by Rachel Go, MyFBA Prep
Looking to diversify your Amazon business with multiple fulfillment options? While the concept of combining FBA and FBM product listings might sound complicated, it’s an achievable strategy that can significantly boost your Amazon business’s profitability.
FBA and FBM are two distinct fulfillment methods offered through Amazon. Each program presents unique advantages and disadvantages that make a compelling case for utilizing both. Keep reading to learn why this combination could be the perfect fit for your business.
Understanding FBA and FBM
Fulfillment by Amazon (FBA) is an Amazon service wherein it handles storage, packing, shipping, customer service, and returns for your products. This program is preferred for its convenience and integration with Amazon’s logistical network.
In Fulfillment by Merchant (FBM), sellers manage the entire order fulfillment process themselves, which offers more control over inventory and direct customer interaction. It’s suited for products with unique handling needs or irregular sales patterns.
Each method possesses distinct benefits and challenges: FBA simplifies the selling process but at a higher cost and less inventory control; meanwhile, FBM boasts more control and potentially lower costs but demands greater effort in logistics management.
When to Adopt FBA
With hundreds of millions of Prime members worldwide, FBA-fulfilled products gain immediate visibility and greater appeal among this customer segment. Prime members frequently prioritize convenience and fast shipping and so are more likely to gravitate towards products eligible for Prime benefits.
Further, FBA breaks down geographical barriers by empowering sellers to reach a global audience easily. Amazon’s extensive network of fulfillment centers strategically positioned around the world facilitates seamless cross-border shipping, enabling sellers to cater to international consumers without the complexities of managing logistics across multiple regions.
Thanks to its positive reputation, FBA also instills confidence in customers, in turn fostering brand loyalty and trust. Amazon’s consistent reliability extends to FBA-fulfilled products, so buyers are assured timely delivery, secure packaging, and hassle-free returns.
FBA is particularly well suited for products with high sales volumes and consistent demand. The efficiency and scalability of Amazon’s fulfillment network ensure products are always in stock and readily available to meet customer demand, which minimizes the risk of stockouts and fulfillment delays.
When to Opt for FBM
FBM enables sellers to extend beyond the confines of standard Amazon packaging and shipping practices to curate unique customer experiences.
The freedom to personalize packaging, include handwritten notes, and offer customized gift-wrapping options sets FBM apart. These perks also foster a connection and sense of exclusivity among consumers.
Sellers in the FBM program gain valuable insights into buyer preferences and pain points by assuming control over the entire fulfillment process. That direct involvement allows for proactive problem-solving, timely order fulfillment, and personalized customer service — all of which contribute to greater customer satisfaction and loyalty.
FBM also gives sellers more flexibility in managing inventory levels, particularly for products with fluctuating demand or unpredictable sales patterns. Sellers can closely monitor stock levels, adjust inventory quantities as needed, and implement targeted promotions to optimize inventory turnover.
FBM is especially advantageous for certain product categories, including:
- Oversized items: FBM lets sellers negotiate shipping rates directly with carriers, potentially securing cost savings for large or bulky items.
- Special products: FBM provides the flexibility to handle delicate or temperature-sensitive products with meticulous care and attention to detail.
- Low-volume listings: FBM eliminates the storage fees associated with FBA, making it a cost-effective option for items with lower sales volumes.
The Benefits of a Combined Approach
Embracing a hybrid fulfillment strategy that combines FBA and FBM yields many benefits, from diversifying customer experiences to expanding market reach and ensuring seamless fulfillment under diverse circumstances.
Tailored Customer Experiences
By leveraging FBA and FBM, sellers can create personalized customer experiences that align with specific product categories and preferences.
FBA’s efficiency and reliability cater to high-demand products and Prime members. At the same time, FBM allows sellers to add unique touches, such as custom packaging or handwritten notes, for special items or lower-volume products. This tailored approach fosters brand loyalty and enhances customer satisfaction.
Expanded Market Reach for Global Growth
FBA’s global fulfillment network seamlessly facilitates cross-border shipping so sellers can easily reach international customers.
However, for products with lower sales volumes or those requiring specialized handling, FBM offers greater control over fulfillment, enabling sellers to cater to specific regional preferences or handle delicate items with meticulous care.
Combining both programs empowers sellers to expand their market reach without compromising on customer satisfaction.
Resilient Fulfillment for Unforeseen Circumstances
Relying solely on FBA or FBM can leave businesses vulnerable to unforeseen disruptions, such as supply chain delays or unexpected product surges.
However, sellers can mitigate these risks by maintaining a backup fulfillment option in the form of a hybrid approach. If FBA inventory runs low, for instance, FBM can step in to ensure uninterrupted product availability.
Optimized Inventory Management for Cost Savings
FBA’s storage fees can impact profit margins, especially for low-volume products. However, joining FBA and FBM helps sellers optimize inventory management costs.
You can store high-demand products in FBA facilities for quick fulfillment while managing lower-volume items through FBM, thus reducing storage expenses.
Strategically Combining FBA and FBM
Effectively combining FBA and FBM requires a strategic approach that carefully aligns each product with the most suitable fulfillment method. This fusion not only maximizes efficiency but also enhances customer satisfaction and profitability.
Prioritize FBA in Your Combined Strategy
FBA works wonders for items that have a high turnover rate. These are typically your bestsellers or seasonal items that experience a surge in demand at specific times of the year.
