Making money online is not a new trend, and if you’re looking to join the bandwagon – selling on Amazon is an excellent way to make money online. But do you just have to head to Amazon and start selling? Of course, no! There are certain strategies you need to follow to hit the right button.
If you’re familiar with selling on Amazon, you already know at least a little about FBM and FBA. They are the two ways one can sell on Amazon. So, this article will outline details about these two methods to help you decide which method is best for you.
What is FBM?
FBM – (Fulfilled by Merchant) is a model of selling on Amazon; as a seller, you list your products on Amazon and handle both the storage and order fulfillment. With FBM, you take responsibility for late delivery of products, or damaged products before arrival.
Advantages of FBM
- Lower fees paid to Amazon: Since you have to handle storage and order fulfillment, you pay lower fees to Amazon. This means potentially higher margins for the seller depending on the shipping cost though.
- You handle inventory and fulfillment: This may appear to be a disadvantage, but it is also a great advantage. You’re able to inspect your inventory upfront to ascertain quality and safety. This assures you of delivering quality and complete products.
- Faster to start selling: You have your products in your house or warehouse, so you can quickly process orders for fulfillment.
Disadvantages of FBM
- You handle everything – you bear the risk of any outcome; returns, damaged products, fees, etc.
- It’s harder to win the buy box – the buy box is an Amazon CTA that leads buyers to purchase products, and it mainly favors customers on FBA.
- Potential additional cost – you are responsible for paying your warehouse fee, and other fees involved in safeguarding your products.
- Not location Independent
- No Amazon prime benefits.
What is FBA?
FBA – (Fulfilled by Amazon) is a selling model in Amazon. As the name suggests, it means that with FBA the seller sells the product while Amazon ships the product to the buyer. Using FBA, the seller stores products in Amazon fulfillment centers, when an order is placed on any of the products, Amazon will sort the product, pack and ship to the buyers.
So if you want to use FBA as seller, you will have to set up FBA in your Amazon dashboard, create product listing, prepare your product and ship to Amazon – where Amazon can get the product and deliver to customers when order is placed.
Advantages of FBA
- Amazon handles all the packaging, shipping and returns: With this, you can focus on other aspects of your business without worrying about packaging or fulfilling orders. It is practically a hands-off fulfillment.
- Amazon handles the storage of inventory: You also don’t have to worry about a warehouse to store your inventory; Amazon stores your inventory and ensures safety. Though you have to pay a fee, it’s worth it because you don’t have to pay for a warehouse or stuck your living space.
- Automatically prime eligible: This is one of the biggest advantages of FBA, you automatically have the prime logo on all your products, and this means faster shipping of your products, higher conversion rates, amongst other Amazon prime benefits.
- Higher chances of getting the buy box: Amazon Buy Box is a Call to Action that refers buyers to a product in a list of many other products. With FBA, you have higher chances of winning the Buy Box and of course, Amazon prefers more sellers on prime.
- Multi-channel fulfillment: With FBA, you have access to multi-channel fulfillment. This means that if you own a Shopify store or eBay, you can also ship products from Amazon to fulfill orders from other channels, but you have to pay the shipping fee.
Disadvantages of FBA
- The product must be prepared before sending to Amazon – each product must have the FBA label. It’s time-consuming.
- FBA Fees for each order
- No immediate access to the warehouse
- Restocking can take some time, which may affect your product listing ranking.
FBM or FBA – which should I opt for?
As you’ve read, FBM is ideal for small scale products, fulfillment by merchant allows the seller to take control of storage and fulfillment of orders and perhaps enjoy more profits with less fees. And for FBA, it is best for high volume products and for sellers who are ready to pay extra FBA fees to benefit from a more hands-off kind of business.
Do you still want to learn more about Amazon FBM and FBA? Watch the video below: