It’s no secret that Amazon is the best way for an e-commerce business to get started. The fact that there are nearly 3 million sellers on Amazon around the world as of 2019 is proof of that.
When most people think Amazon, they think Amazon FBA. But many don’t know about the different ways you can sell on Amazon, including FBM.
If you’ve heard about FBM, but don’t really know what it’s about or why you should choose it, don’t worry. This post will breakdown FBA vs FBM, and why and in which situations you want to use each one.
Can I Sell on Amazon Without FBA?
Many think selling on Amazon means Amazon FBA. They don’t realize that FBA is just a part of the picture, relating to fulfillment (storage and shipping of products).
If you look up and down Amazon search results, you’ll find much more than just FBA products. You’ve also got:
- Amazon’s own brands
- Amazon vendors (sellers who sell directly to Amazon, who then sell the products themselves)
Amazon is much, much more than just FBA.
What is FBA?
FBA stands for Fulfilled By Amazon. With FBA, Amazon will take care of storage, packaging, shipping and everything related to fulfilling orders. The system allows you to take your hands off a big part of the business, and focus on other areas.
When you sell FBA products, you will send them to one of Amazon’s many fulfillment centers, where they will be stored by Amazon, and eventually shipped once an order comes through.
How much does FBA cost?
There are two types of fees you’ll be charged with FBA: fulfillment fees and storage fees.
Fulfillment fees cover picking and packing orders, shipping and handling, customer service and product returns. Fees are charged per unit, based on size and weight.
The fee structure as of December 2019 is:
Standard sized items
- Small – 10oz or less – $2.41 per unit
- Small – 10oz to 16oz – $2.48
- Large – 10oz or less – $3.19
- Large – 10oz to 16oz – $3.28
- Large – 1lb to 2lb – $4.76
- Large – 2lb to 3lb – $5.26
- Large – 3lb to 21lb – $5.26 + $0.38/lb above first 3 lb
- Small oversize (71lb or less) – $8.26 + $0.38/lb above first 2 lb
- Medium oversize (151lb or less) – $9.79+ $0.39/lb above first 2 lb
- Large oversize (151lb or less) – $75.78 + $0.79/lb above first 90 lb
- Special oversize – $137.32 + $0.91/lb. above first 90 lb
There are additional charges of $0.40/unit for clothing items and $0.11/unit for items with lithium batteries.
Storage fees are charged monthly, per cubic foot your items are taking up. The prices are different depending on the time of the year (storage fees go up closer to the holiday season).
The fees are:
Standard sized items
- January – September: $0.69/cubic foot
- October – December: $2.40/cubic foot
- January – September: $0.48/cubic foot
- October – December: $1.20/cubic foot
There are a few additional fees that may come up, including:
- Long-term storage fees (for stock that has been in fulfillment centers for more than 365 days)
- Removal order fees (if you need to take any of your items out of circulation)
- Returns processing fees (for orders where Amazon offers the customer free returns shipping)
- Unplanned service fees (if your inventory isn’t properly labeled or prepared when it comes to the fulfillment center)
What is FBM?
FBM is Fulfilled By Merchant. This is the method in which the seller is responsible for fulfilling orders themselves. FBM requires you to organize things like storage, shipping and packaging.
You list products on Amazon the same way, and once orders come through you need to make sure the product reaches the customer. You also need to handle any return requests from your customers.
The only fees charged by Amazon for selling FBM are the base Amazon seller fees ($39.99 for the Professional selling plan, or $0.99 per item for the Individual selling plan).
You will still have to pay for storage and shipping. But you can likely find cheaper alternatives to FBA with third-party fulfillment centers.
What is SFP?
SFP is one other acronym you can come across related to selling on Amazon. SFP is Seller-Fulfilled Prime, and is essentially an extension of FBM.
One of the negatives about FBM is that you don’t have Amazon’s “Prime” shipping, and don’t have the Amazon Prime badge on your listing. That is, unless you are eligible for SFP.
Seller-Fulfilled Prime allows sellers to offer Prime shipping, together with the high-converting Prime badge and all the benefits it brings. To be eligible for SFP, you need to maintain positive shipping and fulfillment performance metrics, to prove you can offer shipping on the same level of speed and reliability as Amazon Prime.
If you apply for SFP, you’ll have to go through a trial period first, achieving certain benchmarks over your trial orders. If you complete the trial successfully, you’ll become eligible for SFP. However, it can be revoked if your performance drops under the threshold again.
What Are The Advantages of FBA?
Here are some of the biggest reasons to go with Amazon FBA:
- Guaranteed Amazon Prime shipping
- Better chances of winning the Buy Box
- Less manpower & management required
- (Essentially) infinite storage
- Location independent
Guaranteed Amazon Prime shipping
Like Amazon, Amazon Prime is becoming a well-recognized brand itself. Customers love shopping on Amazon because they know they can get fast, reliable shipping on their products, as long as it has the shiny “Amazon Prime” badge.
This offers a range of benefits. You’ll attract more clicks to your listing and more sales with the Amazon Prime badge, and by quickly and safely fulfilling customers’ orders, you’ll end up with more happy buyers and more positive reviews.
