Any e-commerce business has likely considered if they should sell on Amazon, and if so, what strategy may be the best for their bottom line. How you get products to your customers is a big decision to make when you sell on Amazon, and businesses generally have two choices: Amazon FBM and Amazon FBA.
EcommOps helps our clients choose which strategy is right for their business (or if a mix of strategies is appropriate). We are a full-service 3PL specializing in DTC China fulfillment, and we help customers establish resilient, flexible supply chains for reliable and consistent fulfillment. This includes creating and implementing FBM or FBA fulfillment strategies.
Let’s take a look at what these fulfillment strategies are, and what businesses should consider when choosing which option to choose (as well as how it looks when both are used).
What is Amazon FBM?
Amazon FBM (or Fulfilled by Merchant) just means that your business can sell on Amazon without using Amazon’s warehouses. You can use your own warehouse and fulfillment partner and still sell your products on a standard Amazon sales page.
What is Amazon FBA?
Amazon FBA (or Fulfilled by Amazon) is when a business uses Amazon’s warehouses to store their inventory and fulfill orders to customers. Businesses that use FBA only have to worry about making sure inventory gets from suppliers to the warehouses. From there, Amazon handles all other aspects of fulfillment.
What Are the Pros of Amazon FBM?
Amazon FBM often feels daunting to businesses who aren’t used to handling their own fulfillment services, but there are a lot of benefits that Amazon FBM can offer. Just to make sure we’re clear, these benefits are when you combine Amazon FBM with DTC China fulfillment:
Approved China Fulfillment Shipping Lines
In the past, Amazon sellers who were using DTC China shipping got blocked from selling on Amazon (since they only used USPS last-mile tracking, which requires several days before there’s an update after shipping. As of 2023, Amazon fully supports certain DTC China shipping lines (for example, YunExpress).
This means that tracking updates are visible after the order has been paid, and the customer experiences a typical shopping experience with a seller shipping from China.
Lower Product Cost and Overhead Costs
Amazon FBA can get pretty pricey, and businesses can usually save money on the cost of fulfillment and the cost of warehouse storage. Again, that savings comes from handling a lot of the logistics yourself, but if you have the resources to handle it (or if you partner with an experienced 3PL, like EcommOps), it’s easy to obtain savings.
DTC China fulfillment also makes savings possible. Since businesses don’t have to buy products in bulk and ship them via freight to a local warehouse, little-to-no warehousing fees can add up to significant savings.
Faster International Product Delivery Times
If you’re trying to break into international markets, Amazon FBM paired with DTC China fulfillment is a great option. Shipping directly from a China warehouse cuts down on the cost and time of international shipping (EcommOps clients can ship to most major international markets from China usually within 5-8 days).
Improved Order Fulfillment Resiliency
Finally, order fulfillment supply chains that leverage DTC China fulfillment through Amazon FBM are extremely resilient to disruptions. DTC parcels have their own shipping routes, so major supply chain problems (like clogged ports, or issues like the Evergreen disaster) don’t have nearly the impact on DTC fulfillment.
With fewer variables that can impact your ability to get your products to customers, your brand will enjoy higher customer satisfaction, and those customers will appreciate that you can set and fulfill expectations for when products arrive.
Fewer Amazon Regulations
Finally, sellers that use Amazon FBM have far less restrictions and regulations to follow when compared to using Amazon FBA. There are a number of rules and restrictions businesses have to follow to use Amazon FBA services, which can be a burden to businesses who are new to selling on Amazon.
What Are the Cons of Amazon FBM?
While Amazon FBM has excellent benefits, it’s not without its drawbacks. While many of these drawbacks can be navigated with either experience or partnering with a 3PL who has experience (like EcommOps), the following pain points should be kept in mind:
More Complicated Fulfillment
While DTC China fulfillment with Amazon FBM is extremely flexible, it is more complicated than using Amazon FBA. Businesses need to keep in mind that they need to partner with a 3PL or fulfillment partner they can trust. They also need to be prepared to make sure their back-end systems are incorporated appropriately into their fulfillment network.
Slower Domestic Delivery Compared to FBA
While DTC China fulfillment with Amazon FBM is fast enough for most customers, it still won’t ever be as fast as shipping from a domestic Amazon warehouse. This is one reason EcommOps often encourages businesses to consider using both FBA and FBM together (though we’ll get into that a little later in the article).
Lack of a Prime Badge
Finally, it’s very uncommon for businesses that use Amazon FBM to be eligible for the Prime badge. While a program does exist to use Amazon FBM and get a Prime badge (called Seller-Fulfilled Prime), it’s very difficult to get. We don’t recommend businesses rely on getting the Prime badge through this program as part of a core business strategy.
Not having a Prime badge can potentially hurt your conversions, which is a major reason why businesses should not write-off the possibility of using FBA.
What Are the Pros of Amazon FBA?
Amazon FBA is a popular choice for good reason. It provides a lot of convenient benefits to businesses selling on Amazon (especially businesses that don’t have the expertise or resources to manage their inventory process or fulfillment logistics).
