Selling on Amazon offers a variety of fulfillment options, with Fulfillment by Amazon (FBA) and Fulfilled by Merchant (FBM) being the most prominent. While both methods have their advantages, many sellers are tempted to switch from FBA to FBM to save on fees or gain more control over their operations. However, this switch often comes at a cost: a significant decline in sales.
This blog post will explore why switching from FBA to FBM can hurt your sales, the benefits of FBA that FBM doesn’t offer, and strategies to navigate fulfillment decisions without compromising your business growth.
Understanding FBA and FBM
Before diving into the impact of switching, it’s important to understand the key differences between these two fulfillment models.
What is Fulfillment by Amazon (FBA)?
FBA allows sellers to store their products in Amazon’s fulfillment centers. Amazon handles:
- Storage
- Packing and shipping
- Customer service and returns
FBA also makes products eligible for Prime shipping, which is a major selling point for Amazon customers.
What is Fulfilled by Merchant (FBM)?
With FBM, sellers handle the entire fulfillment process themselves, including:
- Storage
- Packing and shipping
- Customer service
FBM offers more control over logistics but requires sellers to invest in infrastructure and systems to ensure timely delivery and customer satisfaction.
Why Sellers Consider Switching from FBA to FBM
There are several reasons why sellers might be tempted to switch from FBA to FBM:
- Cost Savings:
- FBA fees can add up, especially for oversized or low-margin items.
- Sellers may think they can save money by managing fulfillment themselves.
- Inventory Control:
- With FBM, sellers maintain direct control over their inventory, which can be beneficial for unique or fragile products.
- Avoid Long-Term Storage Fees:
- Amazon imposes high fees for inventory that sits in their warehouses for extended periods.
- Better Branding:
- FBM allows sellers to use branded packaging and include custom inserts, enhancing the customer experience.
While these reasons might seem compelling, they often don’t account for the hidden costs and disadvantages of leaving FBA.
How Switching to FBM Hurts Your Sales
Despite the potential benefits of FBM, switching away from FBA can have a negative impact on your sales. Here’s why:
1. Loss of Prime Eligibility
One of the biggest advantages of FBA is Prime eligibility. Prime members account for over 70% of Amazon’s sales, and these customers prioritize fast, free shipping.
When you switch to FBM, your products lose the Prime badge unless you qualify for Seller Fulfilled Prime (SFP)—a rigorous program with strict performance metrics. Without the Prime badge:
- Your product is less appealing to Prime customers.
- Conversion rates drop significantly.
Fact: Products with the Prime badge are 3-4 times more likely to convert compared to non-Prime listings.
2. Reduced Buy Box Eligibility
The Buy Box is the coveted “Add to Cart” button that drives the majority of Amazon sales. FBA products are far more likely to win the Buy Box because Amazon’s algorithm prioritizes listings that:
- Offer fast shipping (Prime eligibility).
- Have excellent fulfillment performance.
FBM sellers often struggle to match the shipping speed and reliability of FBA, making it harder to win the Buy Box. Losing the Buy Box can result in:
- Lower visibility in search results.
- Fewer conversions as customers choose competitors with the Buy Box.
3. Customer Trust and Experience
Amazon customers trust FBA products because they know Amazon handles fulfillment, shipping, and returns. With FBM, customers may:
- Be hesitant to purchase due to slower shipping times.
- Feel less confident about the return process.
A poor customer experience can lead to negative reviews, which further harm your product’s visibility and sales.
4. Increased Operational Burden
Managing fulfillment in-house requires significant investment in:
- Warehouse space
- Packing materials
- Shipping software
- Customer service
Many sellers underestimate the time and resources required to maintain high fulfillment standards. Late shipments, damaged items, or slow response times can lead to:
- Poor customer feedback
- Increased returns
- Account performance issues
5. Higher Advertising Costs
When you switch to FBM, your listings may see a drop in organic rankings due to lower Buy Box eligibility and reduced conversions. To maintain visibility, you’ll need to invest more in:
- Sponsored Products campaigns
- Targeted advertising
This increases your overall cost of doing business, offsetting any perceived savings from avoiding FBA fees.
The Unique Advantages of FBA
To understand why switching to FBM can hurt your sales, let’s revisit the key benefits of FBA that you’ll lose by making the switch:
- Fast, Reliable Shipping:
- FBA’s Prime shipping is a significant draw for customers.
- Better Buy Box Odds:
- Amazon’s algorithm favors FBA products for the Buy Box.
- Seamless Returns:
- Customers trust Amazon’s hassle-free return process.
- Improved Search Rankings:
- FBA products often rank higher due to better conversion rates.
- Time Savings:
- FBA frees you from the logistical complexities of fulfillment, allowing you to focus on scaling your business.
When FBM Might Make Sense
While FBA is generally the better choice for boosting sales, there are situations where FBM can be a viable option:
- Low-Margin Products:
- If FBA fees erode your profit margins, FBM might be more cost-effective.
- Unique or Fragile Items:
- Products requiring special handling may benefit from seller-managed fulfillment.
- Seasonal Inventory:
- To avoid long-term storage fees, FBM can help you manage seasonal products more efficiently.
- Direct-to-Customer Branding:
- FBM allows you to use branded packaging and inserts to enhance your customer experience.
How to Minimize the Impact of Switching to FBM
If you decide to switch to FBM, here are steps to minimize the impact on your sales:
1. Qualify for Seller Fulfilled Prime (SFP)
- SFP allows FBM sellers to display the Prime badge while managing their own fulfillment.
- To qualify, you must meet strict performance metrics for shipping speed, on-time delivery, and order defect rate.
2. Optimize Your Shipping Process
- Use reliable shipping carriers to ensure fast delivery.
- Invest in tools like ShipStation or ShippingEasy to streamline fulfillment.
3. Focus on Customer Service
- Respond quickly to customer inquiries.
- Offer hassle-free returns to maintain a positive experience.
4. Invest in Advertising
- Compensate for lost visibility by running strategic ad campaigns.
- Highlight competitive advantages, such as lower prices or unique product features.
5. Build Customer Trust
- Collect reviews and ratings to showcase the quality of your products.
- Use product inserts to build direct relationships with customers and encourage repeat business.
Conclusion
Switching from FBA to FBM might seem like a cost-saving measure, but it often comes at the expense of sales, visibility, and customer trust. FBA offers significant advantages, including Prime eligibility, higher Buy Box odds, and seamless customer service, which drive better conversion rates and long-term growth.
While FBM has its place in certain scenarios, sellers should carefully weigh the potential downsides before making the switch. By understanding the trade-offs and planning strategically, you can make an informed decision that aligns with your business goals.
Have you considered switching from FBA to FBM? Share your experiences and insights in the comments below—we’d love to hear your thoughts! 🚀
