We’ve been getting a lot of questions lately on Amazon selling options… which one makes the most sense for your business and what do all the acronyms mean? When selling products on Amazon, choosing the right fulfillment model can greatly impact your business’s success. Amazon offers multiple ways for sellers to get their products to customers, and the four primary fulfillment models are Fulfillment by Amazon (FBA), Fulfillment by Merchant (FBM), Seller Fulfilled Prime (SFP), and Vendor Central. Each model has its advantages and trade-offs, depending on your business size, product types, and logistics capabilities. Let’s break them down.
- Fulfillment by Amazon (FBA)
FBA is one of the most popular fulfillment options, where sellers send their products to Amazon’s fulfillment centers, and Amazon takes care of storage, packing, shipping, and customer service.
How FBA Works:
- You send your products to Amazon’s warehouses.
- Amazon stores your inventory in their fulfillment centers.
- Amazon picks, packs, and ships orders directly to customers.
- Amazon handles returns and customer service on your behalf.
Pros:
- Prime Eligibility: FBA products automatically qualify for Amazon Prime, which provides fast and free shipping to customers, increasing sales potential.
- Scalability: FBA allows you to scale without worrying about warehouse space, logistics, or shipping.
- Amazon’s Customer Service: Amazon manages all post-sale services, including returns and refunds, reducing seller workload.
- Trust: Customers trust Amazon’s fast shipping and reliable service, which can enhance your brand’s credibility.
Cons:
- Fees: FBA fees include storage fees, fulfillment fees, and additional fees for inventory that stays too long in Amazon’s warehouses. These can add up, especially for larger or slower-moving products.
- Less Control: Sellers lose direct control over their fulfillment and shipping processes, which might be an issue if you want to manage specific aspects of the customer experience.
- Inventory Management: Amazon charges long-term storage fees, which can increase if you fail to move inventory fast enough.
- Fulfillment by Merchant (FBM)
FBM allows sellers to list their products on Amazon, but they handle all aspects of storage, shipping, and customer service themselves.
How FBM Works:
- You list your products on Amazon.
- When an order is placed, you pack and ship it from your own warehouse or fulfillment center.
- You handle customer service and returns directly.
Pros:
- Lower Costs: Since you’re not using Amazon’s fulfillment centers, you avoid FBA fees. This can make FBM more cost-effective, especially for larger or slower-moving products.
- Control: You have complete control over inventory management, shipping methods, and the entire customer service process, allowing for customization.
- Profit Margins: FBM allows you to retain a larger portion of the profits as you control the shipping logistics.
Cons:
- No Prime Eligibility: FBM products are not eligible for Amazon Prime shipping, which may reduce visibility and appeal to Prime customers.
- Shipping Burden: Managing your own shipping logistics can become complicated and time-consuming, especially as order volumes grow.
- Customer Service: Handling customer service, including returns and complaints, falls entirely on you.
- Seller Fulfilled Prime (SFP)
SFP combines the benefits of FBA’s Prime badge with FBM’s control over fulfillment. With SFP, you ship products directly from your own warehouse but offer Amazon Prime shipping to customers.
How SFP Works:
- You store and ship products from your own warehouse.
- You meet Amazon’s strict shipping requirements, including fast delivery times.
- Your products are eligible for Prime, just like FBA products.
Pros:
- Prime Eligibility: Like FBA, SFP products get the Prime badge, increasing your chances of winning the Buy Box and reaching Prime members.
- Inventory Control: You maintain control over your own inventory, which can be a significant advantage for businesses that want to manage their logistics.
- Brand Trust: Offering Prime shipping without using Amazon’s warehouses can boost customer trust while allowing you to maintain more control over the fulfillment process.
Cons:
- Strict Shipping Requirements: You need to meet Amazon’s high standards for shipping speed and reliability, which may require investments in logistics and staff.
- Cost of Infrastructure: While you avoid FBA fees, the cost of running a fulfillment system that meets Prime standards can be significant.
- Complex Setup: SFP requires a strong fulfillment operation in place, which may not be feasible for smaller sellers.
- Vendor Central
Vendor Central is an invitation-only program where you sell your products to Amazon wholesale. Amazon then resells the products to customers, taking complete ownership of the process.
How Vendor Central Works:
- Amazon buys your products in bulk.
- Amazon manages storage, pricing, and fulfillment.
- Amazon sells your products directly to customers under the “Ships from and sold by Amazon” label.
Pros:
- Amazon Takes Over: Amazon handles everything from fulfillment to customer service, which reduces the workload on your end.
- Brand Trust: Products sold directly by Amazon may benefit from additional customer trust and potentially better visibility on the platform.
- Simplified Logistics: You don’t need to worry about shipping individual orders—just sending bulk shipments to Amazon.
Cons:
- Loss of Control: You lose control over pricing, marketing, and even how your product is presented on Amazon.
- Lower Margins: Selling wholesale to Amazon usually results in lower profit margins compared to selling directly via FBA, FBM, or SFP.
- Invitation Only: Vendor Central is invitation-only, so it may not be an option for all sellers.
Conclusion: Choosing the Right Fulfillment Model
- FBA is ideal for sellers who want to scale rapidly, leverage Amazon’s Prime shipping, and offload the logistical burden. However, the fees can be a drawback for large or slow-moving products.
- FBM is great for businesses that already have efficient logistics in place and want to maintain control while avoiding Amazon’s storage fees, but the lack of Prime eligibility might be a downside.
- SFP offers the best of both worlds by allowing you to retain control while still benefiting from Prime, but the logistical demands can be tough.
- Vendor Central is suitable for larger brands looking for Amazon to manage everything but comes at the cost of reduced control and potentially lower margins.
Each fulfillment model has its pros and cons. The best choice depends on your business’s size, growth ambitions, and operational capabilities. By understanding these fulfillment options, you can make a strategic decision that aligns with your goals and maximizes your success on Amazon.