FBA vs FBM: Is the Prime Badge Limiting Your Business?

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In Search of Fulfillment by Amazon (FBA) Alternatives

If you’re looking for Fulfillment by Amazon (FBA) alternatives, you’re not alone. Amazon is one of the first places most new brands get started, and while there’s no denying the power of the exposure alone that Amazon offers, many sellers feel severely limited by Amazon’s fulfillment network.

Amazon’s fulfillment network works like a well-oiled machine, and if your products fall right into their ideal product profile — small, lightweight, “regularly” shaped, and without any unique handling requirements — it’s hard to cost-justify using any other fulfillment method to stay within Prime requirements. However, if your product doesn’t fall precisely within that product profile, or if you want more control over your inventory and branding, FBA could be hindering your growth.

Some sellers may find early success through FBA, but as their business grows, inventory limits and lack of customer data prevents them from scaling. Moreover, sellers with a multichannel selling strategy often find that FBA complicates their fulfillment operations.

FBA vs. FBM: 5 Key Differences

You may already be seeing the limitations of FBA on your business but might be wary of dropping the Prime badge. Of course Amazon SFP will offer you the best of both worlds (Prime status and greater control), but if you’re either on the waitlist or, FBM is a viable option to kickstart ecommerce growth. If you’re deciding which option is best for your business, consider the five key between FBA vs. FBM.

1. The Prime Badge

Conventional wisdom says that the Prime badge creates brand equity and can increase Amazon sales by up to 30%. However, 72% of Amazon Prime members report that the most important aspect of their Prime membership is fast and/or free shipping, and nothing is stopping FBM sellers from offering free 2-day shipping.

In fact, new manual default handling times allow FBM sellers to set their default handling time to zero days, which allows them to make Prime-like delivery promises, even without the Prime badge.

2. Inventory Control/Visibility

FBA has a strict process for prepping and inbounding inventory. There is no room for custom kitting or packout procedures, and sellers do not get to decide where their inventory is staged.

Fulfilling through FBM (either through in-house operations or an outsourced fulfillment provider) gives you control over your inventory distribution so you can easily expand into new markets and plan your marketing spend accordingly

Finally, FBA inventory limits change often, and the standards seem to change sporadically. High-volume sellers may not be able to inbound quickly enough to keep their most popular SKUs in-stock. With FBM, on the other hand, you have complete control over your inventory levels and SKU management.

3. Economies of Scale

One growth lever you can pull in order to offset pick, pack, and ship costs is to increase your average order value (AOV), but sellers like HyVIDA hydrogen water, FBA find they pay exactly the same fulfillment cost per shipment whether an order contained one case or five.

Partnering with a fulfillment partner like an on demand warehousing partner for FMB can help you realize economies of scale on multi-unit orders.

3. Control of Brand

If you’ve seen success on Amazon, you’ve likely put a lot of effort into branding your Amazon sales channel. You’ve likely registered your brand to have a custom storefront, and filled it with eye-catching and conversion-driving content.

You’ve probably worked hard to narrow down your search terms, honing in and doubling down on the highest-converting keywords for your brand. After putting all of this work into building your brand within Amazon’s limitations, having your product delivered in Amazon Prime packaging is a less than ideal delivery experience.

When shoppers receive your shipments in Amazon-branded packaging, it associates your product with Amazon rather than your brand

4. Customer Interactions

This is where you really have the opportunity to turn Amazon shoppers into loyal customers and to have an even greater impact on your margins by directing shoppers to your more profitable sales channels. Later, we’ll talk more about how to use your Amazon channel to drive traffic to your ecommerce site, but the primary benefit of FBM over FBA is access to customer data and control over customer interactions.

5. Streamlined Fulfillment

Today’s consumers shop everywhere, which means you need to be selling everywhere. If Amazon is a single channel within your greater ecosystem, relying on FBA can require you to segment your fulfillment process — fulfilling Amazon orders through Amazon’s fulfillment network and your other channels’ orders through a 3PL.

