If you’re a new Amazon Seller, looking to launch your business in 2021, then you might be wondering what’s the ideal business model for you. There are 2 main selling methods on Amazon – Fulfillment by Amazon, and Fulfillment by Merchant. So which is better? Here’s your guide to Amazon FBA vs. FBM.
FBA- (Fulfillment By Amazon)
Fulfillment by Amazon FBA is simply using services provided by Amazon fulfillment program to the seller rather than his own resources. FBA fulfillment allows sellers to ship their products to Amazon warehouses where similar items are already stored until they sell.
FBM- (Fulfillment By Merchant)
Fulfillment By Merchant (FBM) is a process when the seller has self-control over the entire process of its storage and shipping. Rather than paying Amazon a service fee and sending inventory to manage, the seller uses his or her own money and delivers the goods directly to the customer.
| FBA Is Ideal IF | FBM Is Ideal IF |
| 1. Seller Items have fast turnovers. | 1. Seller items don’t have fast turnovers. |
| 2. Items are small, lightweight and expensive. | 2. Items are big, heavy and cheap. |
| 3. You accept commingling. | 3. Commingling might be risky for you |
| 4. You do not have enough manpower to fulfill efficiently. | 4. You have enough manpower and storage. |
Now let’s have a brief discussion
FBA vs FBM: A Full Comparison (Pros & Cons) for Amazon Sellers
FBA- Fulfillment By Amazon
| Pros | Cons |
| 1. Prime Eligibility. | 1. Additional Charges. |
| 2. Hands-Off Fulfillment. | 2. Limited Access to Inventory. |
| 3. Buy Box Advantage. | 3. Quality Compromise. |
| 4. Multichannel Fulfillment. | 4. Pricey-Multichannel Fulfillment. |
| 5. Low Shipping Rates. | 5. Tax Obligations. |
FBM- Fulfillment By Merchant
| Pros | Cons |
| 1. Prime Opportunity. | 1. More Responsibility. |
| 2. Hands-On Fulfillment. | 2. Not Automatically Prime Eligible. |
| 3. Less Amazon Charges. | 3. Overhead Cost. |
| 4. High Margin. | 4. Lower Conversion. |
| 5. No Unexpected Costs. | 5. Elusive Buy Box. |
FBA or FBM: Choice Is Yours
FBA is best for high volume products along with High margin. FBA fulfillment is for sellers who are ready/willing to drop the selling price to the lowest possible profit point if need be.
FBM is best for small scale, small margin or one-offs. FBM Fulfilled allows sellers to take control of the fulfillment process without cutting their margins.
There is no particular scale to measure when it comes to Amazon FBA and FBM, Now it depends on your business goals and your business needs. Still, If you are not sure about which fulfillment process suits you best, check out an Amazon Seller Coach, they will assist you throughout the entire process at no cost.
Considerations
FBA and FBM both come with their respective benefits and limitations, so we recommend instead of focusing on statistics, or focusing on the intricacies of each program, new Amazon sellers should focus on what their business needs.
Some Basic Questions
Here are several questions a new Amazon seller should ask themselves before they settle on FBM or FBA. They will serve as a guideline for what you want from your Amazon Business, and help lead you to a conclusion.
Some basic questions you absolutely need the answer to:
- What is the size and weight of my product?
- How much is the shipping cost per unit?
- How fast does my inventory turn over?
- What are the rates offered by 3PLs in my area?
- What weekly or monthly shipping volume is feasible for me?
- How much are my overhead fees and warehousing expenses?
Final Thoughts
In summation, we believe there are benefits to both Amazon FBA and FBM, and that the final decision comes down to what you value in your business. However, for new sellers, a concrete answer to the Amazon FBA vs FBM debate is… go with FBA. Unless you have extensive expertise in logistics, we recommend Amazon FBA. In 2021, when the Amazon Marketplace is so saturated with competition, you will need every perk you can get. Amazon FBA gives you two automatically – Seller Prime and Buy Box.
Whether you choose FBA or FBM, your key focus even before launching your products will have to be Amazon Advertising. Amazon PPC management and optimization is the only true way to beat your competition in 2021, regardless of your sales method. We highly recommend looking into Amazon PPC Tools and Amazon PPC Management Software that will work for you.
Q.What’s better: Dropshipping or Amazon FBA?
If you’re just starting your online business then opt for the dropshipping business model. It comparatively provides more perks than Amazon’s FBA program. If you are already running an online business and wish to further scale, then opt for Amazon FBA.
Q. What is the difference between Amazon FBA and Dropshipping?
In simpler terms, the primary difference is stock possession. When you are dropshipping, you don’t own any merchandise and act as a middleman between suppliers and customers. Whereas when you use Amazon’s FBA program, you have to invest in merchandise and store it in Amazon’s warehouse. In return, Amazon takes care of all your shipments and returns.
Q. Which one to go for in 2021 Shopify dropshipping vs Amazon FBA?
Amazon’s individual plan is more suitable for small-scale businesses. However, Shopify overall offers better value for money. It’s cheaper than Amazon’s professional plan and is more scalable and transparent with its pricing if compared to Amazon’s FBA program, making budgeting much simpler.
Q. Should I go for affiliate marketing or dropshipping?
Affiliate marketing is a business model where you promote the products or offers of another manufacturer or retailer and earn a commission on every sale. In comparison with dropshipping, affiliate marketing doesn’t demand you to handle orders or manage customer support. All you need to do is promote the product on various platforms and earn handsome commissions.
Great article and easy to understand
Mam mehak alamgir efforts are countless.
Thanks alot mam for such great article
Regards Ghulam Mustafa
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