Fulfilled by Amazon vs. Fulfilled by Merchant: How to Choose the Best Amazon Fulfillment Strategy

In 2023, third-party sellers on Amazon achieved sales exceeding $140 billion, highlighting the increasing dominance of this marketplace. By the first quarter of 2024, over 60% of paid units on Amazon were sold by third-party sellers. These trends showcase the lucrative potential for brands leveraging Amazon’s platform.

As a third-party seller, you have two primary options for product fulfillment: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Each has its own set of benefits and challenges, and choosing the right fulfillment strategy is crucial for your brand’s success.

What is Fulfillment by Amazon?

Breaking it down, Fulfillment by Amazon (FBA) is a service where sellers send their inventory to Amazon’s warehouses. When an order is placed, Amazon takes care of the entire fulfillment process, including packing and shipping the order. Additionally, Amazon handles customer service and returns, providing a seamless experience for both sellers and customers. However, FBA involves various fees, including fulfillment costs, inventory storage fees, and potential additional charges such as long-term storage fees, inventory removal fees, and returns processing fees. Fees, as we all know, can quickly affect our bottom line.

When Should You Use Fulfillment by Amazon?

When considering the benefits of Fulfillment by Amazon, it becomes clear why many brands favor this option. If you’re looking to maximize visibility and marketing for your products, FBA is an excellent choice. Being the largest marketplace, Amazon offers unparalleled reach, and products fulfilled by Amazon are eligible for Amazon Prime, increasing its appeal. For business owners who need a reliable fulfillment solution, Amazon’s proven operations and fast shipping are ideal.

The “set it and forget it” model of FBA allows you to focus on core competencies without worrying about logistics and supply chain management. Amazon’s ability to handle customer service and returns further enhances its appeal as a scalable solution for growing businesses.

What is Amazon Fulfillment by Merchant?

An alternative to FBA, Fulfillment by Merchant (FBM), allows third-party sellers to list and sell products on Amazon while retaining control over storage, packaging, and shipping. With FBM, brands manage the entire fulfillment process, including storing inventory in their facilities, packing orders, and shipping them to customers. This approach can be handled in-house or outsourced to a third-party logistics (3PL) provider and gives more control to business owners.

When Should You Use Fulfillment by Merchant?

If managing costs is a priority, FBM might be the better option, as FBA can be expensive. FBM provides flexibility in cost structure and pricing, allowing you to discuss and control costs more effectively. This model is beneficial for businesses that want more control over their products and fulfillment operations.

You can manage inventory levels, choose shipping methods and carriers, and even customize packaging and branding for a unique customer experience. FBM is particularly advantageous for brands with bulky or heavy products that may not meet FBA’s eligibility requirements. Additionally, FBM prevents your products from being listed next to a competitor’s, giving you more control over your brand’s presentation.

“Driven primarily by cost and control over inventory, many of that brands we partner with who have an Amazon presence have shifted to an FBM model” says Pat Diggins, Director of Business Development at FIDELITONE.  “There is a lot of opportunity to optimize service and cost when going this route”.

Deciding Between FBA and FBM: Making the Right Choice for Your Business

Ultimately, the choice between FBA and FBM depends on your specific needs. Consider factors such as product type and size, current fulfillment capabilities, cost efficiency, control over the customer experience, and your ability to handle sales volume and growth potential. Knowing your business’s unique requirements will help you make the right decision.

FBA does offer clear advantages; however, a buyer can reap similar benefits using a 3PL provider. A reputable 3PL will provide reliability, scalability, and can focus on core competencies with the Amazon FMB option.

Using Amazon Fulfillment by Merchant? Trust FIDELITONE for Fulfillment Excellence

Choosing FBM means businesses require a reliable and experienced third-party fulfillment service. FIDELITONE offers the expertise you’ll need in logistics and fulfillment, allowing you to focus on your core business activities. With FIDELITONE, you can expect dependable service and experience that meets Amazon’s and your standards.

Contact us today for a free consultation.