Faster Delivery Times Compared to FBM (if inventory is in-stock)
Amazon is famous for its 2-day Prime shipping, and it’s a huge selling point among customers. Even if you don’t qualify for that fast of shipping with Amazon, businesses can still expect just a couple of days of shipping if products are being sent from domestic warehouses. Customers love fast shipping, and Amazon FBA makes it easy.
Fulfilling orders is extremely easy with Amazon FBA, since Amazon handles the entire process. They will receive and catalog inventory, pick products for fulfillment, and package and ship products on your behalf. They’ll also handle returns, and other related logistics.
Sellers should keep in mind that, while it’s convenient, Amazon isn’t necessarily straightforward about how long it takes to process inventory, where it’s distributed, and other warehouse details.
Prime Badge Availability
The easiest way to get the Prime badge is to use Amazon FBA, since that allows Amazon to have complete control of your shipping speeds. As we’ve mentioned, the Prime badge can be an important factor that drives customer conversions, so it’s an excellent benefit to have.
What Are the Cons of Amazon FBA?
Amazon FBA is not without its downsides, and while the benefits are tantalizing, businesses must take the drawbacks seriously when determining if they want to use Amazon FBA:
There are a lot of costs to consider when you use Amazon FBA, including:
- Fulfillment costs
- Selling plan costs (most businesses will opt for the $39.99 professional plan)
- Referral fees (which Amazon states range from 5% – 18% per item)
- Inventory or warehousing fees
- Refund administrative fees
If businesses aren’t prepared, these fees can take you by surprise and can eat away at already narrow profit margins.
Long Restock Times if You Sell Out
If you sell out of inventory unexpectedly when using Amazon FBA, you are looking at long restocking times. Consider the general process of what it looks like to restock a domestic warehouse:
- You contact your supplier (usually in China) to make a bulk order.
- The supplier begins mass production of your product.
- Once the order is complete, the products are packaged and prepared for freight shipping (usually sea freight).
- The inventory is shipped, where it arrives at a domestic port.
- Once at port, the order has to pass customs. If you don’t use consolidated shipping or otherwise have a full-container load (FCL), it will take longer to clear customs.
- After you clear customs, your products are loaded on domestic freight partners (usually on trucks or trains), where the inventory is delivered to the appropriate domestic Amazon warehouse.
- Amazon receives your inventory and prepares it for fulfillment.
This process can take months, and if it’s during a busy time (like Q4 or during unique supply chain disruptions) it can take even longer.
Why It’s a Problem to Sell Out on Amazon
It’s not just a matter of inconvenience if you sell out on Amazon. It can cause real problems, both in terms of your customers and your listing. Selling out with a long restock time can mean you miss limited-time demand (this could be because your product unexpectedly caught fire, or it could be because of times with traditionally high demand, like Q4).
However, there’s more at stake than just missing sales. Amazon de-prioritizes listings that are sold out, which can affect customers’ ability to find your brand at all, and can even negatively impact your SEO visibility.
More Amazon Regulations
As we mentioned before, there are just a lot of rules and regulations that businesses have to follow in order to use Amazon FBA services. It can take time to learn and implement policies that follow Amazon’s strict guidelines, and not properly understanding those policies can delay and hamper your ability to sell.
Lack of Transparency in Warehouse Management
We mentioned this, but it’s worth saying again: Amazon is not transparent about receiving your inventory. You won’t get a clear time frame for how long it takes them to receive and store your products, where your products are stored, or other detailed information. If you’re trying to get a restocking timeframe, it can be very difficult to know how long it will be before you’re ready to sell again.
Should I Use Amazon FBA or FBM?
After learning about Amazon FBA and FBM, businesses often feel as though they are faced with a choice between using Amazon FBA or FBM. EcommOps recommends that businesses use both Amazon FBA and Amazon FBM, with DTC China fulfillment powering the FBM services.
The Benefits of a Hybrid Approach Using China Fulfillment
When you use both Amazon FBA and FBM alongside DTC China fulfillment, you get the advantages of both systems while being able to navigate around most of the challenges. Let’s take a look at the best advantages of leveraging both:
When FBA Sells Out, FBM Can Pick Up the Slack
We already mentioned that selling out on Amazon is extremely detrimental, but using both Amazon FBA and FBM can avoid this issue entirely. This is how the process works:
- The Amazon warehouse fulfills orders to customers until inventory sells out.
- When inventory sells out, you place an order for more inventory, and while the products are shipped, you switch fulfillment from the Amazon warehouse to the fulfillment center based in China.
- This prevents your listing from being labeled as “sold out,” and still allows you to take advantage of high demand without having to wait to restock.
This hybrid approach allows businesses to take advantage of fast shipping times via Amazon FBA while taking advantage of the flexibility Amazon FBM provides.
Easier to Break into International Markets
If your product has had domestic success, trying to use Amazon FBM to break into international markets can be challenging. There’s likely an Amazon warehouse in the major international market you’re considering, but the cost and time delay to get inventory to those warehouses can be extremely high.
Using both Amazon FBA and FBM can cut costs and delivery times to break into international markets. Again, this is how it looks:
- You use Amazon FBA (or potentially both FBA and FBM) to cater to your domestic customers.
