Mastering Amazon Fulfillment: Fulfilled by Amazon vs. Fulfilled by Merchant

Amazon is a global powerhouse in e-commerce, offering businesses an unparalleled opportunity to reach a vast customer base and expand their operations. With millions of active users, exceptional user experience, and a seamless fulfillment infrastructure, it’s no wonder that Amazon is a popular platform for entrepreneurs looking to grow their businesses. However, to get the most out of this platform and use it effectively, it’s crucial to understand the various fulfillment methods and choose the one that aligns with your business goals.

I’ll walk you through all the nuances of selling on Amazon. We will explore the two primary fulfillment options available through Amazon Seller Central — Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM) — and discuss the pros and cons of each method. Ultimately, our goal is to help you determine the best route to maximize your success on Amazon.

Amazon Seller Central is an all-in-one platform where you can sell your products directly to consumers. It offers two fulfillment options for sellers (FBA and FBM), and each of these methods comes with its own set of advantages and challenges. When starting your Amazon selling journey, it is crucial to understand the inner workings of Seller Central and select the right fulfillment method for your business in order to see the most success.

Opting for FBA means entrusting Amazon to manage inventory fulfillment, whereas you (the seller) are still responsible for all the aspects of inventory management. In this model, you send your products to Amazon’s warehouses. When a customer purchases your product on Amazon, they then handle shipping and manage any returns. Additionally, FBA offers Prime Shipping to any Prime subscriber. However, getting your products to the FBA warehouse in the first place is often additional time and money that could be better spent elsewhere. With FBA, sellers take on more risk, as you are susceptible to paying return costs for unfair scenarios.

Alternatively, FBM gives you full control over inventory fulfillment. With FBM, you store and manage your products, directly delivering them to customers who purchase on Amazon. However, you are also responsible for managing returns in FBM. While this requires more effort, it grants you the ability to exercise greater control. For instance, you can charge a restocking fee for returned items that are damaged. By opting for FBM, you also gain flexibility in modifying the shipping options available to customers. For example, you can offer free economy shipping instead of two-day shipping to reduce costs.

Furthermore, it’s worth noting that FBM Prime is now an invite-only program. Without being grandfathered into the program, you do not have the option to offer Prime shipping, and you do not receive the “Prime” badge. Amazon sets stringent criteria for maintaining Prime shipping eligibility, making it challenging for independent sellers to meet the requirements consistently. 

Ultimately, the choice between FBA and FBM depends on your business needs and goals. To help you make an informed decision, we’ve summarized the pros and cons of each fulfillment method:

For most sellers, FBA is the preferred option due to its extensive shipping network, lower shipping costs, and access to Prime subscribers. FBA empowers you to grow your business on Amazon, as its benefits typically outweigh the cons.

However, the pandemic highlighted the importance of having an FBM listing as a backup plan in case unforeseen circumstances disrupt the FBA fulfillment method. In 2020, Amazon restricted incoming FBA inventory for non-essential items, leaving business owners unable to sell their products until the restriction was lifted.

In such instances, having an FBM listing, a warehouse, and the ability to fulfill your products enables you to continue selling on Amazon. Additionally, delayed replenishment from the manufacturer could leave you without FBA inventory, but an FBM listing would allow you to maintain your Amazon sales by temporarily fulfilling the product yourself.

While FBA is generally preferred, having an FBM listing as a backup plan is critical, especially during unforeseen circumstances that disrupt the FBA fulfillment method. It is also possible to have both FBA and FBM listings for the same product, and larger companies with the infrastructure to fulfill their products themselves should consider having a strategy that combines the two fulfillment types.

When creating product listings on Amazon, it’s best practice to have separate listings for each method to avoid confusion and inconsistencies. For example, if you were selling a garlic press, you could have two listings – one FBA and the other FBM. This strategy helps you cater to different customer preferences, better manage your inventory and customer expectations, and adapt to various market conditions and customer demands without causing disruptions or confusion.

Whether you choose FBA or FBM, the key is to understand the pros and cons of each method and use the one that aligns with your business goals to maximize your success on Amazon.

At Intero Digital, we specialize in helping businesses navigate the complexities of e-commerce and maximize their potential. Reach out for a free quote today and learn more about how our team can build customized strategies for your unique business goals.