03 Feb 2021

FBA vs FBM: A Full Comparison for eCommerce Sellers

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why is it important for small business to have inventory management

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24 February 2021

Why is it Important for Small Business to have Inventory Management
What is Fulfillment by Amazon (FBA)?

FBA means Fulfillment by Amazon, which is a subscription service Amazon sellers can pay Amazon to use. It covers storage, shipping, customer service and returns for your sales on the marketplace. A key element of FBA is that Amazon holds your inventory. You can choose between FBA vs. seller fulfilled on a product-by-product basis, based on your preference, cost levels, and shipping delays.

Pros of using FBA
  1. Prime eligibility

    Your products are automatically eligible for Amazon Prime free two-day shipping and other Prime benefits such as free shipping and increased chances of winning the Buy Box. With Prime, you will likely sell more inventory, since your product is associated with Amazon. The Reputation Institute named Amazon the No.1 most reputable global company among the American general public, so it is safe to say that shoppers typically trust products fulfilled by Amazon itself.
  2. Management of inventory

    FBA provides a simplified process of hands-off packing and shipping. When you rely on Amazon, you have a better chance of placing your inventory close to your clients in one of Amazon's warehouses around the world. This can shorten delivery times and increase customer satisfaction.
  3. No customer service needed

    Amazon manages most of your customer service including returns of products. It provides the same high standard of customer service as it does with its own products. Amazon is known for its obsession with the user experience and will do everything it can to serve your customers well. Therefore, you do not need to worry about the after sales- services.
fba vs fbm
What is Fulfillment by Merchant (FBM)?

FBM means Fulfillment by Merchant. Amazon merchants who do not use FBA ship their orders directly to clients, handle customer service, and manage returns themselves. When fulfillment is handled by the merchant, in the FBM model, the buyer purchases products on Amazon, but the merchant is responsible for delivering them.

Pros of using FBM
  1. Direct customer relationship

    When you manage customer service yourself, you can establish relationships for the long term. Personalized customer care is something only you can give. Many businesses aim to learn from every customer interaction to improve their products and their customer understanding. This is only possible with FBM.
  2. Higher margins

    Because you’re paying fewer fees without having Amazon fulfill the orders, you will likely make slightly more on each sale (depending on the product). Your fulfillment process will appear less expensive with FBM. But this may be because you're using your own resources which you pay for anyway: storage space and time spent on customer communication. A more detailed cost analysis may show the opposite.
  3. More process control

    With FBM, you are in charge of the entire client fulfillment process, allowing you to change or improve it. You can play around with packaging and delivery modes to find the best solution for you and your customers.
ecommerce fulfillment
FBA vs. FBM: Which is the best choice for eCommerce sellers?

FBA is typically best for high volume, large margin products. This type of fulfillment is for sellers who are ready/willing to drop the selling price to the lowest possible profit point if need be. FBM is generally good for smaller scale, small margins products or one-offs. Fulfilled by Merchant allows sellers to take control of the fulfillment process without crushing small margins.

Ultimately, there’s no perfect formula when it comes to FBA vs FBM, and it is up to you and your business’ needs. If you’re still not sure which fulfillment method to utilize, reach out to a shipping specialist from Shipkoo, who will be happy to assist you throughout the entire process at no cost to you.

If you choose to use FBA, Shipkoo has helped thousands of online sellers to manage inventory flows to Amazon. We prepare your shipment to comply with Amazon’s standards, and use air, sea or railway services to deliver it to any of Amazon’s fulfillment centers. You can eliminate the hassle of handling inventory and focus on growing your business through Shipkoo.

If you think that FBM is more suitable, try out Shipkoo’s eCommerce fulfillment service. We help you to pick, pack and dispatch your orders from any of our fulfillment centers and ship them to your worldwide customers.

fba prep and forwarding

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