There are so. many. acronyms. in business, amiright? Luckily, there are only two primary ways to sell on Amazon: Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM). As with many business decisions, there is not necessarily a right or wrong choice, but there is one that is going to work better for your specific business. Let’s start with the logistics.
If you sell FBA, you ship your products to an Amazon Fulfillment Center, where they are stored until they are ordered and subsequently shipped. Under this method, your products are eligible for 2-day, next day, (and now even some same-day delivery!). Customers love Prime so much that they often filter out non-Prime search results.
Furthermore, Amazon highly incentivizes customers to buy FBA items because they know that the customer will get the best possible experience. They primarily incentivize this by featuring Prime offers more prominently in search results. When you use FBA, you actually incorporate the world’s best logistical and shipping systems into your business—AND you get to glean all the benefits!
Also, when you sell FBA, you are much less likely to get negative seller reviews or A-to-Z claims against you, as most of these have to do with the delivery of the products and not the products themselves. It is, without question, far easier to keep a high seller rating when using FBA.
The bottom line for FBA is: business owners who choose this option are able to incorporate what is literally the best shipping system in the world as part of your business. What great fortune! Why reinvent the wheel? Some worry that it’s too expensive, but if you run the numbers, it’s totally worth it. FBA allows you to “hire” experts to take care of fulfillment, freeing you up to focus on whatever it is that you do best for your business.
At Grand Portage Trading Co., we ONLY sell FBA (and we do encourage most of our clients to do the same, as it is typically the option that works better for their business!). That said, there are certain times when selling FBM is better.
Selling FBM typically works better for brands with well-developed warehousing and shipping systems. If your brand already has established systems that can scale once orders start coming in from Amazon, then it makes sense for you to sell FBM. If you don’t already have a stellar shipping system, don’t develop one for this purpose because Amazon already has one—the best in the world, it’s worth mentioning—available for you to use.
Another consideration to keep in mind: when you sell FBA, you need to allocate inventory specifically for selling on FBA, and you’ll likely end up needing to keep more inventory. For instance, if you are selling a one-pack and a two-pack of your product on FBA, you’ll need to send in both one-packs and two-packs. If you are selling FBM, however, you can hold all your inventory and ship as one- or two-packs as orders come in, thereby allowing you to hold less inventory.
What’s the right option for you? I'm Matt Bussey, founder and CEO of Grand Portage Trading Co. I find the whole world of business fascinating, and I love to talk to people about it. If you’re looking over your inventory, storage, and shipping systems and you’d like to talk this decision over with someone, email me and we can set up a free phone call.