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href="https://highstreet.io/">Home</a></span> 禄 <span><a href="https://highstreet.io/ecommerce-marketing-marketplace-blog/">Blog</a></span><span class="breadcrumb_last" aria-current="page"></span></span></div> </div> </div> <article id="post-15687" class="et_pb_post post-15687 post type-post status-publish format-standard has-post-thumbnail hentry category-marketplaces tag-amazon tag-inventory-management tag-marketplace-integration tag-order-management"> <div class="et_post_meta_wrapper"> <h1 class="entry-title">Amazon FBA vs FBM: How Brands Should Decide</h1> <p class="post-meta"> by <span class="author vcard"><a href="https://highstreet.io/author/em-seo/" title="Posts by Highstreet.io" rel="author">Highstreet.io</a></span> | <span class="published">Oct 29, 2024</span> | <a href="https://highstreet.io/category/marketplaces/" rel="category tag">Marketplaces</a></p><img src="https://highstreet.io/wp-content/uploads/2023/06/amazon-fba-1080x675.jpg" alt="amazon-fba-inventory-management" class="" width="1080" height="675" srcset="https://highstreet.io/wp-content/uploads/2023/06/amazon-fba-1080x675.jpg 1080w, https://highstreet.io/wp-content/uploads/2023/06/amazon-fba-980x653.jpg 980w, https://highstreet.io/wp-content/uploads/2023/06/amazon-fba-480x320.jpg 480w" sizes="(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1080px, 100vw" /> </div> <div class="entry-content"> <p>With Amazon鈥檚 ever-expanding global network encompassing over 175 fulfillment centers, the capabilities and advantages of its Fulfilled By Amazon (FBA) platform continue to grow.</p> <p>That doesn鈥檛 mean Amazon FBA is right for every brand, or in all circumstances. As you expand your eCommerce capabilities, the Amazon FBA vs. FBM debate can become difficult to resolve.</p> <p>This post will help by walking you through the details of both options, along with some tips on inventory management and additional automation opportunities you should consider.</p> <h2>What is Amazon FBA Inventory Management?</h2> <p>Amazon FBA (Fulfillment by Amazon) Inventory Management is a system that allows your business to <b>organize, track, and optimize your store product inventory in their fulfillment centers</b>.</p> <p>The platform handles critical inventory and order management tasks like:</p> <ul style="margin-left: 20px;"> <li>monitoring stock levels</li> <li>forecasting product demand</li> <li>replenishing inventory</li> <li>fulfilling orders</li> <li>handling returns</li> </ul> <h2>How Amazon FBA Inventory Management Works</h2> <p>When a customer places an order, Amazon handles the picking, packing, shipping, and customer service, providing sellers with a streamlined and efficient way to fulfill orders and reach a broader customer base.</p> <h3>Amazon FBA Setup Steps:</h3> <p>Setting up an Amazon FBA account is the first step to leveraging the platform鈥檚 fulfillment capabilities. Follow these simple steps and benefit from streamlined order fulfillment, access to Prime customers, and the means for providing excellent customer service.</p> <h3><strong>Step 1: FBA Setup聽</strong></h3> <p>Create your Amazon selling account and log in to Seller Central to set up FBA.</p> <h3><strong>Step 2: List Your Products聽</strong></h3> <p>Add your products to the Amazon catalog and indicate them as FBA inventory.</p> <h3><strong>Step 3: Product Preparation聽</strong></h3> <p>Follow Amazon鈥檚 packing guidelines and shipping requirements to ensure your products are prepared safely and securely for transportation to a fulfillment center.</p> <h3><strong>Step 4: Send to Amazon聽</strong></h3> <p>Create a shipping plan, print Amazon shipment ID labels, and send your shipments to designated Amazon fulfillment centers.</p> <h2>What is Amazon FBM?</h2> <p>Amazon FBA isn鈥檛 the only way to manage the process of getting online orders shipped to consumers. <i>The</i> company also offers Amazon Fulfillment by Merchant (FBM), where sellers either manages or works with a third party to handle areas such as inventory placement, storage, shipping, processing returns and customer service issues.