As the e-commerce market grows larger and larger with each passing year, the options for fulfillment are increasing in tandem. But which fulfillment option makes the most sense (e.g., saves the most money) for your business?
Perhaps the two most common order fulfillment options right now can be broadly categorized as fulfillment by Amazon (FBA) and fulfillment by merchant (FBM).
Both are order fulfillment methods that, depending on a number of factors like what your business is selling and your comfort with managing fulfillment, can be perfectly suitable options.
Let’s now dive into what FBA and FBM are, and how to decide which is best for your business.
What Is Fulfillment by Amazon (FBA)?
Much like how it sounds, FBA involves Amazon handling fulfillment for your business. That means that the e-commerce giant will manage storage, shipping, customer service, and returns. Consumers on Amazon will also be able to see if your business is FBA or FBM, which could impact a consumer’s behavior if they highly value Amazon’s fulfillment services. If you want to have the entire shipping and storage aspect of your product fulfilled by Amazon, then you need FBA.
What Is Fulfillment by Merchant (FBM)?
FBM involves you handling your own fulfillment processes. That means you manage shipping, returns, storage, customer service, and any other aspect of fulfillment. There are some benefits and issues with this method (which we explore below). But, generally speaking, the basic tradeoff is losing access to Amazon’s seemingly endless resources and hassle-free fulfillment handled by a third-party while maintaining more flexibility and autonomy, and also potentially saving on costs.
What Is the Difference between FBA & FBM?
So, what is the difference between FBA vs. FBM?
Well, as explained above, FBA involves Amazon relieving you of the burden of having to manage your fulfillment process.
On the flip side, FBM means that you have more work legwork, but maintain more autonomy and aren’t as tied down to Amazon.
But which one is right for your business?
Benefits of Fulfillment by Amazon
Great Delivery Service
As you’d expect, it’s hard to rival Amazon when it comes to delivery service. The company has made a name for itself by being “obsessive” when it comes to customer service and satisfaction. Part of that obsessing involves rapid delivery times that are famously reliable.
Amazon Prime is among the biggest draws to the e-commerce giant. The two-day shipping guarantee is exceedingly popular, with over 100 million customers in the U.S. alone. Qualifying for this lightning-fast delivery service can be a huge boon to your business—and can even sometimes be the difference between a closed lead or a lost potential sale.
The Buy Box is the much-coveted feature spot on Amazon that, when a shopper is searching for a product, places a particular version of that product’s price, shipping information, seller, and the “Add to Cart” button right up top. Customers are far more likely to make purchases through the Buy Box, making it vital. Order fulfillment and shipping make a big difference in which product is featured in the Buy Box. And that means that, more often than not, FBA-listed products win the Buy Box.
This essentially means that, even if you sell your product outside of Amazon, Amazon will still handle fulfillment. This allows you to build your brand outside of Amazon while still benefitting from the Amazon order fulfillment support.
Lower Shipping Rate
While this can vary based on weight and size, you will find that more often than not Amazon has cheaper shipping rates compared to managing fulfillment on your own. As you’d imagine, Amazon’s massive bargaining power means that it can extract far more favorable shipping costs than if you were to try and negotiate rates solo.
Benefits of Fulfillment by Merchant
Amazon does charge a subscription for its fulfillment services, which can add up over time. Depending on how strong you are at managing your logistics and the resources you have in place, you may find that FBM will save you a lot of money over the long run.
When you manage fulfillment on your own, you have the opportunity to generate higher margins. That’s because you won’t be hounded by those recurring Amazon fees month after month. You’ll also avoid paying for storage fees, and you may find that holding your own inventory is the most cost-effective choice.
More Control Over Your Inventory & Fulfillment
As mentioned at the top, with FBM, you maintain far more autonomy and independence. You’re not beholden to Amazon and its way of doing things. You’re free, in other words, to iterate your fulfillment process to find the system that is most efficient for your business.
FBA vs. FBM: Which One Is the Most Efficient?
So, which is the most efficient fulfillment option for you and your business?
Really, it’s impossible to say without knowing your business.
The bottom line is that each option offers a number of benefits, but you’ll have to engage in some thorough research to find out which is best for you. Or you can work with a top e-commerce fulfillment company…
Get Expert Support for Order Fulfillment
Whether you are an Amazon FBA seller or want to go FBM, APS Fulfillment, Inc. has the expertise and knowledge necessary to optimize your fulfillment process and save your business significant amounts of money.
There are endless benefits to working with a third-party logistics company that uses the best-quality software systems to manage your warehouse. Although other product fulfillment companies offer similar services, APS Fulfillment, Inc. goes the extra step. We take great pride that our quality control procedures are state-of-the-art, and we guarantee 24-hour turnaround times for our service orders.