The internet has brought so much change. There was a time when people had to walk to their local stores to make purchases. Today, you can have anything you want delivered to you with the click of a button.
And it isn’t just the consumer that has benefited from this transformation in technology. So many people are making so much money through e-commerce businesses. Anyone can sell anything they want over the internet and they don’t have to worry about renting expensive office space or hiring entire teams of workers.
If you want increase the amount of traffic coming in and out of your establishment, someone will eventually buy something. You don’t actually have to worry about your merchandise.
You already have your products on your shelves and anyone who sees something they like can simply pluck it off the shelf, pay for it and leave with it.
What is FBM?
Some people are probably seeing that term for the very first time. FBM stands for “Fulfillment by Merchant” and it describes one of the biggest differences between a traditional retailer and an Amazon seller.
- What happens when an Amazon Seller gets an order from a customer?
First of all, in most cases, the seller does not make the product the customer wants. Secondly, the seller doesn’t have the product in question on hand.
He has to reach out to a manufacturer in China who has the item. The manufacturer then ships the item to the seller who is responsible for receiving it, scrutinizing it, packaging it, labeling it and then shipping it off to the consumer who wants it.
- What happens when the seller has multiple consumers demanding multiple products?
He has to execute the steps mentioned above for every single order. That means packaging each individual product, printing the labels, and sending each package off to the individual consumers.
And if there are no orders being made, the seller has to find a place to store his inventory. If you think that sounds like hard work, you’re not wrong. This is Fulfillment by Merchant and it was the way Amazon sellers processed and fulfilled orders in the beginning.
It wasn’t just a hassle. It created so many unnecessary delays and generated unexpected losses through careless mistakes. So when Amazon finally launched FBA, many sellers did not hesitate to abandon FBM en masse.
How to FBA Works?
FBA stands for “Fulfillment by Amazon“, and you can probably guess what that means. FBA refers to a process in which every rigorous step mentioned above that the seller had to endure is handled by Amazon.
Under the FBA model, when a consumer asks for a product, the Seller’s only significant task is to reach out to the manufacturer in China to order for it. Once the manufacturer deploys the product, the relevant FBA warehouse receives it.
Amazon’s staff then stores, labels, and ships the product to the consumer when the time comes. They even offer return services whenever the need arises.
Basically, FBA puts the seller in the same position as a traditional retailer. They only have to worry about attracting new customers and generating sales. Under the FBA model, there is no reason for the Amazon seller to ever handle their own inventory.
FBM VS FBA Advantage
FBM is exhausting and time-consuming. No Amazon Seller would ever choose the FBM model, not if they wish to succeed in the e-commerce business. On the other hand, FBA is cost-effective and efficient.
And it makes all the sense in the world for an Amazon seller to utilize its tools to achieve great success. All of this seems rather obvious.
Why are some people still fighting for the FBM model?
As problematic as FBM sounds, it actually has quite a number of advantages that might make it appealing to some people, for instance:
- 1). Delays
But you need to remember that every time you ask your manufacturer in China to send you products, Amazon has to scan each item and then load it into their system. Only then is it made available online for purchase.
Sometimes this lag is just a few hours long. Other times it can last days. IN other words, your inventory has arrived, Amazon has received it but they haven’t entered it into their database.
FBA is free from such worries. Your inventory is immediately available when you receive it from the manufacturer. There are no unexpected delays for you to worry about, no scanning or loading required.
- 2). Value
A good salesperson understands the importance of providing extra value to a client. It doesn’t have to be anything big. Even a small pamphlet with additional information could do wonders for your brand.
Most consumers love the idea of getting more value than they paid for. And adding value to a product in a personalized manner is very easy to do under the FBM model. After all, you handle all the packages when they arrive and you get to ship each one individually.
It isn’t that hard for you to slip a little extra something into a box before sending it off to a particular consumer.
- 3). Inspection
No Amazon seller wants to ship defective products. But they have no real control in the matter because they do not handle their own inventory. They have no choice but to trust that their supplier followed their instructions and delivered the best possible item.
But people cut corners all the time and you can never know that an inferior batch was made until you see the horrible reviews online.
- 4). Cost
- You should know by now that Amazon doesn’t work for free. If they are receiving, processing, and storing your inventory for you, they expect you to financially compensate them.
This is especially true when it comes to the prep centers which Amazon uses to label and visually inspect packages for faults or damages.
The prices charged will vary depending on the size of the product. The process products undergo in the prep center takes time. You have to take this delay into account by ordering for products early in anticipation of inventory shortfalls down the line.
The Benefits of FBA
Yes, FBM isn’t quite as miserable and worthless as some people think. The model actually brings quite a lot to the table. But at the end of the day, there’s a reason why the FBA model is dominating the e-commerce landscape.
Consider the following advantages:
1). Prime Users will Consider You
One of the biggest attractions of the FBA model is the fact that it makes the products of the seller eligible for Prime Status.
Prime users are the biggest spenders on Amazon. These are people who have chosen to pay $99 a year to enjoy special privileges that make it easier for them to make larger purchases more frequently.
You want prime users to prioritize your products, especially since there are over one hundred million of them now. Prime status definitely justifies the cost of the FBA service.
2). It Is Easier to Scale Your Business
The situation becomes harder to manage when you have twenty units a day and then twenty units an hour, and then twenty units a minute.
But keeping up with the demands that such growth entails will break your body and spirit. FBA takes such worries out of the equation. You can undergo as much growth as you want under the service.
It doesn’t change what you have to do on your end. So long as you pay the necessary fees, Amazon will process and ship all the inventory you want.
3). Returns Are Not Your Problem
You don’t have to deal with the strenuous process of handling returns under FBA. Returns can be quite time-consuming. But again, because you don’t handle your own inventory, returns are not your problem.
You can sit back and watch as Amazon does all the difficult work. They always go above and beyond to satisfy customers. So you can trust that they won’t besmirch your reputation.
The FBA service takes all the physically demanding work out of the equation. It leaves you free to focus solely on growing your sales.
This is also hard work because you have to do market research, investigate your rivals, execute social media marketing campaigns and the like.
And you can do all of that and more if you know that Amazon is taking care of your inventory.
FBM isn’t without merit but no one can deny the fact that FBA is the future. It makes far more sense for the modern Amazon seller.