</p> <h2>Key Differences Between Amazon FBA and FBM</h2> <p>Evaluating Amazon FBA vs. FBM requires thinking across a range of business factors, some of which will be more important than others depending on the size of your company, typical order volumes and your strategic goals.</p> <h3>Startup Costs and Fees</h3> <p>Be prepared for a wide range of fees when you get started with Amazon FBA. These not only include per-unit fees but monthly charges for storing inventory, return fees for some product categories, package prep fees and more. In contrast, Amazon FBM only involves paying an annual subscription fee.</p> <p>On the flip side, fulfilling your own orders means you鈥檒l have to have your own warehouse (or work with a partner with more cost-effective services than Amazon鈥檚) and other in-house resources for picking, packing and shipping your products.</p> <h3>Control Over Shipping and Customer Interaction</h3> <p>Amazon FBA is akin to many traditional outsourcing services, which free up the companies that use them to concentrate on areas like developing better products, marketing and nurturing customer relationships.</p> <p>In some cases, though, staying close to customer needs and expectations can become harder when you fulfill orders through intermediaries, which is where Amazon FBM might be the better approach. Amazon FBM also means you鈥檙e not affected by sudden changes in fulfillment policies and support options that Amazon makes occasionally.</p> <h3>Inventory Management and Logistics</h3> <p>Unless you already have a background or experience in order fulfillment, option for Amazon FBM will require extensive learning and development across your company. This isn鈥檛 as big of an issue for companies when they first launch, but the complexity can increase as your volume of orders goes up. Of course, handing off everything through Amazon FBA means you鈥檒l never master these areas, either.</p> <h3>Scalability and Growth Potential</h3> <p>Most brands want to continually add more customers, increase revenue and expand into international markets. Taking the Amazon FBA approach allows you to scale and grow without worrying about the impact on order fulfillment. If you decide to go the Amazon FBM route instead, you鈥檒l just have to develop a business plan that takes into account the potential need for more warehouses, staff and other resources.</p> <h2>Pros and Cons of Amazon FBA</h2> <p>There鈥檚 a lot to be said for using Amazon FBA, but also a few tradeoffs:</p> <h3>Pro: Stress-free shipping</h3> <p>The process of picking, packing and transporting products from a warehouse to a customer鈥檚 doorstep can be highly complex, time-consuming and expense. Amazon FBA provides an option to completely outsource this area so brands can focus their attention entirely on marketing, selling and developing their products.</p> <h3>Con: Higher expenses</h3> <p>Selling your own products can require significant capital expense. Using Amazon FBA means you鈥檒l be responsible for a range of storage and fulfillment fees, as well as the costs of sitting on inventory if sales don鈥檛 reach expected levels.</p> <h3>Pro: Prime shipping</h3> <p>There鈥檚 a reason Amazon has managed to develop one of the most popular loyalty programs of all time. Free shipping for Prime members can make all the difference with customers who aren鈥檛 sure whether to go through with a purchase. Using Amazon FBA means your products can offer Prime shipping too, offering an immediate competitive advantage over brands that aren鈥檛.</p> <h3>Con: Policy compliance</h3> <p>Selling with Amazon FBA means agreeing you鈥檒l adhere to all its guidelines. These include the way products are added to its database, packaging and other specifications. It can take time to learn Amazon FBA policies and ensure you鈥檙e maintaining compliance on an ongoing basis.</p> <h3>Pro: Post-purchase journey management</h3> <p>Customers will remember (and reward) brands that help them with customer service issues and process returns without a hassle. Brands that use Amazon FBA effectively outsource their customer service operation, and the company has a proven track record in bringing efficiency to product returns.