That could mean you’re juggling different inbounding protocols for each fulfillment channel and different levels of visibility and control. It can also be difficult to reallocate inventory to different channels when you see changes in performance. To scale your multichannel strategy, you may need to integrate fulfillment for all channels through a single network and platform, and FBM could be a better option..

How to use Amazon FBM to Grow Direct Sales

One of the reasons many brands choose Amazon FBM over FBA is the ability to drive brand preference and send repeat customers to their ecommerce site. Direct sales usually drive much higher margins and the ability to capture valuable re-targeting information.

Below are a few levers you can pull with FBM to direct Amazon shoppers to your ecommerce site, increaseAOV, and build lasting relationships with your customers.

Limited SKU availability:

With FMB, your customers know that the product is coming from your brand, not Amazon. You can choose not to list your entire SKU catalogue on Amazon, so when shoppers look you up after trying your product for the first time, they see that they have more options for flavors, colorways, or accessories by ordering directly from your ecommerce site.

Deeper Discounts on Bulk Orders:

When you leverage FBM to create economies of scale in your fulfillment and shipping costs, you can give deeper discounts on bulk orders to entice shoppers to add more items to their cart, driving up your AOV.

Promo New Products:

FBA won’t give you the flexibility to include promotional items or free samples. FBM gives you control of your fulfillment process so you can include these kinds of extras to entice customers to come back for a repeat purchase.

Offer Financing:

Once you direct customers to ecommerce site, you can offer financing after a minimum spend threshold through an app like Four in the Shopify store. It’s risk-free for merchants. Four takes a small percentage of the sale, pays you immediately, and collects the payments from the customer. This is another way to drive up oyur AOV and realize greater savings on fulfillment costs.

Seasonal Offers:

With a flexible fulfillment partner you can put together a seasonal gift pack, building them as needed, rather than pre-packaging them, sending them to Amazon, and hoping that you can sell through them by the end of the season.

Build Customer Relationships:

After a shopper makes a purchase on your ecommerce site, you can build a meaningful relationship with them in a way that Amazon doesn’t allow. You can share content, ask for reviews, and send new product announcements. These are the kinds of relationships that will turn into advocates for our brand who will post about you on social media and tell their friends how much they love your product.

FBA vs FBM: Convenience vs Control

At the end of the day, you don’t have to let Amazon Prime tell you how you have to run your business. If you want to turn Amazon into a tool in your toolbox, FBM could be the first step. To really make FBM work for you, it’s pivotal to find a fulfillment partner that is strategically-minded and committed to your success when you’re looking for FBA alternatives.

You need the flexibility to iterate, to test into new markets and strategies, and to flex your SKU profile when you need. What Amazon fulfillment offers in the way of speed and efficiency, it ultimately sacrifices on flexibility and scalability, and that could very well be standing in the way of your next big step forward.

Looking for an FBA alternative? Reach out to an Amazon fulfillment expert at Ware2Go.

FAQ’s

Is FBA better than FBM?

There is no one-sized-fits-all answer to which fulfillment option is best for your business. FBA is a simple, low-touch solution for many Amazon sellers that enables Prime status. However, FBA’s inventory limits, slow inbounding process, and lack of visibility makes it a poor fit for some sellers. Many Amazon sellers choose to list two SKU’s und a single ASIN — one fulfilled by FBA and the other fulfilled by FBM. This gives them the option to switch between fulfillment methods in the case of a stockout on their FBA listing.

Looking for an FBA backup? Talk to one of our Amazon fulfillment experts.

Is FBA more expensive than FBM?

FBA’s pricing structure highly favors small, lightweight products. Often, for products that Amazon classifies as “oversized” (weighing over 20 pounds or having any single side longer than 18 inches) FBA pricing can be very prohibitive. It’s best to compare prices between FBA and a 3PL or 4PL provider that can provide the same level of service.

Strategic sellers should also consider the value of having full visibility into their supply chain, access to customer data, and the ability to streamline multichannel fulfillment when weighing the cost of FBA vs FBM.

Who pays for FBA shipping?

