Have you ever wondered what it would be like to start your own business on a worldwide ecommerce platform that gets nearly 200 million visits from users per month? Well now you can find out, thanks to Amazon’s FBA and FBM seller programs. Amazon offers users the unique opportunity to leverage themselves as a business owner and seller on their platform, which just so happens to be the most prominent ecommerce site in the world. Depending on your goals as a seller, you can choose to operate through the FBA program or the FBM program.
Amazon FBA
FBA, or Fulfillment By Amazon , is the most popularly used fulfillment method on Amazon. Around 92% of Amazon sellers sell through FBA or both FBA and FBM. FBA is an attractive option for many reasons, the primary one being that your products are stored in Amazon Warehouses for you, across the United States. In addition, FBA provides shipping, labeling fulfillment and customer services for your products. You simply have to ship your inventory to Amazon’s warehouses, and then your products are safely stored there until they’re sold. When a customer places an order for your product, Amazon ships it directly to that customer (usually through Prime 2-day delivery) and also handles all aspects of customer service for that order. The shipping costs are minimal and FBA sellers automatically qualify for Prime shipping, which substantially incentivizes customers to buy. In exchange for these services, Amazon charges a small fee that sellers must pay for the storage and fulfillment benefits that are provided through FBA.
FBA Pros…
- Inexpensive shipping & packaging fees
- Greater sales potential
- Amazon Prime for your products
- Amazon stores your inventory for you in their warehouses across the U.S.
- Amazon stores, picks, packs and ships your products & provides customer service
- Amazon tends to give priority to FBA items in search results
- Ability to build your own business & brand
FBA Cons…
- Takes time to build up brand exposure/reputation
- Inventory management can be confusing for beginners
- FBA is not free (there are fees associated with storage, fulfillment, etc.)
- Competitive
Amazon FBM
FBM, or Fulfilled By Merchant, is the lesser used fulfillment method for selling on Amazon, with only 9% of sellers using FBM alone and 34% selling through FBM and FBA. Through FBM, a seller can list their products on Amazon but must manage all storage, shipping, and customer support themselves. In some cases this fulfillment method is ideal, for example, seller’s with logistics experience/network, heavyweight products, slow inventory turnover or a desire to control customer service. Unlike with FBA where products are automatically receive Prime eligibility, FBM sellers do not qualify as easily. In order to join their Seller Fulfilled Prime Program as an FBM seller, one must prove that they can meet Amazon Prime’s shipping standards over a 30-day trial period. These standards are fairly high, and listed in detail on the Amazon website.
FBM Pros…
- Great margins, no unexpected fees/costs
- Complete control over inventory & fulfillment
- Manage customer services instead of relying on Amazon
- Potential to qualify for Prime benefits
- Can fulfill online & offline orders from one warehouse
FBM Cons…
- More responsibilities on the seller’s end
- Overhead costs can add up quickly
- Tough competition with Amazon FBA sellers
- Difficult to qualify for Prime benefits (Amazon SFP)
- Time consuming and difficult to do without a team