Utilizing FBA for these types of items capitalizes on Amazon’s sophisticated logistics network and the inherent trust that buyers have in Amazon’s delivery and customer service. This can lead to quicker sales, greater visibility on the platform, and potentially higher rankings in Amazon’s search results.
For products that sell in large quantities, FBA can efficiently handle the increased volume without additional strain on your resources.
Establish Complementary FBM Listings
FBM can be a more economical option for products that require special handling or have unique features that FBA might not accommodate. This includes fragile or oversized items, or those with a longer shelf life.
Niche products or ones with lower sales velocity can benefit from FBM as well. It allows for more controlled inventory management and avoids the higher storage fees that can accumulate for slow-moving items in the FBA program.
MyFBAPrep offers specialized services that can assist in navigating the complexities of both FBA and FBM. Check out these insights into effective FBM listing creation.
Strategically Allocate Products to FBA and FBM
A data-driven approach is crucial in deciding which products to allocate to FBA and which to keep under FBM. This involves analyzing sales velocity, customer return rates, seasonality, and profitability of each SKU.
Keeping an optimal inventory level in FBA while managing the rest through FBM can be an effective strategy. This balance prevents over-reliance on one method so you can adapt quickly to changes in demand or Amazon policies.
Optimize Your FBA Usage
Prioritize products particularly attractive to Amazon Prime members in FBA. The promise of fast, reliable shipping can significantly drive sales for these items.
Regularly review inventory levels to ensure your products turn over quickly and don’t incur long-term storage fees. That entails staying on top of stock management, predicting demand, and avoiding overstocking.
Be prepared to shift products between FBA and FBM based on their performance. For instance, if a product unexpectedly starts selling faster, moving it to FBA would be beneficial to capitalize on the increased demand.
Tips to Maximize Sales and Efficiency
Implementing strategic FBA and FBM practices can significantly enhance your performance on the Amazon platform.
Boost Sales Using Both FBA and FBM
Regularly analyze your sales data to understand which products perform well and why. That knowledge helps decide which items to move to FBA and which to keep under FBM. Then, actively solicit and monitor customer feedback for insights into their preferences and experiences. Use this information to fine-tune your product offerings and fulfillment methods.
Stay on top of market trends within your product categories as well. If certain items are gaining popularity, consider moving them to FBA for better visibility and faster shipping. In a similar vein, adjust your strategy according to seasonal trends. For instance, move seasonal items to FBA ahead of their peak demand period for optimal exposure and sales.
Finally, efficiently manage your inventory levels to avoid stockouts or excess inventory, which leads to high storage costs in FBA or missed sales opportunities.
How to Monitor and Adapt Strategies Based on Performance Metrics
Regularly review key performance indicators (KPIs) such as sales velocity, return rates, customer reviews, and fulfillment costs to gain a comprehensive view of your business’s health.
Monitor how quickly your inventory sells and adjust your FBA and FBM allocations accordingly. High-turnover items are generally well suited for FBA. Also, assess the profitability of your products in FBA and FBM. Factor in all costs, including shipping, storage, and Amazon fees, to determine each product’s most cost-effective fulfillment method.
Keep an eye on how customers respond to your products and fulfillment methods as well. For example, if buyers prefer FBA’s quick delivery, consider increasing your inventory in that program.
Keeping up With Amazon’s Policies and Market Trends
Amazon frequently updates its policies and fees. Stay informed about these changes to avoid unexpected costs and compliance issues.
You can take advantage of Amazon’s own tools and resources like Amazon Seller Central and forums to keep up to date on any changes and gather insights on best practices.
The eCommerce market is dynamic, and consumer preferences shift quickly, so you need to be adaptable and ready to pivot your strategy in response to new trends and emerging customer demands. Participate in eCommerce and Amazon-specific webinars, conferences, and training sessions to gain advanced knowledge and insights from industry experts.
Wrapping up — Embrace a More Balanced Approach to Fulfillment
By leveraging FBA’s extensive fulfillment network and Prime eligibility for high-demand products, you can expand your reach and cater to the preferences of a vast customer base. Simultaneously, FBM empowers you to exercise greater control over inventory management, tailor customer experiences, and handle delicate or lower-volume products with personalized care.
This combined approach mitigates risks associated with relying on a sole fulfillment method and opens up new opportunities for growth. Utilize the advantages of both programs to optimize inventory costs, adapt to unforeseen circumstances, tap into diverse market segments, and, ultimately, enhance your overall profitability and brand reputation.
About the Author
Rachel Go is the marketing director of MyFBAPrep, an eCommerce warehouse network for Amazon aggregators, enterprise brands, and top Amazon sellers. Operating a global network of more than 100 warehouses and 85-million-square-feet of operating warehouse space, MyFBAPrep offers a full suite of ecommerce 3PL services including Amazon wholesale and private label, direct-to-consumer (DTC) fulfillment, and B2B retail. Powered by its SaaS technology platform Preptopia™, sellers get access to unified billing, analytics, business intelligence reporting tools and real-time inventory views across multiple warehouses in the network. The company provides FBA Prep automation, modern robotics item picking, and a dedicated account management team. Based in Coral Springs, Florida, MyFBAPrep moves over $1 billion in Gross Merchandise Value (GMV) and processes over 10-million units annually.