As an Amazon seller, one of the necessary decisions you’ll make is choosing between two primary fulfillment methods: Fulfillment by Amazon FBA and Fulfillment by Merchant FBM.
While FBA allows Amazon to handle inventory storage, packing, and shipping, FBM lets sellers retain control over these processes. The integration of both FBA and FBM in your business strategy can provide a competitive edge, enabling efficiency, flexibility and scalability.
What is Amazon FBA?
Fulfillment by Amazon (FBA) is a service that allows sellers to outsource their logistics to Amazon. Under this model, you send your products to Amazon’s fulfillment centers, and they take care of the storage, packing, shipping, customer service, and returns.
One of its important features is its ability to store your inventory in Amazon’s extensive network of fulfillment centers. Once your products are in Amazon’s hands, the platform takes charge of picking, packing, and shipping them to customers, another is the access to Amazon Prime customers.
With millions of active Prime members worldwide, FBA ensures that your products are eligible for Prime’s fast and free shipping options.
What is Amazon FBM?
Fulfillment by Merchant (FBM) is a model where sellers manage the entire fulfillment process themselves. You store the inventory, process orders, package items, and ship directly to customers.
One of the standout features of FBM is its cost-effectiveness. Sellers avoid FBA storage and fulfillment fees, making it an ideal choice for products with lower profit margins or slower turnover rates.
Additionally, FBM is suitable for sellers dealing with oversized or fragile items that may lead to higher fees or handling complexities under FBA.
FBM also allows sellers to diversify their fulfillment strategies; for example, they can experiment with niche products or cater to specific customer requirements without the constraints of Amazon’s standardized processes.
Benefits of Integrating FBA and FBM
Combining FBA and FBM offers multiple advantages, especially for scaling your Amazon business.
1. Cost Optimization
Certain products may have high storage fees in Amazon warehouses.
By using FBM for slow-moving inventory and FBA for fast-moving items, you can reduce costs while ensuring operational efficiency.
2. Improved Inventory Management
Seasonal sales or demand surges can create logistical challenges. FBA ensures that popular items remain readily available, while FBM allows you to store backup inventory for unexpected demand.
3. Flexibility in Fulfillment
With FBM, you get the freedom to try out niche products that might not sell in huge numbers or need special care. FBA, on the other hand, is perfect for high-demand items that need quick delivery.
Plus, FBA makes your products Prime eligible, which can really help you stand out and attract more customers.
4. Increased Profit Margins
Low-margin products can be fulfilled through FBM to avoid FBA fees, whereas high-margin, high-volume products benefit from FBA’s fast shipping and Prime eligibility.
5. Business Continuity
In cases of stockouts at Amazon warehouses or FBA service disruptions, FBM ensures that you can continue fulfilling orders seamlessly.
Challenges in Integrating FBA and FBM
While integrating Amazon’s Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) models can lead to significant advantages for sellers, it also introduces a set of challenges that require careful consideration and approach.
These challenges can complicate operations, increase costs, and potentially impact customer satisfaction if not managed effectively.
Inventory Tracking
Managing inventory across two distinct fulfillment systems, Amazon’s FBA warehouses and your own facilities under FBM, which presents a significant logistical hurdle.
Each system operates independently, where inventory becomes unavailable for purchase, or overselling, where more units are sold than you have on hand. These issues can lead to negative customer reviews, account performance penalties from Amazon, and even suspension in severe cases.
To mitigate these risks, sellers need to invest in robust inventory management software that provides real-time updates and integrates seamlessly with Amazon’s Seller Central platform.
Such tools help track stock across multiple locations, automatically updating availability to avoid errors.
Logistical Complexity
Each method comes with its own set of requirements and standards that sellers need to adhere to.
FBA involves shipping products to Amazon’s fulfillment centers and adhering to their strict inventory preparation and labeling guidelines. Any errors in this process can lead to delays, additional fees, or even rejection of shipments.
On the other hand, FBM requires sellers to manage their own supply chain, including storage, packaging, and shipping. Ensuring timely deliveries that match Amazon’s high standards can be particularly challenging, especially for sellers with limited logistical experience.
Furthermore, coordinating these two systems to ensure smooth operations can be overwhelming without a clear strategy. Sellers often find themselves struggling to allocate resources effectively, especially during periods of high demand or when introducing new products.
Cost Management
While integrating FBA and FBM can optimize costs in theory, it can also lead to unexpected expenses if not executed carefully.
Each fulfillment method comes with its own cost structure, and sellers need to figure out these expenses wisely to maintain profitability. For FBA, costs include storage fees (which increased during peak seasons), fulfillment fees based on size and weight, and long-term storage fees for slow-moving inventory.
On the other hand, FBM leads to costs related to warehouse space, packaging materials, shipping rates, and labor. When jugging these expenses, sellers may unintentionally lead to higher overall costs due to inefficiencies or lack of coordination.
For instance, misjudging demand for FBA products could lead to high storage fees, while poor shipping rates negotiations for FBM items could erode profit margins.
To avoid these pitfalls, sellers need to perform a detailed cost analysis for each product, considering factors like sales velocity, size, and shipping destination.
Customer Service
Providing a consistent customer experience is a foundation for success on Amazon, yet integrating FBA and FBM complicates this process.
Customers have high expectations for fast shipping, reliable delivery, and hassle-free returns, and these standards need to be met regardless of the fulfillment method.
Sellers should develop standardized processes for handling FBM orders, including clear communication protocols, prompt customer service responses, and return policies aligned with Amazon’s guidelines.
Steps to Seamlessly Integrate FBA and FBM
To successfully use both FBA and FBM, follow these step-by-step instructions:
- Evaluate Your Product Portfolio: Determine which products are best suited for FBA based on consistent sales performance, and allocate slow-moving or oversized items to FBM for more flexibility.
- Analyze Costs: Assess the cost-effectiveness of each method by comparing FBA storage and fulfillment fees with FBM shipping and logistics expenses. Use cost calculators to make informed decisions for each product.
- Set up Inventory Management Tools: Use tools like the Seller Central Inventory Dashboard to monitor stock across both FBA and FBM. Make sure you use real-time updates to avoid inventory discrepancies.
- Diversify Shipping Options for FBM: Collaborate with reliable shipping providers and offer a range of delivery speeds to meet Amazon’s expectations and enhance customer satisfaction.
- Maintain Consistency in Branding: Align FBA and FBM orders by using rebranded packaging for FBM products and standardizing customer service to build trust and ensure a seamless experience.
- Monitor Performance: Regularly track key metrics such as Fulfillment Performance, Order Defect Rate, and Buy Box Eligibility to refine your FBA and FBM strategy for optimal results.
Benefits of Amazon Seller Central Integration with Forceget’s Dashboard
Integrating Amazon Seller Central with Forceget’s dashboard can significantly enhance your Amazon selling operations.
You can consolidate all your key Amazon data into one intuitive platform, eliminating the challenge of managing multiple resources.
Automating time-consuming tasks such as order processing, inventory tracking, and report creation allows you to dedicate more time to strategic growth initiatives. Additionally, you can monitor inventory levels and reorder points in real time, while strategically managing inventory placement within Amazon’s fulfillment centers to improve delivery speed and reduce costs.
Forceget’s user-friendly dashboard simplifies order workflows by efficiently generating shipping labels, tracking shipments, and ensuring on-time deliveries, which boosts customer satisfaction.
