What are Amazon FBA and FBM, and what are the differences? How to choose?

To do Amazon e-commerce, you can simply split several things, procurement, cash flow, logistics, and marketing. There are many details, and you can get involved and become a medium-sized seller (annual income of more than 10 million)

Today we will share about the logistics aspect. In fact, on Amazon, the delivery can be directly to the Amazon warehouse, allowing them to handle the goods, delivery, customer service, returns and exchanges. Ship to customer.

All of the above have a parent company that lets Amazon help manage warehouses and shipments. We call it FBA (Fulfillment by amazon); and its own shipping is called FBM (Fulfillment by Merchant). Below we will analyze these two shipping methods.

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FBA process

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Process A (fast, good service, the most expensive but very convenient)

Market analysis/purchasing → Amazon product creation → Logistics shipping directly to Amazon warehouse → Amazon shipping/customer service/processing returns

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Process B (Fast timeliness and low storage fees, but you need to remember that when the Amazon warehouse is insufficient, manual replenishment is required)

Market analysis/purchasing → Amazon product creation → Logistics shipment to overseas warehouses in local countries → Replenishment to Amazon warehouse → Amazon shipping/customer service/processing returns

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*Usually overseas warehouses in local countries are operated by logistics companies, which can provide relatively cheap storage fees.

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FBM process

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Process A (slow timeliness, but saves a lot of upfront costs such as warehousing fees and purchasing fees)

Market analysis/purchasing → Create Amazon products → Put the products on sale → After receiving the customer order, send it directly to the buyer from the factory across the sea.

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Process B (quick delivery, but requires pre-stocking)

Market analysis/purchasing → Amazon product creation → Logistics shipment to overseas warehouses in local countries → Product sales → After receiving customer orders, send them directly to buyers from overseas warehouses

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Comparison of advantages and disadvantages of FBA and FBA

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• FBA (Fulfillment by Amazon)
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  • Advantage
    • Simple and convenient - you don’t need to do anything, just send the goods in and you’ll be fine.
    • Simple and convenient - you don’t need to do anything, just send the goods in and you’ll be fine.
    • High customer trust - Most customers will use FBA shipping as their first choice because of fast shipping, 24-hour customer service, and it is very easy to return goods if they don’t like it. We have done experiments and found that the same product has a conversion rate difference of about 20 when using FBA and FBM.
    • Eligibility for on-site activities - Some activities on Amazon require FBA shipments to participate.
    • Easy to get BuyBox - On Amazon, a product can have several sellers selling the same product together, so everyone will grab the BuyBox. If the product is shipped by FBA, there will be a higher chance of getting the BuyBox.
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  • Disadvantages
    • Warehousing restrictions - The warehouse will limit the number of warehousing, so if you sell out, you may run out of stock, and your ranking will drop once it is out of stock.
    • The price is relatively high - the storage fee is relatively high, and now there are also low-volume inventory fees, long-term storage fees, etc.

Further reading : What is the new low-volume inventory fee in 2024?

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• FBM (Seller ships by himself)
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  • Advantage
    • No need to stock up - If the goods are placed in the factory, or are placed after receiving the order, the initial financial pressure will be much less
    • Customized packaging - If the product has special outer packaging and is shipped through FBM, it will maintain a lot of flexibility.
    • Lower prices - You can freely choose different service providers to compare the lower shipping and warehousing fees.
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  • Disadvantages
    • Handle customer service by yourself - If customers have any problems, sellers must solve them themselves. If customers want to return goods, it will become very troublesome.
    • Longer shipping time - It is difficult for self-delivery to be as fast as Amazon, which may make customers impatient and reduce their willingness to purchase.
    • Lack of trust - Customers may feel uneasy and unsure about whether the seller will actually deliver the goods, the speed of delivery, quality returns, etc., so they turn to FBA sellers to purchase similar products.

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How to choose between FBA and FBM?

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In most situations, we recommend that sellers directly choose to use FBA for shipment. No matter in terms of convenience, security, ranking weight, customer trust, etc., it is much better than FBM. However, in the following situations, we recommend using FBM for shipment. :

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• Large items - Amazon's warehouse design is mainly for small items, so if the product is large, the cost is very uneconomical. Therefore, if your product is relatively large, such as a bicycle or an oversized storage box, we recommend that it be shipped in an overseas warehouse. Both warehousing and shipping costs will be relatively low.
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• Multi-platform operation - If you operate multiple platforms at the same time, such as Walmart, Target, TikTok, etc., it is recommended to use overseas warehouses for shipment, which will be relatively more flexible.

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Summarize

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If you have other shipping issues, please feel free to contact us directly! You can find us on Line’s official account, the account number is @logistiic

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