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

Business scale: When should you choose FBA, and when FBM? 

If you run a large-scale operation with a high volume of sales, FBA may be the perfect solution for you. Amazon handles storage, order fulfillment, and shipping of products, allowing you to focus on other aspects of your business. Thanks to automated processes, FBA can handle thousands of orders a day, which is invaluable for larger sellers. On the other hand, FBM may be more cost-effective for smaller sellers with fewer orders, who can manage shipping themselves. This means they avoid Amazon’s storage and handling fees, but they are responsible for logistics and customer service, 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 cost. FBA comes with additional fees for storage, order fulfillment, and shipping by Amazon. These costs can add up quickly, especially if products sit in the warehouse for a long time. For sellers with low profit margins, this might be less profitable. FBM, on the other hand, allows you to avoid these fees, but the seller must cover shipping, packaging, and potential returns. Choosing FBM also means taking full responsibility for every aspect of the order process, which can be challenging, especially as your business grows.

Shipping speed 

One of FBA’s biggest advantages is the ability to offer fast shipping, including Prime options, which are highly valued by Amazon customers. With its extensive logistics infrastructure, Amazon can ensure products reach customers within one or two days. Fast shipping and efficient returns management translate into better customer reviews and a higher position in search results. With FBM, shipping speed depends on the seller. You may be able to deliver orders faster if you have the right logistics, but in practice, reaching FBA’s level of service can be difficult and costly.

Order process control 

One of the main arguments for choosing FBM is greater control over the entire order process. As a seller, you handle shipping yourself, which allows for direct contact with customers and quick responses to their needs. You can make changes to the service process at any time, adapting it to market and customer demands. FBA, on the other hand, takes away some of this control from the seller. Amazon manages the entire process, meaning you don’t have direct contact with the customer regarding shipping or returns. This could be a problem if you value building close customer relationships or tailoring service to specific needs.

Seasonality: How to choose a model for peak periods? 

If you sell seasonal products, FBA’s advantages are worth considering. Amazon has the infrastructure to handle large volumes of orders during peak times, such as holidays or sales events. This allows sellers to avoid logistics bottlenecks at key moments. For sellers operating in more stable industries or those capable of handling increased traffic on their own, FBM might be sufficient. It allows flexible inventory management and adjustment to demand changes without the additional costs of Amazon’s storage.

Market reach: Which model helps increase visibility? 

FBA can significantly boost the visibility of your products on Amazon through programs like Amazon Prime, which attract more customers. Being part of the Prime program also increases your chances of winning the Buy Box, the preferred position on the product page, which is crucial for driving sales. FBM, on the other hand, offers more flexibility in selling outside of Amazon, which may be beneficial for sellers operating on multiple platforms. You can more easily manage inventory, diversify sales channels, and avoid limiting yourself to one platform.

FOMO: Leverage the fear of missing out 

Regardless of the chosen model, it’s worth applying the FOMO principle – 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 perceived as more attractive, which can effectively increase sales. With FBM, you can create limited offers or personalized messages to customers, offering 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 operate on a large scale, need fast shipping, and greater visibility on Amazon, FBA may be the ideal solution. If you value full control over the order process, lower costs, and flexibility in sales management, FBM might be the better choice. Remember, both FBA and FBM have their pros and cons, so it’s essential to carefully analyze your needs and resources before making a final decision. If you’re unsure which model is best for you, you can always test both options and choose the one that best meets your business needs. Contact us to learn more!