Free online invoicing software
with KSeF support
When starting to sell on Amazon, you need to consider many key issues. One is choosing between the FBA and FBM fulfilment models. How do you choose the right one, and what do they actually mean?
FBA: what does it actually mean?
Breaking down the abbreviation FBA, FB means “Fulfillment By”, while A stands for “Amazon”. Under this sales model, our business handles sales themselves, while Amazon handles all the logistics. This relieves us of tasks such as packing, storage, shipping products, customer service and returns.
The model operates through shipments. As sellers, we send packages directly to the platform’s warehouses, where they are stored. When a customer buys our product, Amazon’s team receives the information, automatically packs the selected package and ships it. They are also responsible for tracking its journey to the buyer.
Accounting that understands your business
Leave your email address to receive weekly guides to help your business grow.
Benefits
This option has many benefits. One of the main ones is eligibility for the PRIME programme. An FBA seller’s offers are then promoted, providing greater visibility on the platform and a wider sales reach.
There are many more benefits:
- Sales operating 24 hours a day, seven days a week.
- Free shipping for Prime users.
- A larger audience.
- An easier returns process.
- Higher conversions resulting from customers’ trust in Amazon and reliance on its reliability.
- A greater chance of winning the Buy Box: FBA sellers win the Buy Box when competing sellers who do not use FBA offer the same prices.
- More time to develop your business.
Furthermore, according to Amazon research, as many as 78% of users who chose FBA confirm a significant increase in sales in their businesses.
The seller’s responsibilities towards Amazon: FBA
1. Choosing the product range you want to sell
It is best to choose products you are confident will sell quickly; otherwise, a fee applies for longer storage. Before starting your Amazon business, carefully consider which products will be in greatest demand.
2. Checking the products in warehouses
Our responsibilities include checking product stock levels in Amazon warehouses. We must make sure the items offered for sale are available to avoid misunderstandings with buyers.
3. Marketing and advertising
This is one of the key issues when selling products we make ourselves. Marketing and advertising help expand our audience. In this case, they are the seller’s responsibility.
The costs of FBA services
Storage in Amazon warehouses is a paid service. The cost depends on package size. When calculating the full cost, add the storage fee, charged monthly per cubic metre, and the shipping fee, which depends on the product’s dimensions and weight. Additional services must also be remembered.
Storage charges range from EUR 26 to EUR 36 per day. This means charges apply only to the days when the products are actually stored. Remember, however, that if goods cannot be sold and remain in the warehouse for longer than 365 days, an additional fee will be charged.
FBA offers quite a few other services. This should not discourage us, because sellers are entirely free to choose the services they need to conduct sales. They can therefore select those matching their business and financial needs. The price list is clear and transparent, helping us avoid confusion when preparing a planned budget.
Fulfillment By Amazon: who is it for?
This model is certainly not intended for every type of business. It works particularly well when a business is still in its early stages.
This type of selling is mainly aimed at:
- Small businesses.
- One-person businesses.
- Newly established businesses.
FBM: what does it mean?
FBM means Fulfillment By Merchant. Under this model, sellers are responsible for all activities involving shipping, storage, customer contact and product returns. If a new business uses FBM, Amazon helps it print US Postal and UPS labels directly from the seller dashboard. Remember, however, that the seller is responsible for the rest, namely shipping and delivering the package to the buyer on time. This model is usually chosen by sellers who are unsure about their idea and products.
Benefits
This sales method offers many benefits for developing the business:
- Greater control over your own business.
- Building substantial independence: no dependence on Amazon or sudden changes to its policies.
- Greater control over warehouses: sellers check matters such as product expiry dates themselves, giving greater control over the quality of the range sold.
- Independent packing: sellers choose the packaging in which they want products delivered, with the possibility of their own logo, a free sample or a small extra for customers.
- Fewer formalities, especially in states not subject to taxation.
Unfortunately, choosing FBM also involves certain challenges:
- Significant involvement from the seller, who must take responsibility for hiring people and monitoring shipments.
- Difficulty joining Prime: sellers are not automatically enrolled. To join, they must meet several conditions during a 30-day trial period:
- A delivery rate above 99%.
- Delivery to all for standard-size items.
- Acceptance of Amazon’s returns policies.
- Deliveries and collections every day of the week, including weekends.
- Using Amazon Buy Shopping Services for 99% of orders.
- An order cancellation rate below 0.5%.
FBM: who is it for?
Fulfillment By Merchant works particularly well when:
- Products are unique or luxurious.
- Sales are less frequent.
- The offer is straightforward.
- There is the ability and time to handle shipping and customer contact independently.
- Large products are sold.
- The seller has storage facilities.
- No additional costs are incurred for hiring services or storage space.
Interested in this article? Explore our accounting services and see how we can help:
Summary
FBA transfers logistics and customer service to Amazon, while the seller remains responsible for the range, stock availability and promotion. FBM gives sellers more control but also leaves fulfilment duties with them. Choose by comparing your products, storage capacity, available time and the costs of each model.
Interested in this article?
Enter your email address and once a week you will receive practical materials and tips to help you grow your business.
Book a free consultation
Grow your business with accounting combined with advisory support:
or
