What is the difference between FBA and FBM, Amazon Australia

May 11, 2021    |     Amazon, Marketplaces

What’s the difference between Amazon FBA and FBM?

Fulfilment by Amazon (FBA): A method of selling on Amazon in which a seller (or a seller’s supplier) sends their products directly to Amazon’s warehouses. Amazon then stores the inventory and ships it directly to the customer (often through their 2-day Prime shipping). They also manage customer support.

Fulfilment by Merchant (FBM): A method of selling on Amazon in which a seller lists their products on Amazon, but manages all storage, shipping, and customer support themselves (or through another third-party).

Which one should a seller use?

For both SMEs and Enterprise brands with elaborate supply chains, all sorts of Amazon sellers can benefit from both Amazon FBA and FBM fulfillment methods. But how do you choose what’s right for your business?

Consider your sales strategy:

  • Private label: create own product label/brand
  • Wholesale: buying products directly from a brand or from distributors with extra stock in order to sell on Amazon
  • Retail Arbitrage: buying discounted products through retailers to sell on Amazon
  • Dropshipping: buying products directly from a manufacturer who fulfills the order and ships directly to the customer

There are six major factors you should consider before you select a fulfillment method on Amazon. 

  • Size and weight of the product
  • Control of customer experience
  • Seller feedback
  • Inventory turnover rate
  • Logistics
  • Expenses and fees

Here is a quick overview of which method you should use based on those factors.

You should consider or use FBM when:

  • Closer relationships and control of your customers
  • You have excellent customer service practices are in place – ETG manages this on behalf of customers.
  • The products you sell are oversized or heavy – due to the limitation of Amazon warehouse and fulfilment they will not fulfill this. 
  • You already have logistics in place – ETG work with or manage through our marketplace warehouse solution
  • You’re able to mitigate the expenses involved in fulfilling your own products
  • Your inventory turns over slowly
  • Profit Margin – Amazon will on average charge you 5%-15% to use their marketplace
  • You have to manage returns – ETG manages this on behalf of customers

You should consider or use FBA:

  • The products you sell are small and lightweight – items where RRP are less than cost of transport
  • You’re ok surrendering control to your customers to Amazon
  • You want Amazon to handle your customer service
  • Your inventory turns over quickly – high sell through rates
  • You do not have logistics in place – when you lack your own solution, (ETG can help with this)
  • Your expenses would be higher if you fulfilled your own products – in Australia transport usually starts around $6 AUD
  • Profit Margin – Amazon will on average charge you 35%-65% 
  • Returns fee
  • Storage fees 

Can you use both FBA and FBM?

Yes, it is all about having a strategy that is based on product selection and sell through rates, Enrich Trading Group work with our clients and manage both.  

If you have a large variety of products, you may consider using both to gain the benefits from the two. 

For more information how this could work for you, or receiving an initial free audit contact us today

blogs_author

Martin Helleborg
Head of Operations & Marketplaces
Enrich Trading Group

Get in touch
with us.


Enrich Trading Group

Hi! Let us know how we can help and we’ll respond shortly.