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Amazon FBA or FBM – which sales and logistics model is better for selling on Amazon?

6 minutes

At the beginning of your  Amazon selling journey, your very first dilemma will most likely be whether to choose Amazon FBA or Amazon FBM. What do these terms mean? What advantages do they offer? What kinds of responsibilities do they bring to bear? Read on and learn all about them.

Amazon FBM – what is it and who has it been designed for?

FBM (Fulfilment by Merchant) is a sales model designed for the sellers who want to warehouse their products and send orders to their customers directly. When choosing this model, you need to make sure that all the key delivery aspects, such as boxes, tapes, bubble wraps, scales and other accessories, are taken care of. If you are a beginner seller, Amazon will help you to some extent – for instance, it offers to print US Postal and UPS labels directly from the seller’s navigation panel. Keep in mind, though, that this model prioritises the packaging process and timely delivery of your products.

When is it more beneficial to choose the Amazon FBM model?

  • When you desire more control over your orders;
  • If you plan to create an independent brand;
  • Want to experience fewer losses caused by changes in Amazon rules;
  • Want to avoid excessive business formalities;
  • When you don’t want heavy involvement in order dispatch operations;
  • Want to comply with fewer rules;
  • Want more effective control over your stock levels;
  • Want to avoid unexpected expenses.

Who should choose Fulfillment by Merchant?

  • sellers who offer exclusive or unique products;
  • retailers with small-scale offers;
  • sellers who want to use the Seller Fulfilled Prime (SFP) program.

Sellers who do not want to worry about on-time deliveries should opt for Amazon FBA (Fulfilment by Amazon). By doing so, you will send your products to Amazon warehouses where they will be packed and sent to your customers. This model is undoubtedly convenient, though it involves additional fees that are usually higher than the sales commission charged by Amazon. Amazon FBA saves you time and potential resources and staff costs that you would otherwise spend on preparing and dispatching orders, but that is not the only advantage offered by this model.

Amazon FBA – how does it work and what kind of profits does it guarantee?

Simply put, the Fulfilment by Amazon (Amazon FBA) sales model means that your company can focus on selling products, with Amazon taking care of the entire logistics process – stock levels, packaging, deliveries, as well as customer service and returns. If you choose the Amazon FBA model, you send your products to Amazon warehouses where they will be stored, waiting to be purchased. When a customers buy your products, the Amazon team selects, packs, transports and tracks them for you. The post-sales service and any potential returns and complaints are also managed by the Amazon team.

This sales and logistics model brings measurable benefits. If you choose Amazon FBA, you automatically qualify for the Prime program. This means, your listings have more reach, and typically end up being bought more often. The Prime badge is the most popular filter on Amazon.de.

Research regarding Amazon has continually shown that 78% of sellers who use the Amazon FBA model confirm that it has substantially boosted their sales.

Other advantages of Amazon FBA include:

  • free deliveries for Prime subscribers;
  • higher positions in the Amazon product ranking;
  • higher chance to win the Buy Box – sellers who have opted for Fulfilment by Amazon win the Buy Box even when the prices of their non-FBA competitors are the same as theirs;
  • higher conversion rates, as customers generally trust Amazon and rely on its honesty – for instance, when it comes to on-time deliveries;
  • simplified return process;
  • 24/7 business availability;
  • access to a significantly bigger target group;
  • more time for you to develop your company across other channels.

Sellers’ Amazon FBA obligations

  • Choosing products for sale.
    You can sell almost anything, but if you want to avoid excessive warehousing fees, make sure that the products you offer sell fast. If you’re wondering whether or not your products will do well on Amazon, contact us and ask for a sales potential analysis.
  • Checking your stock levels in Amazon warehouses.
    You are the one who is responsible for controlling the inventory stored in Amazon warehouses. Keep that in mind when planning product purchasing and stock levels management, as it is vital that your products are always available for your customers.
  • Marketing and advertising.
    If you sell high-rated brand products, you may not have to advertise them. However, if you sell your own products, you should make sure that they can be easily found by your customers. Amazon offers over 350 million items, so if you want your products to do well, a well-thought-out marketing strategy is necessary to driving sales.

Amazon FBA costs

Amazon FBA is a paid model. How much you will pay for it depends, among other things, on the size of your products. To calculate the total cost of using Amazon warehouses, you will need to consider the warehouse fee (payable each month per each square metre) and the delivery fee which is calculated on the basis of a given product’s size and weight (weight of the product + weight of the Amazon transport box). If you decide to use additional services, you need to add these costs to your monthly calculations as well.

You will find more information about the current Amazon FBA Sverige fees in this Amazon presentation.

FBA COST=
keeping payment + selling payment +
payment for extra services

When is it worth choosing the Amazon FBA model?

  • Your products are sold quickly.
  • Your products are small in size and their prices are relatively high.
  • You do not have the resources to effectively organise your logistics processes.

Which model should you choose, then? 

Each of the two models described above has their advantages. Your choice should be based on the character of your business, types of the products you offer and many other factors that need to be taken into consideration. If you need help choosing the most suitable option for your business, contact the Nethansa team and benefit from our knowledge and expertise!

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