Better chances of winning the Buy Box
The Buy Box is incredibly important for Amazon sellers. It’s the section on the side of the page with the “Add to Cart” button. Without the Buy Box, customers have to click the “buy from other sellers” link to buy from you.
Basically, a huge percentage of Amazon sales come through the Buy Box, and the chances of winning the Buy Box are much greater with FBA.
If your product is in FBA, Amazon is confident they’ll be able to ship it on time and with no problems. Thus, they’re going to push customers towards buying FBA products, over FBM.
Less manpower & management required
The load that FBA takes off you cannot be understated. Running a business is a time-consuming endeavor. When you start getting a whole lot of sales and orders coming in, it’s a full-time job to make sure they all get to their customers safely and on time. And that’s just a part of selling on Amazon.
Taking this off your plate (or your team’s plate) lets you focus more energy and resources on things like advertising, keyword research and listing optimization.
(Essentially) infinite storage
Storage space is not an issue with Amazon FBA, as Amazon has massive fulfillment centers all over. If you’re storing your stock at home, you’ll only have so much space to put everything, limiting the volume you’re able to sell.
It’s less likely to be an issue if you use a third-party fulfillment center, but even then they’re not going to be able to match the warehouse space and fulfillment network Amazon has.
One of the great things about FBA is it lets you run an e-commerce business from anywhere in the world. So many entrepreneurs have been able to start up and run their business without needing to be in a specific location, due to Amazon FBA.
This opens the door for much more flexible business models and better lifestyles than being tied down to one place.
What Are The Advantages of FBM?
These are the advantages of fulfilling orders yourself (FBM):
- Lower fees
- Ability to have a hands-on approach
- More flexible
- Better for slow-moving, big or heavy products
- Cheaper for multi-channel fulfillment
For all the benefits of Amazon FBA, it comes with a cost. The fees Amazon charges for storage, preparation and shipping can really cut into your margins. You can save a fair bit by handling this yourself.
The savings can also be passed on to the customer, allowing you to sell your products for cheaper, which should increase sales.
Ability to have a hands-on approach
Fulfilling orders yourself allows you to take full control of your orders. This can help out in a lot of situations. You can personally ensure that orders are correct, instead of trusting Amazon to handle it. It’s also easier to take products out of circulation and inspect them if customers complain of quality issues or defects (with FBA you’ll have to get your stock sent back to you, and then send it back again).
The ability to handle the product physically before you send it out means that you can cater to special cases a lot better. Any special requests from customers can be handled easier, allowing you to provide a better customer experience.
This can easily lead to more reviews and better reviews with high standards of customer service.
Better for slow-moving, big or heavy products
Amazon FBA fees are specifically disadvantageous to certain types of products. If your products are large, heavy, or likely to be in Amazon’s fulfillment centers for a long time, it’s going to get really expensive.
Products like these will make more sense to fulfill yourself. You’ll save a lot on storage (particularly long-term storage fees), allowing you to make much better profits and price competitively.
Cheaper for multi-channel fulfillment
You can use FBA to fulfill sales from non-Amazon sales channels, such as your own site or marketplaces like eBay or Walmart, with Amazon multi-channel fulfillment. However, this is quite expensive, and not ideal if you’re moving a lot of product on other channels.
If Amazon isn’t your primary sales channel – say for example you get a lot of sales from your own Shopify site – you may want to think about using a 3pl (third-party logistics) company.
This lets you manage all your products at the same place, and save a lot of money, particularly on your non-Amazon sales.
Amazon FBM vs Amazon FBA: What is the Best?
The best fulfillment method comes down to your own situation.
If you have a full-time Amazon business, with a lot of sales volume, Amazon FBA is usually the best. The amount of work that Amazon takes off your plate is incredibly valuable, allowing you to focus intensely on areas that will really grow your business. Additionally, the consumer trust and added benefits of the Amazon Prime badge are a huge plus, and will almost always help you sell more than competitors who don’t offer Prime.
FBM is a better option in some situations. If your business is a smaller scale, where you can afford to put time into managing orders yourself, it can allow you to save and take home better margins. Dropshipping or arbitrage businesses are generally better suited for FBM, as you’ll save a lot on storage fees.
FBM may also make more sense if a lot of your sales volume comes from other sources, such as your own site or other marketplaces. FBA multi-channel fulfillment is very pricey, so when you’re selling on many different channels, it’s often better to use a third-party fulfillment center for all your channels.
Access to Amazon Prime makes FBA better for most sellers, but with a reliable fulfillment network outside of Amazon, you may be able to make up for this by becoming eligible for Seller-Fulfilled Prime, or SFP.
Summing Up – FBA, FBM and SFP
Getting orders shipped and products to your customers on time and safely is the most important part of an online physical products business. FBA, FBM (and SFP) all offer unique advantages for certain situations. Whichever you choose can end up having a significant effect on your sales, profits and customer satisfaction.
Choose the right fulfillment method to give your business the best chance of succeeding long-term.