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FBM or FBA? – The better choice for Amazon Marketing Services

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Oodles Marketing
FBM or FBA? – The better choice for Amazon Marketing Services

Order fulfillment has been one of the biggest challenges in the ecommerce sector. But Amazon was able to take charge of it and turn it into its unique selling point. With its effective fulfillment program, Amazon was able to garner 280.5 billion U.S. Dollars as net sales in 2019. Amazon Marketing Services provides two options for completing an order process - Fulfillment By Amazon (FBA) and Fulfillment By Merchant (FBM).  

What is Amazon FBA and FBM?

Amazon has the most advanced fulfillment networks in the world. Fulfillment By Amazon (FBA) is a service under the Amazon buy box. It is a service for Amazon sellers for shipping, packaging, and storage of products and goods. FBA takes the burden off sellers by taking over the supply chain operations in exchange for a fee.   Amazon offers another fulfillment program as Fulfillment By Merchant (FBM). Under this, sellers take responsibility for fulfilling orders. Merchants opting for FBM under Amazon Listing optimization services list their products in Amazon and ship them to their customers by themselves. Sellers with FBM are not liable to pay any shipping fees and hence it saves up an extra cost for products with lower profit margins. Direct sellers (1P) on Amazon are obligated to FBA. Third-party (3P) sellers have an option to choose between FBA and FBM.   FBM is still popularly overlooked by sellers as FBA offers the ease of handling, packaging and other added benefits.  

Benefits under Amazon FBA and FBM-

With the fulfillment expenses amounting to 40.23 billion U.S. dollars in the last fiscal year, FBA offers the following benefits-  

  • Inventory Management: Amazon takes responsibility for the storage, Stock keeping units, and other inventory-related operations. This way sellers don’t have to worry about managing space for stock.
  • Brand Power: Amazon has a strong influence as a brand. People trust Amazon. Sellers associating with Amazon have a higher chance of landing a sale.
  • Logistics and Shipping Protocols: Shipping involves complicated custom regulations and practices. Amazon looks after this task and eases the shipping end for sellers.
  • Prime Benefits: Amazon FBA qualifies under Amazon prime. It is a prime benefit both for the prime members (Amazon shoppers) as well as FBA sellers. FBA does priority order fulfillment for prime members.
  • Profit Margin: Although sellers get hesitant for opting FBA due to the fees, it brings substantial gains. A brand’s association with Amazon pushes the sales volume by an appreciable margin. 

  Despite the benefits of FBA, it still might not be a viable option for every seller. FBA can be expensive for sellers dealing with -   

  • Slow-moving goods
  • Products having lower sale frequency
  • Exclusive and luxury items
  • Products larger in size or amount

  Also, there are instances where FBM tends to be cheaper than FBA. FBM benefits include-  

  • Sellers can create online as well as offline presence. 
  • FBM provides insight into shipping processes. 
  • Sellers have the freedom to run their business without being answerable to Amazon. There are no taxation fulfillments and considerably less paperwork hassle. 
  • FBM saves on long term storage fees and fulfillment prices.  It also grants greater profit margins on a single sale.
  • Brands can build their standalone brand name. 

Changes in Amazon Marketing Services due to COVID 19

Lockdown brought many unprecedented changes for sellers over Amazon.  Amazon went on to restrict inbound shipping and Prime delivery of non-essential items. This pushed a lot of sellers towards FBM. COVID caused changes in the following aspects of Amazon fulfillment program-  

Operational changes

The differentiation between essential and non-essential items caused limited operationality for FBA. FBA prioritized essential items like baby products, health and household items, grocery and food, industrial and scientific materials, and pet supplies. Sellers falling out of these categories aren’t prioritized. Amazon considered them only under special circumstances like-

  • High-demand products
  • Product inventory in transit
  • Fulfillment center capacity
  • Amazon’s ability to adhere to the latest health guidelines while fulfilling those orders.

In contrast, FBM methods are currently operating as normal. 

Shipping speed

Amazon FBA is operating delayed delivery times and is currently not guaranteeing Prime deliveries. Amazon FBM methods are operating as normal, depending on your carrier or fulfillment provider. Governments are considering shipping carriers and warehousing as essential operations. Therefore most postal services and third-party fulfillment providers remain operational.

New products

FBA’s restrictions on inbound shipments of non-essential items mean that you may be unable to introduce and fulfill new product lines via FBA.  FBM sellers can use their in-house or outsourced fulfillment solution to source, stock, and fulfill new products to suit the current market. 

Additional Costs

Amazon FBA practices a competitive pricing strategy for fast-moving, small, and lightweight items. Further, high costs are from additional fees for long-term storage, inventory removal, and multi-channel fulfillment fees.  While there’s no Amazon fee for FBM, sellers need to still consider the in-house and outsourced fulfillment costs.   

Delay across Multi-channels

FBA also offers multi-channel fulfillment options. However, this comes at an additional cost. Also, currently,  Amazon Marketing Services aren't guaranteeing any delivery speeds. This is largely due to the quarantine. This delivery uncertainty can cause an impact on being eligible on other channels for fast delivery. FBM empowers a unified fulfillment operation for multi-channel eCommerce business.   

Conclusion

The battle between FBA and FBM is everlasting. Depending on the type of products and their saleability, each has its own merits.  Due to COVID-19, nothing is clear anymore. Businesses must be flexible and adapt to their business requirements. Nothing is static in an economy. A professional online marketing agency can guide a seller through the dynamics of the market to make appropriate decisions. FBA is still operating restrictions that could bar sales and even cease a business. FBM right now can sustain customer service while adapting a seller’s product lines to meet changing customer needs.

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