Finding products to sell as an Amazon seller can be quite challenging nowadays. With Amazon's vast marketplace boasting over 200 million customers worldwide, it's essential to consider the logistics aspect to ensure a smooth operation with the ultimate goal of satisfying customers and fostering repeat business.
When it comes to the logistics part, Amazon sellers have two options for order fulfillment. If you're not familiar with the term 'fulfillment,' you can refer to a blog I wrote on the subject earlier.
The first option is to fulfill orders yourself as a merchant (FBM), while the second option is Fulfillment by Amazon (FBA), where Amazon takes charge of fulfillment services and handles logistics on your behalf.
Before making your decision, I'd like to share some insights I've gathered from my experience working in the logistics industry. While my journey in this field hasn't been exceptionally long, it has provided me with enough understanding to navigate the e-commerce world.
First and foremost, I'll provide definitions for both options and then outline some significant pros and cons associated with each model. Finally, I'll leave it up to you to decide what's best for your business. Let's dive deep into it!
What is Fulfillment by Amazon?
FBA stands for Fulfillment by Amazon. It's like this awesome service Amazon offers to folks selling stuff on their platform. Basically, if you're one of these sellers, you can stash your products in Amazon's fulfillment centers. And just so you're up to speed, in 2023, Amazon has about 100 of these bustling centers in the US and more than 185 all around the world. Now, the cool part is that Amazon handles a bunch of stuff for you once your products are in there, like storing them, packing them up, shipping them out, and even dealing with customer service. So, here's the lowdown on how FBA really works:
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Product Storage: You send your goods to Amazon's cool storage spots, and they keep 'em safe until they find new homes with buyers.
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Order Processing: When a customer orders something from your store, Amazon steps up and does all the legwork: picking, packing, and sending it off to the customer for you.
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Shipping and Delivery: Amazon taps into its massive delivery mojo to bring the product right to the customer's doorstep. And guess what? They're all about speedy and dependable shipping, including the magic of Amazon Prime's two-day or one-day delivery options.
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Customer Service: Amazon's got your back when it comes to customer questions and returns for FBA orders. They take care of all that customer support stuff on your behalf.
FBA brings some sweet perks to the table for sellers. You get the ease of Amazon taking care of all the logistics and customer service jazz, a shot at reaching those Amazon Prime folks, and a smoother path to growing your business. But, don't forget, there are fees and some rules to play by. So, sellers on Amazon, take a good look and think long and hard about whether FBA fits your product and business game plan.
Pros of selling via FBA
Prime Eligibility
Items fulfilled by Amazon usually get the Prime treatment, which can help you reach more customers. Prime members love stuff that ships fast and free, so you'll likely see your sales go up.
Amazon’s Reputation
Amazon FBA items often benefit from Amazon's trusted reputation. If we put ourselves in the shoes of shoppers, including us as buyers, we're more inclined to purchase products that are fulfilled by Amazon. So, what does this mean for you as an Amazon seller? It means you can boost your conversion rate and increase your sales.
Simplified Logistics
FBA takes care of the whole warehousing, packing, and shipping deal. That means you can kiss goodbye to a ton of time and effort spent on that stuff. Instead, you can put your energy into the fun parts of your biz, like marketing and creating awesome products.
Cons of selling via FBA
Complex Fee Structure
When we talk about rate cards, it's a bit of a head-scratcher in the logistics world, no doubt about it. Amazon's rate card is no exception, and it can be a real puzzle with all sorts of fees - like referral fees, fulfillment fees, storage fees, and the whole shebang. Wrapping your head around and keeping tabs on these fees can be a real brain-teaser.
Storage Fees and Long-Term Storage Fees
FBA charges you for the space your stuff occupies in their warehouses. If your products don't sell fast or you have lots of slow-moving inventory, these charges can get pretty high. And if your stuff sits in their warehouses for too long, they'll hit you with even bigger long-term storage fees. These fees can add up fast, so it's important to keep a close watch on your inventory to avoid them.
