[Section 2] Lesson 4: Fulfilment by Merchant (FBM) vs Fulfilment by Amazon (FBA)

Hello friends!

Hope this day is a wonderful one for you!

Today we explore various options to process orders on Amazon and look at the pros & cons of all options together!

Fulfilment = Timely Dispatch of Order + Timely Delivery of Order + Customer Service

FBA stands for Fulfilment by Amazon. The term is self-explanatory i.e., fulfilment of the orders will be taken care of by Amazon.

On the other hand, FBM stands for Fulfilment by Merchant, which means that timely dispatch, timely delivery & customer service will be taken care of by the Seller.

FBM can be done in 2 ways — Easy Ship & Self Ship.

Under Easy Ship, Amazon Courier (ATS) picks up the packed and labelled packets from your place and delivers them to customers. In the case of returns, it picks up the packets from the customers and delivers the packets back to you at no extra cost for reverse logistics.

Whereas, under Self Ship, we as sellers have to get in touch with Amazon-recognized third-party courier partners and ensure timely delivery of the material. In the case of returns, we have to coordinate with third-party courier partners and arrange the return.

Now let’s dive a little deeper into each fulfilment method.

#FBA

Look at the listing of JBL speakers on Amazon in the image below. The FBA tags signify that this order will be fulfilled by Amazon. A lot of customers trust Amazon & prefer purchasing products that are fulfilled by them.

• Prime Tag — Yes
• Fulfilment by Amazon Tag — Yes

These tags improve visibility on amazon, thereby resulting in more sales.

Another major advantage of using FBA is time management. As a business person, you might wish to avoid getting into the hassle of maintaining the stock of every product at your warehouse and dispatching each order. This eats a lot of useful time which can easily be utilized in taking care of other important aspects of the business.

This is the best way to scale your business quickly through the power of Amazon.

But beware of the extra cost that comes with FBA –

• Cost of sending the product to Amazon Fulfilment Centres
• Pick & Pack cost charged by Amazon for packing and labelling our products
• Rental Cost charged by Amazon for storing products in their warehouse

If you have enough margins to sustain the extra cost, you may want to look at this option.

Tired of low-profit margins in your ecommerce business? Understand the difference between Mapping & Private Labelling and improve your profit margins, with Practical Examples.

#Easy Ship (FBM)

Another great option is to opt for Easy Ship. Under the Easy Ship program, you just have to book a pickup slot with Amazon and then keep the packets packed & labelled before the pickup slot. This gives you a lot of control over the quality of packing of your product and at the same time, the duty to deliver the product on time is of Amazon Courier (ATS).

Also, Amazon has to return the product to the seller in case of a customer return at no additional cost.

This is a great way to keep your costs to a minimum and at the same time take the advantage of Amazon’s vast quick delivery network.

• Prime Tag — Yes (Only if Opted For)
• Fulfilment by Amazon Tag — No
• Pick & Pack Charge — Directly Paid to Employees & Labour
• Rental Cost — Only if you are using a Rented Space

To understand everything about Easy Ship Courier, Click Here.

For a Step-By-Step guide to process an Easy Ship order, Click Here.

#Self-Ship (FBM)

At first glance, a Self-Ship order seems to be a less profitable option, but it is very advantageous for some sellers.

• Prime Tag — Yes (Only if Opted For)
• Fulfilment by Amazon Tag — No
• Pick & Pack Charge — Directly Paid to Employees & Labour
• Rental Cost — Only if you are using a Rented Space

Some large-scale sellers who have their dedicated fulfilment team prefer this option as it gives them more control over the process. These sellers tend to have large credit accounts with various couriers. This improves their cash flow as they have to pay the third-party couriers at a later stage, while Amazon deducts all the charges before paying the seller.

Another major advantage of Self Ship is that only pre-paid orders are received for products under Self Ship. This results in very few returns as most of the returned orders in the Indian e-commerce market are COD orders.

Even after these great advantages, a mid-level seller can’t have tie-ups with several couriers. Though some services like Shiprocket are solving this problem by providing services of all couriers from one dashboard at very low prices.

Even though this has not been specifically written anywhere, but Amazon’s policies clearly show that it discourages Self Ship. So, it’s like working with a lot of disadvantages on Amazon if you go with self-ship.

But it’s great if you can somehow pull it off!

#Wise Advice

I recommend you to go for Easy Ship first and understand the business. Once you know your profit margin well and you know which product is selling well, then evaluate the option of FBA.
If you already have an established business and you wish to purely run your business on auto-pilot mode, you may decide to go for FBA from the very beginning. In this case, I recommend you send a limited inventory of each product to the Fulfilment Centre first and then resend the inventory once it’s selling.

Hope this gives you clarity on all the fulfilment options that you have on Amazon.

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