Amazon FBA and FBM are both eCommerce platforms that offer access to a wide range of businesses. Amazon’s platform is more flexible than eBay, but has lower profit margins for sellers and less powerful search functions. Ebay’s platform offers higher profits per product sold through its marketplace, but does not allow the same flexibility as Amazon when it comes down to listing new items or changing your prices on an individual basis.
Amazon FBA Vs FBM—Which Is Better? [updated May 2022] is a question that has been asked many times. I have updated this answer to reflect the current situation of Amazon FBA and FBM.
Amazon is becoming more popular among businesses. This business opportunity is profitable, manageable, and fulfilling. However, you must pick between Amazon FBA and FBM before you begin selling.
You’re not alone if you have no idea what these phrases represent. Many individuals are unsure of the differences between these business models or how to choose the best one for them.
Fortunately, we’re here to put things right. Continue reading to learn all there is to know about Amazon FBA versus FBM. We clarify each choice, discuss the differences, and assist you in selecting the best solution for your company.
What Is FBA (Fulfillment by Amazon)?
FBA (Fulfillment by Amazon) is an Amazon selling strategy. FBA merchants (or suppliers) deliver items to Amazon warehouses directly.
The whole fulfillment procedure is then handled by Amazon. Products are stored, shipped, and customer service is provided.
What is Amazon FBM, exactly?
Amazon Another technique of selling on Amazon is FBM (Fulfillment by Merchant). FBM vendors advertise their items on Amazon but manage their own fulfillment. Storage, shipping, and customer support are all handled by them. FBM merchants may do it all themselves or hire firms other than Amazon to do it.
Which is more popular, FBA or FBM?
You were probably already acquainted with FBA before reading this post. This makes logical, given that FBA is used by the great majority of Amazon merchants. The FBM model is also rather common, with around a third of all merchants utilizing it.
The FBA approach is used by the majority of vendors. A lower proportion employs both FBA and FBM, and an even smaller fraction uses FBM exclusively.
Which Should You Choose: Amazon FBA or FBM?
When comparing Amazon FBA with Amazon FBM, it’s crucial to remember that one isn’t always better than the other. Each provides benefits that are beneficial to certain sorts of enterprises.
When picking between FBA and FBM, consider the following factors:
FBA, as you would assume, charges fees to fulfill your orders. Lightweight items benefit from the FBA fee structure. Unfortunately, it is less liberal when it comes to large and heavy items. Consider the following instances…
Let’s imagine you wish to sell a tiny item on FBM, such as a spatula. One is $5.99 during the promotion. You may purchase one for $1.50, with Amazon charging $1.05 every item sold. You will be charged $3.00 per unit to fulfill the product.
After deducting the product cost, Amazon’s commission, and fulfillment costs, you end up with After subtracting the cost of the product, Amazon’s fee, and the cost of fulfillment, you make $0.44 per unit. This yields a 7.3% profit margin, which isn’t too bad considering it is a small item..44 per item. This results in a profit margin of 7.3 percent, which isn’t terrible for such a little item.
If you utilize the FBA model, you may be able to create more per spatula. Let’s pretend you’re selling the identical spatula. Except for the fulfillment fee, all other aspects are the same. You simply have to pay $2.00 per item for fulfillment thanks to FBA’s price structure.
As a consequence, you earn $1.44 each unit (a profit margin of around 24%!). The FBA model more than triples your revenues, making it the best alternative for this particular product.
Lightweight items are often more suited for FBA, as this example shows. However, this is only a guideline. Just because you’re selling lightweight items doesn’t imply you should choose FBA as your preferred option. Likewise, just because you’re selling bulky items doesn’t guarantee FBM is the best option.
Make your own estimates rather than relying on trends. To determine which strategy is more lucrative, use Amazon’s FBA income calculator.
Fees and Expenses
As previously said, the size of a product does not communicate the whole information. Consider the expense of receiving, storing, and shipping the merchandise yourself. You should also think about labor expenses, packaging materials, and a few other things.
Compare these costs against Amazon’s fees to discover whether it’s less expensive to let Amazon handle everything. If this is the case, and profit is your first priority, FBA may be the way to go.