</p> <h3>Con: Inventory fluctuations</h3> <p>The flip side of Amazon鈥檚 best-in-class returns process is that customers may send more of your products back than expected, in some cases buying multiple versions or styles to try them first. Having Amazon serve as a fulfillment partner can also make it difficult to maintain full visibility into what you have in stock.</p> <h2>Pros and Cons of Amazon FBM</h2> <p>Similarly, companies thinking about Amazon FBM should weigh the following risks and rewards:</p> <h3>Pro: Increased profit</h3> <p>If you鈥檙e a brand selling high-value products (like luxury fashion and accessories) with relatively low order volumes, using Amazon FBM could potentially mean a wider profit margin than outsourcing your fulfillment processes.</p> <h3>Con: Greater resource investment</h3> <p>Even a profitable company will have to ensure they offset the absence of Amazon resources to help manage order fulfillment, returns and related tasks. The amount of warehouse space you鈥檒l need to store products can also vary widely during periods like the holiday season, which makes planning how much time, effort and equipment you鈥檒l be investing in these areas even more difficult.</p> <h3>Pro: Flexibility for personalized experiences</h3> <p>When you choose Amazon FBM you retain full control over how your products are packaged, which could allow you to personalize orders for your most valuable customers. You鈥檒l also be able to make judgment calls on whether to waive fees or other policies when a loyal customer needs to process a return.</p> <h3>Con: The lack of Prime status</h3> <p>In most cases products fulfilled via Amazon FBM are not eligible for Prime. This cuts your brand out from a large number of established Amazon customers who regularly make purchases in order to justify their monthly membership fees.</p> <h3>Pro: More opportunities to gather and analyze data</h3> <p>Managing fulfillment on your own could help deepen insights in customer shopping patterns, distribution channel preferences and more. This opens the door to creating customer segments and a more tailored approach to marketing and selling your products.</p> <h3>Con: Greater risk of negative outcomes</h3> <p>If orders arrive slowly, late or the wrong product is delivered, you鈥檒l only have your own fulfillment operation to blame. However those mistakes can add up, having an adverse affect on areas such as customer retention and customer lifetime value.</p> <h2>How the Amazon FBA vs. FBM Decision Can Affect Your Multichannel eCommerce</h2> <p>Many brands are not only selling their products on their own websites and online marketplaces like Amazon but via additional eCommerce channels. These channels can be highly proprietary and a lack of integration can cause problems in taking and fulfilling orders. If your company has reached this level of complexity, Amazon FBA might be the desired option due to factors such as:</p> <h3>Managing Inventory Across Multiple Channels</h3> <p>Amazon FBA includes Multi Channel Fulfillment (MCF) services, whereby sellers can use API plug-ins to connect popular eCommerce channels such as WooCommerce and Magento. Amazon also offers multi-channel listing software so you can making listings from a single location.</p> <p>If you go with Amazon FBM, you鈥檒l have to address this on your own or with a trusted third party with experience in multichannel eCommerce integration and product listing.</p> <h3>Ensuring Fast Shipping and Quality Control</h3> <p>Regardless of the Amazon FBA vs. FBM question, all customers will want the same thing: to have the right product arrive in a timely manner without any damage or other quality control issues.</p> <p>Beyond speed of order fulfillment, some of the most common quality control problems stem from a lack of poor inventory management. Here鈥檚 how to address them:</p> <ul style="margin-left: 20px;"> <li><b>Stockouts:</b> Inadequate inventory management can sometimes lead to frequent stockouts, where your products become unavailable for purchase. This results in missed sales opportunities, dissatisfied customers, and potential damage to your seller鈥檚 reputation.> <a href="https://m.media-amazon.com/images/G/01/sell/pdf/FBA-Restock-Guide-EN.pdf?initialSessionID=143-2708112-8182239&ld=NSGoogle&ldStackingCodes=NSGoogle" target="_blank" rel="noopener">Amazon鈥檚 re-stock guide</a> helps to keep your stock up-to-date.