As a UK seller on Amazon, one of the most important processes to establish is how your products travel from your inventory to your customer’s doorstep. Once your stock is secured from Pound Wholesale, all Amazon sellers, irrespective of size, niche and business model have a decision to make.
Whether your business elects for Fulfilment by Amazon (FBA) or Fulfilment by Merchant (FBM) can have a huge impact on profitability, efficiency and growth potential. There is no definitive correct answer – it will depend on what is right for your business, its processes and model, and it’s important for businesses to assess all the perceived benefits and deficiencies of each method to make the smartest choice.
According to statistics, 82% of all Amazon sellers use FBA services, either solely or as part of a hybrid model, whereas only 34% use FBM.
What is FBA & FBM?
Fulfilment by Amazon (FBA)
FBA allows Amazon sellers to pack products and send them to an Amazon fulfilment facility, whether that’s from your home, business premises or from a supplier such as Pound Wholesale directly. With FBA, when your customer places an order and completes a transaction, Amazon handles the whole process. From picking, packing and shipping to customer service and returns.
Benefits of Amazon FBA
For many Amazon sellers, FBA is the preferred logistical process as it allows businesses to solely focus on sourcing, marketing and managing their business without getting busy with day-to-day logistics. For example, with a UK wholesale supplier like Pound Wholesale, a business can have stock navigated from supplier to fulfilment centre, to the customer’s doorstep without ever touching the stock. FBA also provides access to Amazon Prime customers.
- Get your Prime badge in: One of the biggest advantages of FBA is simply getting your Prime badge. With millions of UK households possessing Amazon Prime membership, having the Prime badge can lead to a significant increase in sales conversions and visibility as Prime is a symbol of trust, providing sellers access to loyal, high spending consumers and the chance for repeated acquisitions.
- Logistics: Amazon provides a huge fulfilment network that does the work for you. Freeing up new time to explore new product ranges, optimise your listings and managing your business accounting, FBA is a fantastic solution particularly for those that run selling accounts from their home or premises with limited space, or without any logistics experience.
- Customer Service: Amazon FBA is not just logistics – they can even process most customer inquiries and returns processes for orders. This can save time and reduce your workload, even as the volume of sales increase.
Limitations of Amazon FBA
Though FBA can be highly practical and convenient for UK Amazon sellers, there are potentially some negative points for businesses to assess.
- FBA fees and complexities: When using Amazon’s FBA services, UK businesses have a plethora of complex and unpredictable fees to contend with, from referral fees and fulfilment fees per unit to monthly storage charges, which can also fluctuate from season-to-season. If stock doesn’t perform as well as expected, long-term storage fees can affect profits.
- Inventory control & risks: Though Amazon provides huge fulfilment centres and networks with are generally highly capable and fluid, UK sellers are ultimately placing their trust in Amazon. With the stock in Amazon’s inventory, sellers have no direct control, meaning stock can’t be inspected prior to shipping, and there’s little control over the packaging and brand identity of your services. Moreover, Amazon can misplace inventory, which can affect your customer’s receiving their stock.
- Box/packaging requirements: Amazon’s FBA services, whilst efficient and effective, can have drawbacks due to packaging and labelling requirements. This may involve adjusting processes and box sizes to meet those requirements, and failure to do so can cause delays and extra costs.
Fulfilment by Merchant (FBM)
Fulfilment by Merchant puts Amazon sellers in control. From product listing to the fulfilment process, sellers will store their own inventory, pack and ship directly to their customer, leaving all customer service and returns aspects to your business. For businesses that aim to provide a personalised, hands-on method to online selling, FBM provides superior independence, without relying on Amazon and being subjected to FBA fees, maximising potential profits.
Benefits of Amazon FBM
- No storage limitations: As the stock is being handled at your business premises or home, in theory, there are no worries about Amazon’s storage limitations, or long-term risks of storage fees. This allows Amazon sellers to store whatever inventory is required to fulfil orders, providing the flexibility to manage your stock internally.
- Lower costs: Without relying on FBA, Amazon sellers can explore competitive shipping rates provided by couriers and hauliers such as Royal Mail and DPD, creating their own shipping model to suit your requirements.
- Control & branding: With inventory at your facility, Amazon sellers can provide a personalised or tailored experience to customers, such as adding their own branding and packaging, and building a relationship with customers directly.
Limitations of Amazon FBM
By adopting an FBM approach, Amazon sellers may face additional challenges and may require greater staff resources for processing orders and managing inventory.
- No Prime Badge: The Amazon Prime badge is an important factor for many Amazon sellers, for sure. Without the Prime badge, listings are likely to have lower visibility and conversion rates, as many consumers stick to Prime listings. To beat the FBA sellers, FBM sellers can attain a Seller Fulfilled Prime account, but this requires high performance metrics and can be difficult to maintain.
- Increased workload and managing logistics: FBM Amazon models will require a greater application of time, effort and resources. By managing every aspect of the fulfilment process, Amazon Sellers will face increased challenges, particularly as your business grows.
- Slow deliveries: Despite using services provided by Royal Mail, Parcel Force, DPD and Evri, it’s going to be difficult to match Amazon’s standard 1-2 day Prime delivery services. As consumers are finding product acquisition increasingly simple online, customers are likely to prefer the speed and reliability of FBA processes.
- Potential storage limitations: For UK Amazon sellers operating from home or premises with limited storage capacity, there could be challenges when it comes to managing inventory, particularly when processing a large volume of orders.
FBA vs FBM – Which is the best choice for me?
| Challenge | FBA | FBM |
| Product | For lightweight, fast-moving consumer goods, such as Pound Wholesale's large letter items, FBA is better for handling high sales. | For large, oversized products with fewer volumes of sales, FBM provides superior flexibility for fulfilment. |
| Time & Resources | Businesses that want to scale up quickly and don’t have the capacity to manage logistics, FBA provides services to get your product to your customer. | If businesses have the capacity to store inventory, the time and expertise to ship orders, FBM is a good option for your business. |
| Profitability | FBA eats into profit margins, but with a higher sales volume, FBA fees can be absorbed/incorporated into costs. | For healthier profit margins, FBM gives Amazon sellers greater freedom to maximise the profit of every sale. |
| Control & Branding | For Amazon sellers focused solely on the units sold, FBA can manage all customer experience and processing, but vastly restricts customisation. | FBM allows Amazon sellers to provide a personalised and branded experience, potentially providing a better customer experience. |
| Logistics | FBA manages logistics for you, allowing sellers with no experience to get their product to your customers, but can incur storage charges and affects price per unit. | FBM allows sellers to discover their own logistics processes and providers, and potentially increase profit margins. |