Key Takeaways

• It's a Strategic Choice: The decision between Fulfilment by Amazon (FBA) and Fulfilment by Merchant (FBM) is one of the most critical you'll make. It impacts costs, customer experience, and your ability to scale.

• FBA Offers Simplicity and Prime: Using FBA means Amazon handles storage, packing, shipping, and customer service, granting you automatic Prime eligibility. This is a massive advantage for reaching Amazon's most loyal customers.

• FBM Provides Control and Branding: FBM gives you complete control over your inventory and the customer experience. It allows for custom packaging and branding, which is impossible with FBA, and can be more cost-effective for certain products.

• Product Profile Matters: The right choice often depends on your product. Small, lightweight, fast-selling items are often perfect for FBA, while large, heavy, or slow-moving goods can be more profitable with FBM due to FBA's storage fees.

• A Hybrid Model Can Be Best: You don't have to choose just one. Many successful sellers use a hybrid approach: FBA for their bestsellers to leverage Prime, and FBM for niche products, new launches, or items requiring special handling.

  
  

Introduction

Starting an Amazon business is exciting, but you will soon face a critical decision that could define your success: how will you fulfil your customer orders? With millions of products competing for attention, your fulfilment strategy isn't just about logistics—it's about gaining a competitive advantage, optimising costs, and scaling your business effectively.

Understanding Your Two Main Paths

When it comes to Amazon fulfilment, you have two primary roads to choose from: let Amazon handle everything, or take control and do it yourself. Neither is inherently better; they are different tools for different business situations.

• Fulfilment by Amazon (FBA): This is the "hands-off" approach. You send your inventory in bulk to Amazon's warehouses, and they handle everything else: storage, picking, packing, shipping, and customer service.

• Fulfilment by Merchant (FBM): This is the "hands-on" approach. You maintain complete control, handling all aspects of order fulfilment from your own location or a third-party logistics (3PL) partner.

  
  

The FBA Advantage: When Amazon Does the Heavy Lifting

FBA shines when you want to focus your energy on growing your business rather than managing day-to-day logistics. The most immediate benefit is Prime eligibility. In today's market, that little Prime badge is often a necessity. Prime members are Amazon's most valuable customers, and they actively filter for that promise of fast, free shipping. With Prime, you compete with the full weight of Amazon's customer loyalty behind you.

This also builds customer trust. When shoppers see that Amazon is handling the delivery and returns, it gives them peace of mind, which is particularly valuable for newer sellers.

The Trade-offs You'll Face with FBA

However, this convenience comes at a price. FBA storage and fulfilment fees can significantly eat into your margins, especially for slow-moving items. Amazon charges long-term storage fees for products that sit too long, which can turn profitable stock into a liability if you don't manage it carefully.

You also surrender control over the customer experience. You cannot add personal touches like custom packaging or branded inserts that help build your own brand identity.

The FBM Route: Maintaining Full Control

FBM is for sellers who view fulfilment as a competitive advantage. When you handle it yourself, you control every customer touchpoint. Brand customisation becomes your superpower. You can create a memorable unboxing experience that reinforces your brand and encourages repeat business.

The cost structure can also be more favourable, as you avoid Amazon's specific FBA fees. This is often true for large, heavy, or lower-priced items where FBA fees would be disproportionately high. Direct customer communication also allows you to build relationships and gather valuable feedback.

The Challenges You'll Navigate with FBM

The flip side of control is responsibility. You are now running a logistics operation. During peak seasons, this can become overwhelming without the right systems and staff.

Gaining Prime eligibility is a major hurdle. While Amazon's Seller Fulfilled Prime programme exists, its performance requirements are so strict that it is currently closed to new applicants in the UK, making it very difficult for FBM sellers to compete on that front.

Making the Strategic Choice

• Product Characteristics: Your products often point to the right strategy. Small, lightweight, fast-moving items typically thrive with FBA. Large, heavy, or products with seasonal demand might be better suited for FBM, where you can avoid long-term storage fees.

• Business Resources: Be honest about your capabilities. If you are a small team, FBA's automation can free you up to focus on marketing and product sourcing. If you have logistics expertise, FBM might align better with your vision.

• Financial Modelling: Don't just compare fees. Model the total cost for each approach, including your time, inventory carrying costs, and the potential sales uplift from the Prime badge.

  
  

The Hybrid Approach: The Best of Both Worlds?

Many successful sellers realise the FBA vs. FBM decision isn't binary. A hybrid approach allows you to match the fulfilment method to the specific product. You could use FBA for your core bestsellers that benefit from Prime, and FBM for new product tests, seasonal items, or products with unique packaging needs. This strategy adds operational complexity but can optimise both your costs and the customer experience across your entire catalogue.

Conclusion: Your Fulfilment Evolution

Your fulfilment strategy isn't permanent. As your business evolves, your optimal approach may change. The key is to start with a strategy that matches your current situation while building the capabilities that support your long-term vision. The Amazon marketplace rewards sellers who can deliver an exceptional customer experience efficiently and profitably. Your fulfilment choice will determine how well you can serve them.

Frequently Asked Questions (FAQs)

1. Can I switch from FBA to FBM, or vice-versa? Yes, you can switch your fulfilment method for any product at any time. You can have some of your inventory in an Amazon warehouse (FBA) and fulfil orders from your own stock (FBM) for the same product, which can be a useful way to avoid stockouts if your FBA inventory runs low.

2. What is Seller Fulfilled Prime (SFP)? Seller Fulfilled Prime is a programme that allows FBM sellers who meet very strict performance criteria to display the Prime badge on their listings while still shipping from their own warehouse. However, it's important to note that Amazon has paused new enrolments into the SFP programme in the UK and other regions, so it is not currently an option for new sellers.

3. Do FBA fees include shipping costs to the customer? Yes, the core FBA fulfilment fee covers the entire process of picking, packing, and shipping the order to the customer, as well as handling customer service and returns for that order. However, you are still responsible for the cost of shipping your inventory to Amazon's fulfilment centres.

References

• Amazon Seller Central UK. (n.d.). Fulfilment by Amazon (FBA). Retrieved from https://sellercentral.amazon.co.uk/help/hub/reference/G53921

• BigCommerce. (2024). The Guide to Amazon FBA vs. FBM. Retrieved from https://www.bigcommerce.com/articles/ecommerce/amazon-fba-vs-fbm/

• The Digital Shelf Institute. (2024). Winning on Amazon: A Guide to FBA and FBM. Retrieved from https://www.digitalshelfinstitute.org/blog/winning-on-amazon-a-guide-to-fba-and-fbm