Amazon Shipping Model: Analysis of the Advantages and Disadvantages of FBA and FBM

Amazon’s three major logistics models

Amazon provides sellers with a variety of logistics model options, including Fulfillment By Amazon (FBA) and Fulfillment By Merchant (FBM), which are Amazon fulfillment services and seller self-shipping services.

Detailed explanation of FBA mode

In FBA mode, sellers need to create a shipping plan in the Seller Center backend and send the goods to Amazon’s overseas warehouses. Amazon will provide a series of services, such as warehousing, sorting, packaging, delivery, payment collection, and customer service and after-sales support. For each order, Amazon charges certain fees, such as order processing fees, sorting and packaging fees, and weighing processing fees.

Advantages of FBA

• Amazon store tilt: Products using the FBA model can get higher traffic exposure, which helps promote new products. Compared with the self-shipping model, the FBA model can usually bring More sales.
• Reduced operating expenses: Compared with self-delivery, FBA delivery reduces the need for packaging and delivery personnel, thereby reducing labor costs. In addition, the logistics cost of bulk shipments to Amazon’s overseas warehouses is also relatively low.

Discussion on the Fulfillment by Merchant (FBM) model

Although FBA is popular for its many advantages, FBM still has its value.

Advantages and disadvantages of FBM model

• Lower costs: Sellers who choose FBM do not need to pay FBA-related service fees and can save expenses to a certain extent.
• High controllability: FBM allows sellers to more autonomously manage the storage, packaging and shipping processes of goods, thereby better adapting to the specific needs of customers.
• Need to handle after-sales issues by yourself: When encountering a return or exchange request, the seller needs to resolve it personally, which undoubtedly adds additional work burden and cost.
• Shipping may be slow: Since all warehousing and distribution work is solely undertaken by the seller, delays in processing orders may result in delays in delivery, affecting the user experience.

Application scenarios of FBM model

FBM is particularly suitable for the following situations:

• Small Sellers: For merchants with small sales volume and smaller business scale, FBM is a more cost-effective and easier-to-operate option.
• Products that require personalized services: Some products may require customized services, and FBM is particularly important at this time.
• When the product is temporarily out of stock: Using FBM, sellers can communicate with buyers in a timely manner and provide solutions even if there is a shortage.

Methods to improve FBM efficiency

In order to overcome the inherent shortcomings of FBM, sellers can consider implementing the following strategies to improve work efficiency:

• Properly plan inventory: Develop a reasonable inventory plan based on historical sales data and current warehousing capacity.
• Optimize packaging process: Simplify packaging steps and speed up packaging.
• Choose a reliable logistics provider: Work with a reputable courier company to ensure fast and accurate delivery.
• Improve the order processing mechanism: Build an efficient order management system to prevent order backlogs.
• Use professional tools to assist management: Use advanced inventory management, order tracking and logistics coordination software to improve overall operations.

Despite the growing popularity of FBA, FBM remains a viable and valuable option for certain types of sellers. By taking the appropriate measures, FBM can not only remain competitive but even achieve greater operational efficiency.