Limited Customization
As your brand grows, it gets tougher to give that personal touch. You might want to add something special, like a custom box or a little gift, to make your customers feel special. But with FBA, you're kind of stuck with standard Amazon boxes, and it's hard to make things unique or add your own personal touch.
What is Fulfilled by Merchant?
FBM means 'Fulfilled by Merchant.' In this gig, you're the boss. You handle everything from storing, packing, and shipping to dealing with customers all by yourself or with a little help from third-party logistics providers (3PLs) or fourth-party logistics providers (4PLs). No Amazon warehouses or services involved.
Pros of selling via FBM
Greater Control
This can be one of the pros that every Amazon Sellers I’ve worked with all give the same feedback of how complete control that they have for their entire fulfillment process, from storage and packing to shipping and customer service. Example when customer complaint about the shipping of orders you can easily send the email or phone over to third-party fulfillment partner to solve the problem whereby in Amazon - that might take long as your request need to be in the queue with Amazon Customer Service team. Apart from that, this level of control allows Amazon sellers to maintain their branding, packaging, and shipping methods according to your preferences and standards.
Lower Fulfillment Cost
This is especially important for those big, bulky, or not-so-speedy-selling products you've got on Amazon. You see, in 2021, Amazon rolled out these storage limits, and if you've got large or slow-movers, they can hit you with higher fees - remember those cons I mentioned earlier about FBA? Among all the fulfillment stuff, storage can be a real deal-breaker when it comes to your profit margin.
Flexibility
Here's the thing every Amazon seller adores: 'Flexibility.' FBM is like the flexibility king, especially when it comes to handling inventory and fulfillment. Sellers can tweak their inventory levels and shipping methods on the fly, depending on what customers want or how the market is shifting. This kind of adaptability is gold, especially if you're dealing with seasonal stuff or your business sees ups and downs in demand.
Cons of Selling via FBM
Limited Prime Eligibility
FBM products don't come with Amazon Prime benefits like speedy, free shipping. The cool perks, like better search visibility and a bigger customer base, often go to Prime-eligible products, which are usually handled by Amazon's FBA.
Customer Trust
Some folks lean towards FBA products because they trust Amazon's reliable delivery game. But if you're going the FBM route, you've got to put in the extra effort to earn and keep customer trust. That means nailing the packaging, spot-on shipping, and being super responsive on the customer service front.
What is the best suit for your business?
Well, the good news is, you're not locked into just one fulfillment method on Amazon. You can actually go for both, but it takes a bit of planning ahead. Here's the drill:
Pick Your Approach
Decide which items you want to handle with FBA and which ones with FBM. It's like your 'moat'—the fast-sellers can go to FBA, while the slower ones might be a better fit for FBM.
Your top-notch, best-selling products should totally get the FBA treatment. It lightens your load and, over time, boosts your FBA limits by keeping those sales soaring. Check your sales data to spot your champs, and for the ones that fit FBA, create mirror listings (FBM) to back them up when your FBA inventory gets low.
Streamline Your Amazon Selling Journey with 3PL Partnerships
To make your life as an Amazon seller a breeze, teaming up with 3PLs can be a smart move. Some 3PLs, like us, handle both FBA and FBM – just hit up their website or chat with their sales team to see what they offer.
When you're into FBA, trusty 3PLs can get your FBA goods all prepped to meet Amazon's strict rules. Amazon's known for being a tough cookie, so having a squad dedicated to Amazon Prep can be a game-changer.
And if you're rocking FBM, they’ve got you covered from start to finish. they ‘ve got slick automation to snag those Amazon orders, roll them into their WMS, and make sure they're out the door ASAP. Our mission? Keeping those customers smiling ear to ear.
Final Thoughts
Once more, it's worth emphasizing that every Amazon business is like a snowflake—unique. So, picking the perfect fulfillment approach depends on your specific situation. I'm thrilled to share the tips and insights I've gathered throughout my work.
If you're hungry for more knowledge or have any burning questions about FBA/FBM, don't hesitate to leave a comment below.
See you in the next blog!