Turnover of Inventory
Some things sell out quickly. Others may languish for a long time before being purchased. This is a common aspect of the Amazon selling experience, but to optimize revenues, you need pick the correct selling plan.
FBA may be your best option if you have a product that sells rapidly. Your items will not accrue storage costs since they will not be languishing in fulfillment centers for lengthy periods of time.
You’ll wind up paying exorbitant storage costs if your things take a long time to sell. This is particularly crucial if your items have been sitting for more than a year, since Amazon will begin charging higher long-term storage costs.
If your turnover rates are sluggish, FBM may be a good option.
While owning an FBM company is very lucrative, you are responsible for overseeing the whole process. You must determine the following:
- Where can I get low-cost shipping materials?
- The most cost-effective delivery options
- How to deal with returns
All of this needs much study and effort. FBA is the way to go if you’re new to selling. It will look after everything for you. However, if you already have these logistics in place, the FBM model may work for you.
Interaction with Clients
You will seldom interact with your consumers if you utilize FBA. Amazon will manage all consumer communication, including complaints, returns, and so forth. This appeals to vendors who would rather not deal with this.
Some retailers, on the other hand, want that personal contact with their clients. They view it as an opportunity to enhance their service and build customer connections. FBM is the way to go if you fall into this group. The consumer experience is significantly more within the control of FBM vendors.
Don’t be concerned if you don’t want to perform customer service but are concerned about poor service. Amazon offers some of the greatest customer service around. If you pick FBA, you can be certain that your consumers will be properly looked after.
When a customer buys from a third-party seller via Amazon, they can leave Seller Reaction. Seller Reaction is different from a product rating as it only covers factors like:
- The experience of shipping
- Seller interaction
- Whether or not the goods got was as described on Amazon
Let’s say a customer leaves you negative Seller Reaction. If you use FBA, you can request to have this feedback removed. This is because you aren’t responsible seeing as Amazon handles your fulfillment.
However, if you use FBM, there’s not much you can do about negative Seller Reaction. All you can really do is avoid it in the first place by shipping items promptly and providing great service.
You’ll also want to consider what Marketing Plan you’re using. Let’s say you use a dropshipping business model. This involves buying products directly from a manufacturer and shipping them straight to the customer. It wouldn’t make sense to use FBA as Amazon would be acting as an unnecessary middleman.
Similarly, using FBM makes sense if you develop your own goods. Because you already have the things, sending them directly to clients will save you time and effort.
Is it possible to combine FBA with FBM?
You may utilize a mix of FBA and FBM if you offer many items. This will assist you increase your revenues in all areas.
Assume you offer a range of bicycle-related items, such as bicycles, helmets, and bells. FBA may be more suited to lightweight goods (helmets and bells). FBM may be better suited to heavier items (bikes). Amazon will handle the helmet and bell delivery, leaving you free to concentrate on managing bike sales. You’ll be earning the maximum money possible the whole time.
When Should You Use FBA or FBM?
In general, you should utilize FBA if you want to:
- Your items are compact and lightweight.
- You have a fast Turnover of Inventory
- You’ve never sold on Amazon before.
- You don’t have any logistics in place yet.
- You agree to let Amazon handle all fulfillment and customer service issues.
You should also use FBM if:
- Your goods are large and weighty.
- You have a slow Turnover of Inventory
- You’ve previously sold on Amazon.
- You already have logistics in place.
- You want complete control over customer service and fulfillment.
Final Thoughts on FBA vs. FBM
Many merchants lack the necessary resources to fulfill orders on their own. As a result, FBA is a good option for optimizing revenues.
However, if having control over customer service is important to you, the somewhat lower profit margins of FBM may be worth it. It all boils down to determining your company’s specific requirements.
You can make an informed decision between FBA and FBM if you keep these points in mind.
Amazon FBA is a platform that allows people to sell their products on Amazon.com. Amazon FBM, or “Fulfillment by Amazon,” is the same thing but for sellers who want to ship their items directly to customers. The question of which one is better is still up in the air. Reference: amazon fba analytics.
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