Amazon FBA vs FBM: How to Structure Your Fulfillment Strategy
For sellers operating on Amazon, the opportunities are nearly endless, with 300 million active users and more than 350 million unique products for sale on the eCommerce giant.
If you sell on Amazon, you likely use Fulfillment by Amazon (FBA). In fact, Marketplace Pulse reports more than 80% of sellers currently use the service. Since FBA is easy to use, many sellers rightfully rely on the fulfillment network for its business operations.
However, with the recent supply chain delays, inbound storage limits, and reports of long delivery times, when does FBM make sense to strengthen your fulfillment strategy?
What is Fulfillment by Amazon (FBA)?
Fulfillment by Amazon (or FBA, as it’s known in seller circles) is Amazon’s own fulfillment network service, available to sellers for a fee. When you sell items through FBA, Amazon will pick, package, ship, and provide customer support for your items as you sell them.
With fulfillment centers around the country and the world, FBA enables sellers to outsource some of their inventory operations while also ensuring their inventory is geographically close to customers. As a bonus, for sellers who have crossover manufacturer SKUs in Amazon inventory, Amazon can even reallocate inventory by using that of another seller to fulfill your order on the West coast. The company then reassigns that same borrowed inventory SKU and volume back to their inventory for an exemplary customer experience.
What is Fulfilled by Merchant (FBM)?
Fulfilled by Merchant, or FBM, is when merchants fulfill their own orders via owned warehouses or private third-party logistics (3PL) partners. With FBM, you’re required to manage the fulfillment of items you’ve sold, from picking to prep and packaging, shipping out to customers, and providing customer service or returns as needed.
FBM requires you to manage your own network of warehouses or hire a network of warehouses to support fulfillment.
Many merchants need to create FBM backups to supplement their FBA items. With Amazon putting storage limitations on FBA, merchants require safeguards to avoid selling out. This way, when their FBA goods do sell out, they can use a 3PL like MyFBAPrep to replenish quickly. In the meantime, their listings can switch over to the merchant fulfilled so they can continue selling, and MyFBAPrep can fulfil their FBM.
How to Structure a Joint FBA and FBM Strategy
With the ease of FBA, why would any seller choose to fulfill their own orders?
Prior to the pandemic’s disruption, sellers could get away with relying solely on FBA — it made fulfillment easy and reduced the need for sourcing support with a 3PL. However, this is no longer the case.
In March 2020, Amazon shipping times for Prime reached one month — a far cry from its two-day shipping promise — as a result of the order overload that hit fulfillment centers during the early days of the COVID-19 pandemic. Amazon cited the need to prioritize the most in-demand, essential items in warehouses as the cause. Unfortunately for sellers, these changes have not been reversed or abated; if anything, they’ve grown stricter.
In the weeks leading up to Prime Day, Amazon announced additional restrictions for FBA. So, for sellers without a robust fulfillment process, get ready to run out of inventory.
However, with a combined approach to fulfillment, carefully tailored to your unique business needs, you can avoid running out of inventory and continue to sell without disruptions. A combined approach also means you’re not putting all of your eggs into one basket, enabling you to be flexible and pivot if additional changes are implemented to FBA restrictions.
How to Establish a Killer FBM Strategy
To establish an effective and scalable strategy, you need to analyze critically your products, your current set-up, and your sales data.
Create Mirror Listings of All FBA Items for Your FBM fulfillment
When you list your items for sale on Amazon, you assign them as either FBA or FBM. If you have items already set to FBA, now’s the time to mirror those listings and create identical FBM listings. This way, when you run out of FBA inventory, you can immediately switch to FBM for that same item without any lapse in sales.
To mirror or copy a listing, log into your seller account and go to the Inventory menu. From there, select Manage Inventory. Locate the product you want to create a mirror listing for. Select Copy Listing from the drop-down menu for that product and then enter the unique SKU, product identifier, and other attributes (like FBA vs. FBM) and hit save. It’s that easy!
Your FBM mirror listings will kick in once FBA inventory is spent for a seamless transition from Amazon to self-fulfilled items.
Find a Reliable Fulfillment Partner
Finding a partner to handle your fulfillment is imperative to keeping your business running smoothly, especially as you grow and scale. MyFBAPrep can streamline the fulfillment of all FBM orders, from picking to packaging and shipping your items. This frees you to focus on other elements of your business, like marketing and sourcing products.
A fulfillment partner can also shorten fulfillment timelines. The default listed FBM shipping time is 7-14 days, much longer than the two-day shipping promised by FBA. Work with your partner to understand what shipping times they can accommodate and update your shipping settings accordingly.
Since MyFBAPrep has warehouses around the globe, you can cut shipping times drastically to get your product into customer’s hands within one to three days, much faster than shipping from your own single warehouse.
Identifying the Best Products for FBA vs. FBM
Be picky about what items you assign for FBA versus what items you assign to FBM.
