You have become an Amazon seller, and now it’s time to choose which Amazon selling model you will use. You can choose between Amazon FBA (Fulfilment by Amazon) and Amazon FBM (Fulfilment by Merchant). FBA Amazon means that you hand over the order management process to Amazon: your products are stored in Amazon warehouses, Amazon takes care of order fulfilment and customer returns. On the other hand, Amazon FBM is a selling model where sellers handle everything themselves. It’s like selling from your own online store: you store the products in your own warehouses and, upon receiving an order, you directly ship it to the customer’s home. Both Amazon selling models have their pros and cons, so which one to choose?
FBA Amazon advantages and disadvantages
In the 2021 Amazon seller statistics report prepared by “Jungle Scout,” the statistics show that only 57% of Amazon sellers use FBA, while only 9% use FBM (more: https://www.junglescout.com/blog/amazon-fba-vs-fbm/). Why is FBA Amazon significantly more popular?
Amazon Prime. More than 200 million buyers are using the Amazon Prime program, and this number is constantly growing. Products are delivered to them in as little as two business days, and in some regions, even within one business day. The short delivery time increases your potential to sell products, and you can only meet this delivery deadline by using FBA Amazon.
Buy Box. When competing with other sellers offering the same product, it is crucial that your offer is included in the Buy Box – the box on the product page that displays all seller offers and features the “Add to Cart” and “Buy Now” buttons. And of course you would win, since up to 85% of Amazon sales occur through winning the Buy Box. Sellers who offer the best price and delivery time ratio have the highest chances of winning it. Therefore, the FBA model, which provides a shorter delivery time, can help you outperform your competitors and win the Buy Box.
Amazon SEO. Although Amazon has not officially confirmed it, it is widely believed that FBA offers are ranked higher and displayed in higher positions to buyers in product searches compared to FBM.
Speaking of the downsides of FBA Amazon, the biggest one is the fees involved. By relinquishing control to Amazon, you will have to pay fulfilment fees and monthly inventory storage fees. Additionally, there are logistics costs for shipping your products to Amazon’s warehouses. However, looking at it from another perspective, you don’t have to worry about shipping the products to customers, dealing with courier services, managing returns, and so on, which can also incur financial and human resource costs.
Packaging and labelling requirements. The platform has very strict standards for the packaging and labelling of products arriving at Amazon’s warehouses, and they can easily reject goods that fail to meet these requirements. This can cost sellers a significant amount of time, money, and frustration. Therefore, it is highly recommended to thoroughly research and understand all the requirements and strictly adhere to them. This will help ensure a smooth selling experience using the FBA Amazon model.
Amazon FBM: Why do some sellers choose this model?
It seems clear – FBA selling is more popular, but some sellers still choose FBM. Why?
In order to sell on FBA Amazon, you must have a VAT number in the country where you will store your products in Amazon warehouses. If you’re selling in Europe and sending your products to an Amazon warehouse in Germany, you will need a German VAT number. The process of registering and obtaining the VAT number can take several months, during which you won’t be able to send products to the warehouse. This delays your ability to start selling on Amazon, and that’s why some sellers choose to sell using the FBM model during this period.
According to the mentioned “Jungle Scout” report, it is stated that 34% of Amazon sellers choose to sell using both methods simultaneously: both FBA and FBM. This option is indeed possible, and the biggest advantage of this combination is that you will never be “Out of Stock,” meaning your sales won’t come to a halt. If you unexpectedly sell out all the FBA inventory while the new shipment hasn’t reached Amazon’s warehouses yet, you will be able to administer the orders yourself.
So, choosing the Amazon selling model essentially depends on how involved you want to be in the order management process. However, we always recommend opting for the FBA Amazon method, where you hand over the entire process to Amazon’s hands, or combining both FBA Amazon and Amazon FBM methods. If you still need more detailed answers about method selection or require assistance after choosing a particular method, DIGITAL FREAKS is ready to help you.