FBA or FBM - Which sales model is right for you?

Selling on Amazon has become one of the most popular ways to grow an e-commerce business. However, before making a decision to sell on this platform, you need to choose a logistics model that best suits your needs: FBA (Fulfillment by Amazon) or FBM (Fulfillment by Merchant). Both models have their advantages and disadvantages, and the choice depends on many factors such as the scale of the business, costs, shipping speed, control over the order process, seasonality, and market reach. In this article, we will analyse which seller each of these models will be suitable for.

Business Scale: When is it worth opting for FBA, and when for FBM?

If you run a large-scale business with a high sales volume, FBA may be the ideal solution for you. Amazon handles storage, order fulfilment, and shipping of products, allowing you to focus on other aspects of your business. With automated processes, FBA can handle thousands of orders daily, which is invaluable for larger sellers.

On the other hand, FBM may be more cost-effective for smaller sellers who have a smaller number of orders and can manage shipping independently. This means they do not incur storage and handling costs from Amazon, but must take care of logistics and customer service quality themselves, including managing returns and maintaining account health.

Costs: Analysis of FBA and FBM expenses

One of the key factors when choosing between FBA and FBM is the costs. FBA involves additional fees for storage, order fulfilment, and shipping through Amazon. These costs can add up quickly, especially if products linger in inventory for long periods. Therefore, for sellers with a low profit margin, it may be less cost-effective.

FBM, on the other hand, allows you to avoid these fees, but the seller must handle shipping costs, packaging, and any potential returns themselves. Choosing FBM also means full responsibility for every aspect of the order fulfilment process, which can be challenging, especially as the scale of the business begins to grow.

Shipping Speed

One of the greatest advantages of FBA is the ability to offer fast shipping, including the Prime option, which is especially valued by Amazon customers. With an extensive logistics infrastructure, Amazon can ensure that products reach the customer within one or two days. Fast shipping and efficient return management translate into better customer reviews and a higher position in search results.

In the case of FBM, shipping speed depends on the seller. You can deliver orders in a shorter time if you have the right logistics, but in practice, achieving such a level of service as in FBA can be difficult and costly.

Control Over the Order Process

One of the main arguments for choosing FBM is greater control over the entire order process. As a seller, you handle shipping independently, allowing for direct contact with customers and a quick response to their needs. You can make changes to the handling process at any time, adapting it to market and customer requirements.

FBA, on the other hand, takes away some of that control from the seller. Amazon manages the entire process, which means you do not have direct contact with the customer regarding shipping or returns. This can be a problem if you are keen on building close relationships with customers or tailoring service to specific needs.

Seasonality: How to choose a model for peak periods?

When trading seasonal products, it is worth considering the advantages of FBA. Amazon has the infrastructure to handle large volumes of orders during peak periods, such as holidays or sales. This allows sellers to avoid issues related to excessive logistical strain during critical moments.

For sellers operating in more stable industries or who have the ability to handle increased traffic independently, FBM may be sufficient. This allows for flexible warehouse management and adaptation to changes in demand without incurring additional storage costs with Amazon.

Market Reach: Which model will help you increase visibility?

FBA can significantly increase the visibility of your products on Amazon thanks to programs such as Amazon Prime, which attract more customers. Being part of the Prime program also means a greater chance of winning the Buy Box, which is a preferred position on the product page and is key to increasing sales.

FBM, on the other hand, offers greater flexibility in selling outside of Amazon, which can be beneficial for sellers operating on multiple platforms. You can manage inventory more easily, diversify sales channels, and not limit yourself to just one platform.

FOMO: Use the fear of missing out

Regardless of the model chosen, it is worthwhile to apply the principle of FOMO – the fear of missing out. Inform customers about limited product availability or offer time-limited promotions. In the case of FBA, products marked as Prime are often seen as more attractive, which can effectively boost sales. In FBM, you can create limited offers or personalised messages to customers, which gives more opportunities for building a unique brand.

Summary: Which model to choose?

The choice between FBA and FBM depends on the specifics of your business. If you run a large-scale operation, need fast shipping and greater visibility on Amazon, FBA may be the ideal solution. If, however, you value full control over the order process, lower costs, and flexibility in managing sales, FBM will be the better choice.

Remember that both FBA and FBM have their pros and cons, so it is worth thoroughly analysing your needs and resources before making a final decision. And if you are unsure which model will be best, you can always start by testing both options, and choose the one that best meets the needs of your business.

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