Sellers pay for storage, pick, pack, and ship services on FBA products in the form of an FBA Fulfillment Fee. The fee is calculated according to the item’s dimensions and the amount of time it has spent in storage.

You may already be seeing the limitations of FBA on your business but might be wary of dropping the Prime badge. Of course Amazon SFP will offer you the best of both worlds (Prime status and greater control), but if you’re either on the waitlist or don’t quite have the resources to build an SFP network to meet the new requirements, FBM is a viable option to kickstart ecommerce growth. Let’s talk about the main differences between FBA vs FBM and the changes we’ve seen in our business since making the switch.

• Prime Badge: Conventional wisdom says that the Prime badge creates brand equity and can increase Amazon sales by up to 30%. But the truth of the matter is that the biggest expectation of Prime customers is free 2-day shipping, and you can offer that with or without the Prime badge. On your product listings, just display your free 2-day shipping promise where your Prime badge would be, and shoppers will be equally drawn to your listing.
• Inventory Control/Visibility: This was a major reason we went looking for FBA alternatives for a couple of reasons. The first was that we have particular packaging needs that FBA was unable to meet. Our customers were receiving packages with an average of 1 to 4 dented cans, and as a high-end brand, this was unacceptable to us. The second was that we wanted to break up our 12-pack single flavor SKUs into smaller variety packs for new customers who wanted to try multiple flavors without making a big cost commitment on their first order. Amazon’s fulfillment would not support this, and it was limiting our ability to reach new customers and turn them into brand advocates.
• Economies of Scale: As a high-end brand focused on bringing quality ingredients that our customers feel good about putting in their bodies, we aren’t cutting corners when it comes to manufacturing our product. That means that in order to grow our business we need to have laser focus on creating margin and taking advantage of efficiencies of scale wherever possible. One growth lever we wanted to pull was increasing our average order value (AOV) to offset our shipping and fulfillment costs, but with FBA we were paying exactly the same per case whether an order contained one case or five.

• Control of Brand: This is a big one. We’ve put a lot of effort into branding our Amazon sales channel. We’ve registered our brand, which allows us to have a custom storefront, and fill it with eye-catching and conversion-driving content. We’ve also gotten really targeted with our search terms, honing in and doubling down on the highest-converting keywords for our brand. After putting all of this work into building our brand within Amazon’s limitations, it would be a real lost opportunity to have our product delivered in Amazon Prime packaging. When shoppers receive your shipments in Amazon-branded packaging, it associates your product with Amazon rather than your brand
• Customer Interactions: This is where you really have the opportunity to turn Amazon shoppers into loyal customers and to have an even greater impact on your margins by directing shoppers to your more profitable sales channels. I’ll dive a little deeper into  exactly the levers we pulled to turn Amazon into a channel that serves our ecommerce site, but FBM was the clear winner in FBA vs FBM when it came to this aspect.
• Streamlined Fulfillment: Amazon is just one channel within our sales channel ecosystem. We’re selling on Walmart Marketplace, Faire.com, HyVIDA.com, and we will soon be in major grocery and convenience stores. When we were using FBA, we were segmenting our fulfillment process and fulfilling our non-Amazon channels through a 3PL. We had vastly different inbounding protocols for each fulfillment channel and zero flexibility when it came to inventory allocation. We realized that in order to really scale our multichannel strategy we needed to integrate fulfillment for all channels through a single network and platform, and we needed an FBA alternative to do that.

How to use Amazon FBM to Drive eCommerce Sales

One of the most important reasons we chose Amazon FBM vs FBA for our business was the ability to drive brand preference and send repeat customers to our ecommerce site, where we realize much higher margins and capture valuable re-targeting information. These were a few of the levers we pulled with our new fulfillment partner to direct Amazon shoppers to our ecommerce site, increase our AOV, and build lasting relationships with our customers.

