FBA vs. FBM
Fulfillment by Amazon
Behind this fulfillment method is a shipping service provided by the corporation. This means that Amazon manages shipping, storage, and all contractual obligations arising from the sale of goods for the seller. Sellers only pay for the services they use. Thus, there are no subscription fees, contracts, or minimum inventory requirements. The seller sends the goods to the respective logistics center, and the billing is based on the shipping services and storage space used.
Fulfillment by Merchant
If a marketplace seller chooses the Fulfillment by Merchant method, they take on all of these responsibilities themselves. The merchant, in this case, refers to the seller who regulates storage, shipping, and customer service for their items.
Advantages and Disadvantages of Fulfillment Methods
Both fulfillment methods have their pros and cons. While the Fulfillment by Merchant method gives the seller full control and responsibility over their goods and value streams, with the Amazon method, the seller must rely entirely on the fulfillment provider Amazon. For example, the not always optimally packaged goods or the unnoticed FBA errors have been criticized by sellers. If sellers opt for the Merchant method, they may have to deal with the fact that their products are less likely to land in the Buy Box, as the algorithm currently highlights sellers who use FBA. However, it is expected that the preferred promotion of sellers will be more balanced in the future.
Note: Especially in the current pandemic and the resulting stoppage of deliveries for non-essential products by Amazon, sellers who choose the Merchant method (FBM) benefit. They can continue to ship their goods independently of the fulfillment provider.
FBA or FBM – What Should Sellers Choose?
The decision on how to collaborate with Amazon should be an individual one for each seller. If a seller is already extensively present in e-commerce, for example, through their own online shop, the existing shipping system can be a major influencing factor in being able to handle their fulfillment internally. Another crucial factor for choosing the fulfillment method should be the type of product. While the Amazon solution is best suited for selling mass-produced goods, shipping through the Merchant is more suitable for distributing products that are custom-made or unique pieces. When considering the reverse logistics of the sale, this can also be an important aspect for choosing the fulfillment solution.
