Back in 2015, Amazon wanted to celebrate their 20th anniversary in grand fashion. So, they started Amazon Prime Day.
Amazon Prime Day serves two purposes. It helps produce a huge spike in online sales for Amazon, and it shows new sellers that there is a huge upside to marketing their products on the platform.
Amazon stated that Prime members around the globe ordered over 100 million products on Prime Day this year. Amazon saw a significant increase in their sales. It’s estimated that their sales increased by $1 billion in one year.
Selling your products on Amazon will expand your market and increase your annual sales. You have two main selling options: Fulfillment by Merchant (FBM) or Fulfillment by Amazon (FBA). Both options will give you the golden opportunity to build a strong brand.
Amazon FBA vs. FBM : Which option offers the best opportunity for merchants?
When it comes to Fulfillment by Amazon, here are some things you need to take into consideration:
- Can you ship your items at a reasonable price?
- Will you make more profits with a higher shipping volume discount?
- Will you be facing monthly or long-term storage fees?
- Will the increased price make it possible to compete with FBA to level additional fees?
The Advantages of Fulfillment by Amazon
With FBA, Amazon handles packaging, shipping, and returns. This will help you run your business efficiently.
What is the biggest advantage of FBA? As a seller, you can sit back and let Amazon fulfill your orders. Their machines and employees will take care of the hard work.
When your customers make a purchase, their order is shipped from Amazon’s warehouse. It will be delivered to their mailing address. You don’t have to worry about packaging your items and making trips to the post office.
Amazon Stores Your Inventory
If you decide to go with FBM, there’s a strong chance of your home being cluttered with your inventory. This could turn out to be a very frustrating experience.
If you decide to market your products via FBA, you can send your products to Amazon’s warehouse. They will be more than happy to store your products. When your customers place their orders, Amazon will ship the products promptly to their address.
As you can see, Fulfillment by Amazon will save you precious time and space. You’re only responsible for making sure that you have enough products at the warehouse to cover your orders.
Prime Eligible
It’s important for you to know that over half of the customers on Amazon are prime customers. When you use FBA, your products are eligible for fast Prime shipping.
Prime shipping can help you get a sharp edge over your competitors. Most Amazon customers will not turn down the opportunity to get free two-day delivery or inexpensive same-day delivery.
This opportunity is not extended to FBM sellers.
Getting the Buy Box
When it comes to getting the Buy Box, prime shipping plays a huge factor. Amazon is well-known for favoring FBA products over FBM products when selecting the seller on the buy box.
Amazon is in full-control of the shipping of FBA products. Amazon also knows that customers will get their products fast. This creates a win-win situation for everyone.
If you are marketing a new product, you are not automatically selected for the buy box. Amazon expects you to make a few sales before you are considered for the buy box. However, you will get your chance.
Multi-channel Fulfillment
Multi-channel fulfillment does not restrict you from selling your products on other platforms. Fortunately, Amazon will not have a problem with handling the shipping and fulfillment of the order.
Let’s say you want to sell your products on your website. You can secure the sales and Amazon will take care of the shipping.
You can build an impressive Shopify store, use search engine optimization to get traffic, and collect email addresses.
When an order is placed, Amazon will ship the order to the customer. This business model allows you to take your business to another level. It doesn’t take a rocket scientist to see that selling products on multiple channels will increase your sales revenue.
As I stated earlier, Amazon FBA vs. FBM is one subject that you cannot afford to ignore.
Location Independent
With Fulfillment by Amazon, you can run your business remotely. You can run your business in the United States, the Virgin Islands, etc. The choice is yours!
Having access to the internet opens the door for you to drop ship products with ease. This digital nomad lifestyle is intriguing for people from all walks of life.
You can reach your suppliers via email, Skype, or Alibaba. Your suppliers can ship your items to the Amazon warehouse and Amazon will take it from there.
If you want financial freedom, Fulfillment by Amazon can make it happen. You can set your own hours and scale your business over time.
What are the Advantages of FBM?
Lower Fees and Higher Margins
FBA vs. FBM Fees
When you use FBM, you will be looking at paying lower fees. Since Amazon will not be storing your products, you don’t have to worry about dealing with warehouse fees. This is a big plus if you are dealing with products that offer little room for mark-up.
However, you are still responsible for paying Amazon a fee for their service. They are not going to allow you to use their platform for free.
You Handle Your Inventory and Fulfillment
This may seem like a huge disadvantage, but there are some benefits to handling your own inventory. For instance, you can inspect your products before they are shipped out. Your personal quality control will ensure that your customers are pleased with the experience.
Shipping out your items will also help you avoid getting negative reviews. It doesn’t take a rocket scientist to know that negative reviews can hurt your business.
If you really want to stand out in a competitive niche, you can give your packages a personalized touch. For example, you can wrap your packages with a beautiful ribbon.
FBM Is Easier to Get Started
When you start out with FBM, you will not be required to pay for your inventory at once and ship it to Amazon’s warehouse. Amazon is notorious for having strict rules, and it will take time for you to ship your products to them.
With FBM, you can circumvent some of Amazon’s strict regulations by placing your listing on their site. When you handle the shipping, you will have more control over your business.
New Customers
Let’s say you have an existing business that handles packaging and shipping. Selling your products on Amazon will help you get new customers.
Please keep in mind that millions of people visit Amazon daily. Hundreds or thousands of people will see your listing daily. If you have a solid listing, there’s a strong chance of you making consistent sales on the platform.
If you have a site to store your inventory and a staff, Amazon Fulfillment by Merchant may be your best option. It will help you get off to a great start.
Unlike FBA, you will have fewer fees on your hands.
Amazon FBA vs. FBM
Should you choose Fulfillment by Amazon or Fulfillment by Merchant? Both options offer many wonderful benefits. However, you should choose the option that will be suitable for your business.
If you have limited space, you should consider going with Amazon FBA. Amazon will be more than happy to store your products and ship them to your customers.
If you have enough room to store your products, you should go with Amazon FBM. Simply list your products on Amazon’s website, wait for the orders, and ship the products to your customers.
Knowing your capabilities and goals will help you make the right decision.