Becoming a seller with Amazon’s Fulfillment-by-Amazon (Amazon FBA) program, or using the Amazon Fulfilment-by-Merchant (Amazon FBM) approach, are both great opportunities to make 300 USD per day (and much more!).
Anyone can become an Amazon seller, and as more consumers shift to online shopping for most physical products, the Amazon marketplace continues to grow.
But, what are the differences between the Amazon FBA vs. FBM strategies?
What are the pros and cons of each approach to selling your products on Amazon, and how to decide which is for you?
In this review and comparison guide, I weigh up Amazon FBA vs. Amazon FBM to help you answer these questions and start your journey towards financial freedom.
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Table of Contents
- Selling on Amazon: The Basics
- What Is the Difference Between Amazon FBA vs. FBM?
- Which Option Should You Choose?
- FBA vs. FBM FAQs
- Wrapping Up
Selling on Amazon: The Basics
Selling on Amazon involves several key steps.
I’ll briefly walk you through the process so you know how choosing the FBA or FBM model will impact your Amazon-selling business.
- Identify your marketplace. Amazon has 18 global marketplaces, including Australia, Europe, Asia, the Middle East and the Americas. I suggest selecting a marketplace based on where you live, as this makes things easier with currency, shipping and communication with customers.
- Select your Amazon business model. Amazon sellers have different approaches that use a variety of inventory and products. Some sellers like to sell private labels. Others opt for wholesale, arbitrage, dropshipping or handmade items.
- Select your fulfillment method. This is what we’re looking at in this article — your order fulfillment. Once a customer places an order with your Amazon shop, you need to take their order from your stock, package it and send it to them. Where this happens and who takes control of the process is the essential difference between Amazon FBA vs. FBM.
- Create an Amazon seller account. After you’ve identified what you’ll sell, where you’ll sell it, and how you’ll fulfill your orders, it’s time to start setting up your accounts. You can do this via the image below.
- List products. Depending on the items you’re selling, you’ll need to select them from Amazon’s existing catalog or create a new product listing. This is where you add information on your stock, such as the price, condition, quantity available and fulfillment method.
- Fulfill your orders. Depending on whether you’ve chosen FBA or FBM, either Amazon will handle your orders from here, or you’ll need to package, ship and communicate with customers for the rest of the order.
As you can see, setting up your Amazon selling business is relatively straightforward, which probably accounts for the fact that 60% of Amazon sellers say their Amazon business is their first foray into being a digital entrepreneur.
Now, I want to get to the meat and potatoes of this article and discuss the differences and relative benefits of Amazon FBA vs. Amazon FBM.
What Is the Difference Between Amazon FBA vs. FBM?
As we’ve seen, once your Amazon store receives an order, it’s time for you to fulfill that order.
You can do this one of two ways: Fulfillment-by-Amazon (FBA) or Fulfillment-by-merchant (FBM). Both approaches have pros and cons, which I’ll discuss here.
These pros and cons fall into six determining factors that heavily influence whether FBA or FBM is the correct method for you:
- Size and weight of your product
- Managing your customer experience
- Handling seller feedback
- Inventory turnover
- Costs and overheads
But first, let’s get an understanding of FBA vs. FBM.
With FBA, you send your inventory from your supplier directly to Amazon’s warehouses. Then, Amazon stores this inventory, and when you receive an order, ships it straight to your customer. Amazon takes care of customer support during the order fulfillment process.
- The beauty of FBA is how hands-off the strategy is.
- You don’t need to worry about negative seller feedback from customers during the fulfillment process, and you don’t need to worry about storing your products.
- Amazon’s fees for fulfilling your order and storing your products are agreeable for smaller items that turnover quickly.
- FBA offers a good chance for new Amazon sellers to get their feet wet and learn how the process works before taking on more responsibility for fulfilling their own products.
- Amazon’s fees on inventory build as time goes on, and if an item has been in Amazon storage for more than 365 days, the seller starts getting charged long-term storage fees – which are expensive.
- You, as the seller, rarely, if ever, interact with your customers with FBA. For some business models, this is ideal. However, for other more personalized models, such as handmade or bespoke products, a personal touch goes a long way to establishing rapport with your client base. FBA prevents this.
With FBM, you use Amazon to list and advertise your products, but you or a third-party run order fulfillment.
That means you take charge of storing, shipping and customer support — once an order has been placed.
- While FBM does leave you vulnerable to more public criticism due to extended delivery times or poor condition of the order, this is only a concern if you are slow and careless with your deliveries. If you refine your fulfillment process to ensure your products and packaging are up to standard, FBM provides a more personalized, memorable customer experience. This will keep people coming back to your store and also recommend you to their peers.
