method has its advantages and disadvantages, which we will cover later. But instead of giving you a list of pros and cons like every other blog post out there, we want to help illustrate the key differences by showing which method is best for each type of seller. In other words, which merchant should use which method? Should you use both, or neither, or maybe let someone else handle fulfillment for you? Running out of stock (OOS) on Amazon is like running out of mosquito spray in the jungle. You don’t want to do it. After all your hard work, you could lose lots of your coveted sales momentum almost overnight. If you still aren’t certain which direction to go after reading this, that is totally fine and perhaps even expected too given the number of options and importance of this choice. We recommend talking to someone who does understand this well as it’s not something to be taken lightly.
The Jaguar (FBA-aligned seller)This big cat is swift, adaptable and relies on stealth and speed to catch its prey, often blending in with his surroundings; a strategy which helps make the jaguar one of the top predators of the jungle. Like the Jaguar, the typical and model FBA product is lightweight and moves quickly, keeping storage and shipping fees low. (However, know that many heavy and slow-moving products can make sense through FBA too.) Many sellers who choose FBA prioritize sales, marketing, or customer service over fulfillment due to a more lean organizational structure. Some of those types of companies can be as small as one-person operations working out of their garage. But not all businesses suited for FBA are small. Many of these companies are multi-billion dollar organizations with an international presence. Not exactly mom-and-pop operations. Regardless of size, FBA is for the seller who wants to make a serious go at Amazon as a significant channel. A major advantage of FBA sellers lies in utilizing the Amazon reputation, manpower and Prime status to increase conversions.
Compact but PowerfulOne of the most notable characteristics of the Jaguar is its compact body, and powerful jaws. This helps the Jaguar maintain a low profile while closing in on its prey. Merchants whose products are small and lightweight can benefit from lower storage and shipping fees charged by Amazon. Because FBA fees vary by product volume, sellers with more compact items may realize greater margins (yet like above not always).
Prime PredatorThe Jaguar is a top-level carnivore, poised with thousands of years of evolution on its side for one purpose, to win the fight in the amazon. Similarly, FBA sellers typically win the buy box more often than their non-FBA competitors due to a number of differentiating factors:
- Prime eligibility
- Ability to offer all shipping options available
- Utilization of baked-in Amazon brand trust & reputation
The Capybara (FBM-aligned seller)The Capybara is the world’s largest rodent. It’s a social animal who thrives in groups and in dual environments (wet and dry) and is often picky about what it eats, choosing one specific plant over another. Many sellers suited for FBM have plenty of manpower to handle many facets of the business, including fulfillment and customer service. But— not all FBM-aligned sellers are large organizations with a robust staff. Many smaller, multi-channel orgs may lack the sophistication to run multiple fulfillment options simultaneously and will opt for a simpler single fulfillment solution over which they can maintain the most control. For example, the small seller whose business is split between a primary ecommerce channel and a secondary online marketplace may find it simpler from a logistical perspective to keep their fulfillment under one roof. If your items are large and heavy, FBM typically becomes a logistical no-brainer, and is most likely the cost-effective solution as well. FBM aligned merchants care about brand cohesion and prefer not to commingle with other products in their packaging.
Team PlayerThe Capybara is only as strong as its weakest rodent. With strength in numbers on its side, the Capybara has an easier time defending its group and territory over those who go it alone. Fulfillment is a task for many. You need people to organize, pack and ship your products. Until we see box-packing robots become ubiquitous, we need hands and brains to do the work. If you’re an established organization with enough manpower to carry out the rigors of fulfillment, you might be better suited for FBM.
Multi-channel MammalThe capybara thrives in both wet and dry environments, sometimes staying underwater for up to forty minutes without a breath! Just like the Capybara, the FBM aligned merchant can hold its own while fulfilling through Amazon and elsewhere. In-house fulfillment allows the merchant to maintain online and offline orders with just one inventory. Most important, the FBM seller controls the shipping and delivery experience across multiple channels to ensure brand cohesion. This plays well when potential customers perform multichannel research on your products and company and discover similar experiences shared among customers spanning multiple outlets.
Picky PackerNot only does FBM save you from the ever-changing storage, packing and shipping fees incurred by FBA sellers, you also enjoy the freedom of choosing what packaging you use to ship (mitigating damage) and how you communicate with your customers throughout the process. Some FBM merchants include enhancements like handwritten letters or gifts in their packaging depending on each specific order’s needs.When you control how your product is shipped, without commingling of other products, you control the experience delivered to your customer. Albeit an abstract benefit, the value of a cohesive brand story from decision to delivery, cannot be overstated.
Pros and Cons of FBA and FBMHere’s a quick breakdown of some of the pros and cons of using FBA or FBM
FBA Pros and ConsPros
- Baked in brand Amazon trust converts more customers
- Amazon handles customer care, shipping and returns
- More likely to win buy box due to prime status
- Vast shipping and distribution networks
- Lower shipping rates
- Sophisticated warehouse storage and reporting
- Simplified returns
- Products commingle
- Limited access to quality control
- Evolving storage and shipping fees
- Loss of customer experience control
- Unpredictable packaging poses damage risk
- Fees and policy subject to unexpected changes
- Slow-moving products can incur long-term storage fees (LTSF)
FBM Pros and ConsPros
- Freedom and control
- The possibility of greater margins
- Brand independence and cohesion
- Reduced product damage and returns
- Seller Fulfilled Prime program eligibility
- Save money on larger items with slow turn rate
- Simplified online and offline inventory management
- Cohesive service reputation across multiple channels
- Minimize out of stock situations with controlled inventory
- More space and manpower required for efficient fulfillment
- Amazon penalties associated with poor customer experiences
- Continuous quality control and oversight responsibilities
- Competitive pricing strategies mean smaller margins
- Limited market exposure unless prime eligible
- Potentially higher overhead costs