FBA vs FBM: Which e-commerce fulfillment option is right for you?

You’ve developed your product, listed it on Amazon, found a customer base, and the orders have finally been placed. Now, however, comes the difficult part: fulfillment.

In the ever-changing landscape of e-commerce, fulfillment — or, in simpler terms, getting goods to customers’ doors after an order has been placed — remains a constant source of stress for many businesses. 

Explore more: Wayfindr’s (formerly CBIP) Global Logistics Services – End-to-end solutions for scalable fulfillment strategies.

Today, nearly 40% of shoppers say they’ll skip an order if it’s expected to take longer than a week to arrive. And when time is of the essence, you can’t afford any missteps.

The good news? You have options. Specifically, two major ones: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). The question is: which fulfillment option is right for your business?

Let’s take a closer look at the comparison between FBA vs FBM from a global e-commerce company’s perspective and see which model best fits your operational needs.

FULFILMENT BY AMAZON

When using FBA your business accesses the extraordinary value of Amazon’s world-class customer service.

What is FBA (Fulfillment By Amazon)

Fulfillment by Amazon (FBA) is a program that lets you outsource order fulfillment to Amazon and offer customers free, two-day shipping through Prime. By enrolling in FBA, you can send your products into Amazon’s global network of fulfillment centers, and we’ll pick, pack, and ship orders, as well as handle customer service and returns. FBA is part of a fully automated set of services we call Supply Chain by Amazon.

FBA PROS

Amazon fulfillment began in 2006, allowing small businesses to use its massive network of warehouses and shipping providers. Though its capacity to list goods grew exponentially, there wasn’t always a clear way to ‘fulfill,’ or get products to the customer’s door. Now, Amazon has integrated shipping with its listings through FBA.

In order to use Amazon fulfillment, e-commerce merchants pay two fees. The first is a which a fulfillment fee covering packing, shipping, and customer service in addition to a monthly inventory fee.

For companies listing their goods on Amazon, the selling points of FBA include:

• Prime Shipping: These days, Amazon Prime alone accounts for roughly 200 million users worldwide. Sellers today often opt to have orders fulfilled by Amazon to keep up with the rising expectations of fast shipping that Amazon helped to establish.
• Customer Service: retailers can access Amazon customer service, which is available 24/7 with a quick turnaround time (typically  2-3 days at a maximum).
• Return Management: handling returns can be a source of serious frustration for many retailers.  With FBA, Amazon takes over and handles returns for you.

If your company can follow Amazon’s guidelines and cover these costs, the integrated system allows you to begin sales quickly. Despite these advantages, though, there are still a number of other factors to take into consideration before deciding to fulfill exclusively through Amazon.

RELATED: How to Take Your E-commerce Business Global

FBA CONS

While any seller can opt to carry out fulfillment through Amazon, that doesn’t always mean it’s the right fit.

One reason is that Amazon uses a warehousing practice called commingling. CCommingling refers to the practice of putting the inventory of different companies together in a warehouse.

While it can simplify fulfillment for companies and help to increase the speed of deliveries, there is also the potential for fraudulent or counterfeit products to end up alongside your goods — or worse, get labeled as your order. 

In addition to the costs and commingling, another potential disadvantage to using Fulfillment by Amazon is that you have to play by their rules. That means you could be out of luck if you:

• Like to conduct warehouse inspections yourself
• Want to adapt on the go to consumer preferences and changes in your stock.
• Don’t want to take on a long-term storage fee. This is key for small retailers who are still ramping up the volume of their stock — after 6 months, Amazon applies a semi-annual long-term storage fee that could drive up your costs significantly early on
• Want more access to inventory. With Amazon, you won’t get a dedicated space for your own inventory, in turn limiting your growth potential.

FULFILLMENT BY MERCHANT (FBM)

Amazon FBM is usually the only fulfillment method available to new merchants selling on Amazon, as FBA requires a few approvals, demonstrated inventory turnover, and takes time to set up.

What is FBM (Fulfillment by Merchant)?

FBM is an e-commerce fulfillment method where sellers handle all aspects of order fulfillment, including storing, packaging, and shipping products directly to customers. This contrasts with Fulfillment by Amazon (FBA), where Amazon handles these tasks. With FBM, sellers are responsible for managing the entire customer journey from purchase to delivery. 

FBM PROS 

Fulfillment by Merchant (FBM) is when your business takes on logistics itself or outsources the operation to another logistics partner other than Amazon.

In times of major shifts in the logistics landscape like COVID-19, having Amazon in full control caused serious problems for many sellers. 

Amazon shifted its policy and delayed shipments of all goods that weren’t already in a warehouse. This created massive delays and left many sellers unable to ship orders for a full 30 days — a far cry from the two-day delivery they’d come to expect. While Amazon’s system was the cause of the issue, companies themselves had to deal with the consequences. This event led many businesses to create plans to handle at least part of their own fulfillment.

Today, 43% of sellers on Amazon handle at least some of their shipping using other non-Amazon providers. This number is up nearly 10% from the previous year.

While sellers need to make sure their goods meet Amazon’s requirements in terms of labeling, utilizing this method means they can take full control from start to finish. Partnering with a competent logistics provider using FBM unlocks a host of benefits, including:

• Fewer fees from Amazon and a way to only take on costs of services you use in a given month
• Much more control over your fulfillment process from start to finish, including the ability to make warehousing changes
• More opportunities for organic growth
• The ability to react faster to changes in the market

FBM CONS

Even though FBM puts a company in control of its logistics, there are a few potential downsides worth noting.

If your e-commerce business doesn’t use FBA, it can be costly in the beginning to find a logistics plan that matches up to their rapid delivery system.

Another consideration is Amazon Prime. For some shoppers, the promise of two-day shipping is perhaps the most important selling point. As noted in the case of COVID-19, however, receiving deliveries in two days isn’t a guarantee 100% of the time. Though FBM doesn’t make your goods prime-eligible, it also doesn’t mean you’re unable to deliver quickly and efficiently another way.

If your company wants to grow organically and independently, these potential downsides are likely to be insignificant in the long run. By partnering with a competent, experienced logistics team, you’ll be able to pave the way for your e-commerce business to develop in a way that makes sense — not by always deferring to Amazon.

Get an Integrated Team of Logistics Experts for your E-commerce Business with Wayfindr

If you want to maintain control of your domestic and global e-commerce fulfillment operations but need a trusted partner to keep things running effectively, we’ve got you covered. We handle the complex aspects of your supply chain so you can focus on growing your business.

At Wayfindr (formerly CBIP), we support both FBM and hybrid models with full-service logistics tailored to your unique needs. If you’re looking for flexibility, visibility, and global reach, we’re the logistics company that can deliver.

We believe the era of relying solely on one mega-provider is over. Through our proprietary order tracking and warehouse management systems, we design adaptive and transparent logistics services that put you in control.

Whether you’re scaling across borders or optimizing fulfillment for Amazon, we provide:

• Multi-market 4PL logistics support
• Regional fulfillment hubs
• Custom warehousing solutions
• Integrated tech stack to manage inventory and performance

Have a say in your fulfillment. Get in touch today for a free assessment to craft a logistics plan tailored to your business.