• Limited SKU availability: With our new fulfillment partner we’re confident that customers know the product is coming from HyVIDA, not Amazon. We don’t expose our full SKU catalogue on Amazon, so when shoppers look us up after trying our product for the first time, they see that they have more flavor options by ordering directly from our ecommerce site.
• Deeper Discounts on Bulk Orders: Now that we have those economies of scale in our fulfillment and shipping costs, we can give deeper discounts on bulk orders to entice shoppers to add more items to their cart, driving up our AOV.
• Promo New Products: FBA didn’t give us the flexibility to break up flavors to make variety packs, so customers who wanted to try a new flavor had to take a risk by ordering a full pack. Our new fulfillment partner will build variety packs for us so customers can try multiple flavors or have new ones mixed in with old favorites.
• Offer Financing: This is specific to our ecommerce site. Once we’re able to direct customers to HyVIDA.com, we offer financing after a minimum spend threshold through the Four app in the Shopify store. It’s risk-free for us. Four takes a small percentage of the sale, pays us immediately, and collects the payments from the customer. This is another way we’ve been able to drive up our AOV and realize greater savings on fulfillment costs.
• Seasonal Offers: With a flexible fulfillment partner we can put together a seasonal gift pack, building them as we need them rather than pre-packaging them, sending them to Amazon, and just hoping that we sell through them by the end of the season.
• Build Customer Relationships: After a shopper makes a purchase on our ecommerce site, we can build a meaningful relationship with them in a way that Amazon won’t allow for. We can share our content, ask for reviews, and send new product announcements. These are the kinds of relationships that will turn into advocates for our brand who will post about us on social media and tell their friends how much they love our product.

Amazon FBA vs FBM: Let’s Talk Numbers

So, did we see the 30% drop in Amazon sales that everyone told us we would if we would if we dropped the Prime badge? The short answer is no. The long answer is, not only did we continue to grow our Amazon sales, we more than doubled sales on our ecommerce site year over year. Those growth metrics were directly impacted by our decision to start looking for FBA alternatives to engage with our customers on a more meaningful level, and the growth is not slowing down. In February our ecommerce sales were 60% higher than January, and we’re on track to grow our Amazon sales by another 25%.

At the end of the day, you don’t have to let Amazon Prime tell you how you have to run your business. If you want to turn Amazon into a tool in your toolbox, FBM could be the first step. To really make FBM work for you, it’s pivotal to find a fulfillment partner that is strategically-minded and committed to your success when you’re looking for FBA alternatives. You need the flexibility to iterate, to test into new markets and strategies, and to flex your SKU profile when you need. What Amazon fulfillment offers in the way of speed and efficiency, it ultimately sacrifices on flexibility and scalability, and that could very well be standing in the way of your next big step forward.

Looking for an FBA alternative? Reach out to an Amazon fulfillment expert at Ware2Go.

FAQ’s

Is FBA better than FBM?

There is no one-sized-fits-all answer to which fulfillment option is best for your business. FBA is a simple, low-touch solution for many Amazon sellers that enables Prime status. However, FBA’s inventory limits, slow inbounding process, and lack of visibility makes it a poor fit for some sellers. Many Amazon sellers choose to list two SKU’s und a single ASIN — one fulfilled by FBA and the other fulfilled by FBM. This gives them the option to switch between fulfillment methods in the case of a stockout on their FBA listing.

Looking for an FBA backup? Talk to one of our Amazon fulfillment experts.

Is FBA more expensive than FBM?

FBA’s pricing structure highly favors small, lightweight products. Often, for products that Amazon classifies as “oversized” (weighing over 20 pounds or having any single side longer than 18 inches) FBA pricing can be very prohibitive. It’s best to compare prices between FBA and a 3PL or 4PL provider that can provide the same level of service.

Strategic sellers should also consider the value of having full visibility into their supply chain, access to customer data, and the ability to streamline multichannel fulfillment when weighing the cost of FBA vs FBM.

Who pays for FBA shipping?

Sellers pay for storage, pick, pack, and ship services on FBA products in the form of an FBA Fulfillment Fee. The fee is calculated according to the item’s dimensions and the amount of time it has spent in storage.