Amazon sellers have two main options for order fulfillment: FBA and FBM. FBA (fulfilled by Amazon) lets Amazon take care of storage, packing, shipping, and customer support. FBM (fulfilled by merchant) gives you complete control of the packaging, storage, and shipping. Each option has unique advantages, so you may leverage FBA loans or enjoy better stock management with FBM.
What Is the Amazon Seller Model?
The Amazon seller model comes by many names, including FBM (fulfilled by merchant) and SFP (seller fulfilled prime). As the name suggests, the model involves fulfilling orders without Amazon’s intervention. Sellers can list their business and products on the Amazon marketplace, and customers purchase through Amazon Prime. The seller is responsible for storing their inventory, picking, packaging, and shipping items to the customers.
What Is the Amazon FBA Model?
The FBA (fulfilled by Amazon) model is the most popular choice for new store owners. You give Amazon full control to handle inventory storage, packaging, and shipping. Sellers send products to Amazon, where they’re stored in the Amazon warehouse. When a customer completes an order, Amazon will pick, pack, and ship it. Your products remain in the warehouse until someone buys them. You pay for each day Amazon holds them.
Amazon FBM/SFP Vs Amazon FBA
Most Amazon sellers use the FBA model because of its benefits, including free shipping and trusted Amazon customer service. FBA enhances scalability and is cost-effective if your products clear quickly. Amazon FBM/SFP models have unique benefits for specific sellers who need more control over their inventories. Here are seven main differences between the Amazon FBM/SFP and FBA fulfillment structures:
1. Logistics
Within the FBA model, Amazon handles all logistics, from warehouse product storage to picking, packaging, and shipping. FBA is perfect for new sellers without existing dispatch logistics. Businesses adding Amazon as an extra sales channel may have distribution planned out. For such cases, you don’t necessarily need Amazon to fulfill orders but may save more money with the FBA model. FBM and SFP frameworks give you full control of the logistics.
2. Stock Control
E-commerce sellers with Amazon as their only outlet can choose the FBA model, which entrusts the entire stock to Amazon. You’ll pay a small fee for keeping your products in Amazon warehouses, but that’s all you need to worry about. If you have multiple channels, you can split the inventory to use the FBA model or choose the FMB/SFP option to manage your stock. The caveat is meeting Amazon’s promise concerning delivery, which is one day for prime members.
3. Returns
Small establishments can leverage Amazon’s infrastructure to handle product returns if they opt for the FBA model. Amazon will take back all returned goods and manage the customers via their excellent customer service team. Sellers will then receive a general box of returned goods. If you choose the FBM/SFP model, you’re in charge of all returned goods, which can be costly, but easy to track. Both frameworks involve the vendor covering for returned products.
4. Access/Eligibility
All Amazon sellers are eligible for the FBA program, but that’s not the case with SFP and FBM frameworks. To qualify to ship on your own, you must first use the FBA model and pass the free trial period. You’ll need to wait for Amazon to free up space for new SFP merchants. The marketplace doesn’t add new SFP vendors, so you may have to wait several months before joining the program. FBA enrollment is processed immediately if you qualify.
5. Fulfillment Fees
Both FBA and FMB/SFP frameworks involve fulfillment fees. Sellers who choose the FBA model must pay Amazon for their products to be fulfilled through the FBA model. The fee covers storing, picking, packing, and dispatching the products. If you choose SFP frameworks, you still have to pay for storage, picking, packing, and shipping expenses. You can compare the costs to identify which fulfillment option makes more sense for your store.
6. Seller Feedback
Customers can provide seller and product feedback through comments and star ratings. Negative feedback can affect your store and eligibility for specific benefits, such as FBA loans. Sellers who choose the SFP model have a higher risk of negative seller reviews because they handle the packaging and shipping. If you use the FBA model, Amazon handles logistics, so negative seller feedback is unlikely. You can request the removal of negative reviews.
7. Product Turnover
Sellers using the FBA framework need to consider product turnover because it can affect the storage fees. If a product remains in the Amazon warehouses for a long time, long-term storage rates will apply and impact profit margins. Sellers with items that sell slowly may consider fulfilling their orders. Large, heavy items cost more to keep in Amazon warehouses. You’ll still pay for storage expenses regardless of the fulfillment framework used.
FBA Loans for Amazon Sellers
With Amazon FBA, you can qualify for many loan products from reputable lenders. If you’re looking for FBA loans, make sure you go through the lending terms to find the best products for your store. Amazon sellers can access several loans, including the Amazon Lending Program (ALP). Other options include merchant cash advance (MCA), personal and business term loans, P2P loans, and credit card loans.
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