FBA vs. FBM on Amazon. Which one to choose?
- 05 May 2020
Although Amazon is not yet officially available in all countries, many online sellers, for example from Eastern Europe, are already interested in starting operations on this platform. No wonder – the world leader in e-commerce offers extensive opportunities to promote the offer and reach customers. To successfully start selling on Amazon, however, you must first choose one of the available logistics models – FBA or FBM. How do they differ and how do you know which one will be better for our business?
FBM and FBA – what to choose?
We have dedicated a separate article to becoming an Amazon merchant. The selection of the right logistics model is crucial if we want to be successful on this website – the operating costs and margin depend on it largely. When making this decision, you should, first of all, consider the type of products sold, your infrastructure, and human resources. Each case is different and there is no universal recipe – before choosing a model, you should carefully calculate the costs and assess which will be more profitable.
FBA on Amazon – pros and cons
The first model, FBA (Fulfillment by Amazon), is that the entire sales and logistics process is handled by Amazon. The seller only needs to deliver the goods to the service warehouse and ensure the promotion of products. Products purchased by customers are sent to them directly by Amazon.
The main disadvantage of this model is that it involves paying an additional commission for the website. Despite this, it can be really profitable, especially for sellers who offer fast-rotating products of small dimensions. It will also be suitable for companies that do not have large warehouses and do not employ many people. FBA offers also receive the Buy Box more often, about which we wrote in more detail in the article on effective price monitoring on Amazon. Sales in this model can also increase conversion because Amazon’s logistics service is perceived by buyers as trustworthy.
FBM on Amazon – pros and cons
FBM (Fulfillment by Merchant) is a model closer to traditional marketplaces, in which the entire sales and logistics process remains with the seller. The auction owner is responsible for product storage and shipping coordination, and the website’s participation is limited to placing an offer.
This solution usually works well for products of significant sizes, because then the costs of their storage by Amazon may turn out to be too high. Before making a decision, it is worth analyzing them thoroughly using special calculators available on the website. FBM generally allows you to have higher margins as well as a sense of control over the sales process. A big advantage of using this solution will also be independence from the agent’s policy and no commission. The FBM model also increases the chance of receiving the Seller Fulfilled Prime (SFP) award, which marks the most trusted sellers on Amazon.
If you already sell on Amazon, Google Shopping, or on local platforms, you can improve your competitiveness and margins thanks to price monitoring tools like Dealavo. Thanks to them you will be able to more efficiently monitor the market and manage prices in your store, and thus maximize profit. Contact us – we will help you choose solutions that will help you succeed in online sales.
Learn more about factors you should analyze when deciding about the optimal sales and promotion channels for your business: Which products to sell and promote on the most important e-commerce platforms?