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Amazon has a massive community, with over 2.5 million sellers. Every seller on Amazon needs to make a choice when it comes to fulfillment. Either they can pay amazon for storage and shipment of their orders using Fulfillment by Amazon (FBA), or take the shipping and storage responsibility on themselves through the Fulfillment by Merchant (FBM) program.
According to a leading survey, most sellers on Amazon go for FBA; whereas, only a third of the sellers opt for FBM. Some sellers also use both methods.
Here is a quick description of FBA and FBM users
When using FBA, you are charged a fulfillment fee and a monthly storage fee, whereas with Merchant fulfilled selling, you can ship and store your products or outsource to a 3rd party.
Choosing the optimal method for fulfillment can be a little daunting experience, So, here are some pros and cons for both FBA and FBM.
Products that use FBA are eligible for Prime shipping. So, customers with an Amazon Prime subscription can receive your products with 2-days shipping at no additional cost.
More than 110 million people have Amazon prime subscription in the US alone, and they are more likely to prefer a product with prime shipping.
Winning the Buy Box
The Buy Box is part of the product detail page where customers can begin the purchasing process by adding items to their shopping carts. Since more than one seller can sell the same product on Amazon, they compete for the Buy Box.
Buy Box placement can lead to increased sales, and sellers that use FBA are more likely to win it.
FBA allows you to focus on selling:
Fulfillment is a very hectic part of any business. Hiring employees, keeping track of your inventory, making sure you ship products on time, and negotiating better carrier rates can be overwhelming for a new and even a seasoned seller.
Using FBA takes away the headache, It allows you to focus your energy on selling and marketing your products, knowing that your shipment and storage are taken care of by Amazon Fulfillment service.
Though Amazon has not publicly admitted how their rating algorithm works, many experts believe that FBA products rank higher on product pages, considering that all other factors are identical.
For any successful E-commerce business, Customer service is essential. When you use FBA, Amazon handles all returns and customer service, which makes your business more reliable and customer-friendly without any extra work on your part.
Multi-Channel Fulfillment (MCF):
Many online sellers use multiple channels to sell their products. They may sell both on Amazon and other websites.
FBA offers fulfillment services for multiple channels, and you can fulfill orders from Amazon and your E-commerce website through FBA.
However, keep in mind that fees for MCF are higher than standard FBA.
Perhaps the only con of using FBA is the fulfillment services fees. From storage and fulfillment fees to FBA return fees. You will have to pay a considerable amount for using the amazon fulfillment service. However, with the benefits you get, the costs are worth it for the most part.
Moreover, keep in mind that storage fees are seasonal, and they rise between October and December.
If you want to be hands-on with your inventory, FBA can be a little challenging. If you are using FBA, you need to be comfortable with doing
Things the Amazon way. You will not control how your inventory is stored, and you can not inspect your products.
However, Amazon has one of the best networks of warehouses in the world, with skilled and responsible employees. Therefore, this isn’t that big of a problem.
More control over your inventory and fulfillment:
As opposed to FBA, you will have more control over your fulfillment services and inventory with FBM. Therefore, you can be more flexible with how you package your products and how you store them.
Lesser Amazon Fees to pay:
Obviously, by storing and fulfilling your products by yourself, you can save a lot on fees. For instance, long-term storage fees, stock removal fees, and return processing fees apart from the fulfillment and storage fees.
You don’t get any Buy Box perks:
Getting the Buy Box placement on your page can bring a boost in sales; however, for highly competitive products, getting the buy box can be a tad tedious, and for the most part, sellers using FBA can get the edge.
You won’t get any SEO Perks:
As compared to FBM, FBA products are known to rank higher on product pages. Though FBA isn’t going to make keyword ranking and SEO efforts obsolete, it does give sellers an edge over FBM sellers.
Customer service and returns responsibilities can be problematic: When you’re using FBM, customer service and returns are your responsibility, which takes time and can be a frustrating overhead. You need to hire a customer service team. Moreover, processing product returns can disrupt the flow of your sales.