</li> </ul> <ul style="margin-left: 20px;"> <li><b>Overstocking</b>: Poor inventory management may lead to overstocking, where you hold excessive inventory that ties up capital and storage space. Overstocking can increase storage fees, inventory obsolescence, and reduce profitability.>The <a href="https://sell.amazon.com/fulfillment-by-amazon?ref_=sdus_soa_sov_invent_myi#inventory" target="_blank" rel="noopener">Manage Excess Inventory page</a> in your Seller Central FBA account helps you maintain the right inventory levels.</li> </ul> <ul style="margin-left: 20px;"> <li><b>Inaccurate Order Fulfillment:</b> Fulfilling customer orders is only possible with accurate inventory management. You could mistakenly accept orders for products that are no longer in stock, leading to cancellations, negative reviews, and customer dissatisfaction.><a href="https://sell.amazon.com/learn/inventory-management#inventory-management" target="_blank" rel="noopener">Amazon鈥檚 Inventory Management Dashboard</a> is an excellent way to track your orders and inventory.</li> </ul> <ul style="margin-left: 20px;"> <li><b>Inefficient Replenishment:</b> The inability to accurately forecast customer demand and manage inventory numbers can result in inadequate replenishment. Sellers may experience delays in restocking.>Use a tool like <a href="https://m.media-amazon.com/images/G/01/sell/pdf/FBA-Restock-Guide-EN.pdf?initialSessionID=143-2708112-8182239&ld=NSGoogle&ldStackingCodes=NSGoogle" target="_blank" rel="noopener">Amazon鈥檚 re-stock guide</a> to avoid these holdups.</li> </ul> <h2>How Highstreet.io Can Help You to Simplify Product Inventory Management</h2> <p>The good news is that the right technology solutions can streamline and automate many core eCommerce processes, no matter how your Amazon FBA vs. Amazon FBM comparison turns out. When brands work with Highstreet.io, for instance, they gain access to capabilities such as:</p> <h3><strong>Multichannel optimization solutions to ensure seamless order fulfillment</strong></h3> <p>Highstreet.io turns product data optimization and product feed development into a managed service. This means you can connect with popular eCommerce channels with ease and have full confidence in how orders are collected and processed for fulfillment.</p> <h3><strong>Inventory management solutions for Amazon FBA sellers</strong></h3> <p>The most successful eCommerce companies have a clear line of sight into what鈥檚 in stock and what鈥檚 not. Highstreet.io鈥檚 platform acts like a hub between your products and key selling channels, allowing you to synchronize data between your product catalog and Amazon鈥檚 warehouses.</p> <h3><strong>Integration with popular marketplaces like Amazon</strong></h3> <p>Getting set up to sell on Amazon can take a lot of manual work, which increases the risk of errors. Highstreet.io鈥檚<a href="https://highstreet.io/marketplace-integration/" target="_blank" rel="noopener"> marketplace integration services</a> handle everything from product listings to category mappings. In fact, Amazon is just one of more than 50 marketplaces where Highstreet.io can help brands extend their reach.</p> <p><a href="https://highstreet.io/book-a-demo/"><b>Contact us today to schedule a demo</b></a> and discover how Highstree.io can help you automate and centralize your marketplace workflow.</p> </div> <div class="et_post_meta_wrapper"> </div> </article> </div> <div id="sidebar"> <div id="search-2" class="et_pb_widget widget_search"><form role="search" method="get" id="searchform" class="searchform" action="https://highstreet.io/"> <div> <label class="screen-reader-text" for="s">Search for:</label> <input type="text" value="" name="s" id="s" /> <input type="submit" id="searchsubmit" value="Search" /> </div> </form></div><div id="tag_cloud-2" class="et_pb_widget widget_tag_cloud"><h4 class="widgettitle">Categories</h4><div class="tagcloud"><a href="https://highstreet.io/category/data-feeds/" class="tag-cloud-link tag-link-114 tag-link-position-1" style="font-size: 22pt;" 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