- If you sell more oversized items with longer turnaround times, then the storage and fulfillment fees charged by Amazon can make FBA an impractical option for your business. With FBM, you can store larger items for longer in a location of your own without worrying about accruing Amazon fees.
- Handling your own deliveries might require extra labor costs and warehousing fees. You need to ensure these are less than what Amazon charges via FBA.
- Suppose something goes wrong with your delivery, and there is a delay. In that case, you’re susceptible to negative seller feedback from your customers, which will reflect poorly on your Amazon seller account and make future potential customers less likely to purchase from your store.
- FBM merchants need a better understanding of delivery logistics and ensuring their deliveries get to their customers, so it might not be the best choice for new Amazon sellers.
Which Option Is Best for You?
As you can see, FBA and FBM are two very different order fulfillment strategies.
With FBA, you hand over responsibility entirely to Amazon and get them to take care of order fulfillment. With FBM, you shoulder the responsibility and do it yourself.
I’ve looked at the pros and cons of each approach in the above section, but to help crystalize the decision for you, let’s look at which option you should choose, according to the six determining factors I mentioned:
FBA is for you if…
- Your inventory is small and lightweight products
- You don’t need to offer a personalized customer experience
- You don’t want to deal with customer queries or handle customer service
- Your items sell rapidly and don’t sit on shelves for a long time
- You’re unfamiliar with the logistics of running orders in high volume
- Your overheads would be more if you fulfilled your own deliveries
FBM is for you if…
- You want to offer a personalized customer experience
- You’re confident in your customer service and want to stand out from the crowd
- Your products are large or heavy
- Your products take time to sell, i.e., they are large and expensive
- You have connections and logistics set up to run deliveries on time
- You can keep the cost of handling your deliveries lower than Amazon’s fees
FBA vs. FBM FAQs
Asking questions is a foundational characteristic of any entrepreneur. If you need something clarifying, then don’t be afraid to raise your hand and say, “Can you please elaborate on x, y, or z?”
Chances are if you are asking the question, others are, too.
Having said that, these are some of the questions people approach me with regarding Amazon FBA vs. FBM.
Which Is More Profitable: Amazon FBA vs. FBM?
It totally depends on your Amazon business model (which ties back to what type of product you sell).
FBA sellers have larger profit margins per sale, but FBM sellers sell in greater quantity.
- 37% of FBA sellers have profit margins greater than 20%, compared to 32% of FBM sellers
- 26% of FBA sellers generate more than $25,000 in monthly revenue, vs. 33% of FBM sellers
Can You Use Both FBM and FBA?
Absolutely. In fact, combining FBA and FBM is an excellent strategy for sellers who have a mixed inventory of small, lightweight items that sell fast and heavier, larger items that take longer to move.
Having a diverse inventory makes many sellers enjoy a seven-figure Amazon selling business, and combining FBA with FBM enables them to handle mixed products effectively. As you can see, 34% of Amazon sellers leverage both fulfillment strategies.
With Which Do You Get Started Selling Faster: Amazon FBA vs. FBM?
FBM merchants get their Amazon businesses up and running sooner than FBA sellers do.
- 51% of FBM sellers sold their first product on Amazon in less than six weeks, compared to 34% of FBA sellers.
- 25% of FBM merchants enjoyed profit in less than three months, compared to 20% of FBA sellers
Which One Is Better for Passive Income and Little Time Investment: Amazon FBA vs. FBM?
Amazon FBA businesses require less upkeep and less time investment, which means FBA is a better choice for passive income.
However, it’s important to note that over 50% of all FBA and FBM sellers attribute success with their Amazon businesses to having time to spend on their businesses.
How Much Capital Do I Need to Start With FBA/FBM?
Amazon FBM merchants tend to get their businesses up and running with less initial startup capital than FBA businesses do.
- 37% of FBM merchants invested less than $1,000 for start-up, compared to 27% of FBA merchants
The amount of capital you need to start your business will largely depend on the products you choose to sell. Obviously, more expensive products will require a greater initial investment, but these will also return more significant profits.
As you can see, choosing between Amazon FBA vs. FBM depends on many factors, but primarily your own personality, your location and which products you plan to sell on Amazon.
If you plan to sell small items that sell quickly, then FBA is likely the way to go.
If you want to sell bulkier items that might sit in storage for a few months before someone buys them, then FBM is probably a good choice.
Over 3 million Amazon sellers are making money on Amazon, so there is absolutely no reason you shouldn’t be one, too.
But becoming an online entrepreneur doesn’t just happen like that. That’s why I strongly encourage you to take this opportunity to sign up for my upcoming webinar “How to Systematically Scale From $10/Day Passive Income to More Than $1000/Day.”
With the unique silver linings method I discuss here, I explain how you can start your journey towards financial freedom today.