It’s important to choose your FBA items strategically by prioritizing items based on popularity or sales volume and ensuring only those products you know will move often and quickly are sent to Amazon for fulfillment.
- Lightweight, high-volume products = FBA
- Bulky or large, low-volume products = FBM
- Supplement with a combination of inventory available in both channels\
- Ensure FBA items are in stock through your FBM fulfillment methods in case FBA runs out or has delays (or if the rare non-Prime member wants to make a purchase, and doesn’t have access to Prime delivery through FBA anyway)
Higher Volume Products Should be Set to FBA
You should set your highest volume, best-selling products to FBA. This will reduce your workload by splitting fulfillment for these high-volume items with some of your fulfillment managed by Amazon, even if you’ve sold out of your FBA inventory.
Review your sales data to understand which items are your best-sellers and identify those that make sense for FBA. Then, build mirror listings to support your sales beyond the FBA inventory requirement.
FBA isn’t a good fit for large or oversized, heavy, or bulky items. Their storage fees also hike up for long-term storage, so keep these in mind when choosing the best products for FBA.
Lower Volume Products Should be Set to FBM
One of the easiest ways to optimize your current strategy is either to shift FBA listings to FBM, or create FBM listings for items that don’t make sense for FBA due to the current restrictions.
Your lower volume products shouldn’t take up space in your stock limits for FBA. If you know you’re less likely to fulfill a particular item, save those for your FBM strategy to ensure you don’t consume valuable FBA stock space that would be better used for more popular items.
FBM is also good for lower-profit margin items. For example, if you want to carry a full catalog of a certain brand, but some items have such low profit margins it wouldn’t make sense to fulfill through FBA. In this case, you can find a fulfillment partner or handle it in-house.
Break Out Specialty Products According to the Best Method for Managing Their Fulfillment
Beyond your high- or low-volume sales products, you may have items that come with special requirements. If you have specialty products such as heavy or fragile items, or those that must be sent in climate-controlled settings, these might be best saved for your own fulfillment via FBM as well, especially if you have a fulfillment partner who handles that particular specialty.
By strategically assigning your products to FBA or FBM, you can build a scalable and sustainable strategy for your business moving into peak seasons and the new year.
Think Beyond the Here and Now
When responding to change, it’s easy to get wrapped up in the current situation and lose sight of the bigger picture. While today’s restrictions might be manageable, upcoming changes or surprises to your supply chain or requirements can wreak havoc on your business if you haven’t planned ahead for how you’ll respond to and thrive from them.
Plan Ahead for Additional Changes
Prior to the pandemic, no one could have foreseen the disruptions to FBA, nor the ongoing restrictions for FBA sellers. Similarly, no one can predict what may be in store as supply chain issues and our post-Covid world evolve. Savvy merchants plan ahead for additional changes and position themselves to respond to any further restrictions.
Establishing a strategy today that you can scale up or down based on your business needs and changes to Amazon fulfillment networks ensures your business won’t be caught off guard.
For example, if your inventory restriction for FBA is further reduced, are you prepared to manage that fulfillment in-house? If not, it’s time to find a 3PL partner who can support you. Which brings us to our final point…
Choose a Partner Who Can Help You Scale Your Business Long-Term
The nature of business is that it’s always changing. Twenty-five years ago, we couldn’t imagine an Amazon solution for consumers, and twenty-five months ago, we were blissfully unaware of the disruption COVID-19 would bring to our lives. As our world changes, the way we run our businesses does, too. A reliable partner who can help see you through big changes is an effective way to plan for future eCommerce success.
Finding an experienced partner to help you stay ahead of trends and changes, manage the everyday tasks of your business, and optimize your fulfillment approach is one of the most important business moves you’ll make. MyFBAPrep has decades of experience in logistics, customer service, and account management, and, as former Amazon sellers, they know exactly what’s required for FBA and FBM prep and fulfillment.
An experienced partner brings a wealth of knowledge to help you build your business, no matter what the future holds.
Wrapping Up — Combine FBA and FBM for a Fulfillment Strategy With the Best of Both Worlds
Combining FBA and FBM in your Amazon store is not just a recommendation — it’s a must-have for sellers in today’s market. Through a careful approach and thoughtful execution, you can avoid sales disruptions and better manage your fulfillment to continue to deliver a great experience for your customers.
About the Author
Rachel Go is the marketing director of MyFBAPrep, a nationwide and international network of prep centers with 50+ warehouses, 1 million+ square feet of operating space, and the ability to reach any US customer (or FBA center) in 1 – 2 days. MyFBAPrep provides access to strategic warehouse locations and a wide variety of eCommerce services with a single partnership, along with white glove customer service and best-in-class technology. Sellers can send items into a single MyFBAPrep location and let us handle shipment splitting, prepping, packaging, and shipping across their sales channels.