- You use Amazon FBM exclusively for international customers, fulfilling orders directly from China without sending them to a domestic Amazon warehouse.
This way, your domestic market can still take advantage of Amazon FBA (like fast shipping and the Prime badge), and your international customers get fast-enough shipping times (usually 5-8 days) with shipping costs up 50%+ less expensive than they otherwise would be.
Consistent Shipping Times
When you combine Amazon FBA and FBM, you get consistent shipping times to both domestic and international customers. Even though those shipping times are necessarily always 2-day shipping, your shipping times are fast enough that customers are bothered (especially if that expectation is set when they check out).
The Best of Both Worlds: FBA and FBM with China Fulfillment
Let’s quickly summarize the benefits of a hybrid approach to selling on Amazon:
- Using both allows for 2-day domestic shipping (and the Prime badge)
- Using both easily navigates around unexpectedly high demand and prevents selling out
- Using both helps business break into international markets and maintain their domestic presence
Challenges of Using Amazon FBA, FBM, and China Fulfillment
EcommOps encourages most businesses to approach selling on Amazon with a hybrid strategy, but there are several factors to keep in mind. After all, this strategy only provides the benefits we mentioned if it’s done well. Here’s a couple key points to consider:
You Must Have Organized Back-End Systems
When using a hybrid approach, you’ll have a single point of sale that will be routing to multiple warehouses. If you don’t have clear fulfillment processes laid out, you could end up double-fulfilling orders, or you could miss customer orders entirely. To avoid this, we recommend having:
- A clear inventory number of when your China warehouse begins to fulfill orders in place of your domestic warehouse.
- A clear inventory number for when you need to place an order to restock your domestic warehouse.
- Clear logistics of what warehouse should fulfill what orders based on customer location.
If this feels beyond the scope of your expertise, an experienced 3PL will generally provide these kinds of services (including EcommOps).
Manage and Maintain Relationships with Factories
It’s easy to forget that relationships with factories need to be maintained, not just initially established. A successful, long-term strategy for a hybrid approach of using Amazon FBA and FBM requires factory partners that are high-quality, reliable, and easy to communicate with. Some courteous steps you can take to maintain a relationship with your supplier include:
- Providing expectations of how frequent inventory orders might be (which is especially important for China fulfillment)
- Giving clear feedback on product issues and wanted improvements
- Discussing and establishing long-term business plans (so the supplier knows you’re serious about a long-term relationship)
If you aren’t sure you have the expertise to effectively manage your factory partners, full-service 3PLs often provide this service, including EcommOps.
How Can I Ship from China to Amazon Customers?
If you want to ship from China to Amazon customers like an expert, then you should partner with the expert in China fulfillment: EcommOps. We have years of experience helping businesses create resilient, reliable fulfillment logistics that help them scale in sustainable, profitable ways. Our unique advantages help us accomplish this consistently, and those advantages include:
- A fulfillment warehouse in Shenzhen, China
- Bilingual Mandarin/English support
- Physical offices in both China and the U.S.
- A full-suite of 3PL services
If you’re serious about selling on Amazon, and you have around 50 orders a day for your products, we’d love to talk to see how we can partner with you. You can reach out to us on our online form, and we’ll be in touch.
FBA vs FBM FAQs
1. Will my store get blocked if I use DTC China fulfillment for Amazon FBM?
In the past, businesses using China fulfillment in conjunction with Amazon FBM would get blocked because of a lack of transparency in shipping. In the past, the process looked like this:
- A customer would order a product on Amazon.
- The product would ship from the China warehouse
- Tracking information would not be available until the product reached the United States.
- Once the package arrived, USPS would pick up the parcel and generate a tracking number for it, which the customer could then see.
That gap in transparency is something that Amazon didn’t like, which is why stores got banned. As of 2023, there are approved shipping lines for China fulfillment (for example, YunExpress) that will generate tracking information as soon as a customer orders a product. This creates a great customer experience while allowing for DTC China fulfillment.
As long as businesses use approved shipping lines, their stores will not be banned for using DTC China fulfillment in conjunction with Amazon FBM.
2. How does Amazon FBM work?
Amazon FBM works by allowing businesses to choose their own warehouses and fulfillment partners instead of using Amazon’s warehouses. Their Amazon stores will connect to their own back-end systems, which will relay orders from Amazon to 3rd-party warehouses for fulfillment.
Businesses are free to choose their fulfillment partners (or even use their own warehouses and fulfillment resources) when using Amazon FBM.
3. How much does Amazon FBA cost?
Amazon FBA has a lot of costs outside of just fulfillment costs, though most of those costs will vary depending on what kinds of products you sell and how much you sell. Business can expect:
- Referral fees based on what kind of product you sell
- Inventory management fees
- Administrative fees related to returned products
There may also be fees for not selling enough of a product (which is a problem for many sellers who offer high-end products that move at a low-volume).
4. Can I use FBM and FBA together?
Yes! EcommOps helps businesses create strategies to use FBM and FBA together regularly. A hybrid approach allows for the advantages of both methods to be achieved while mitigating many of the pitfalls of using only one method. If you’re curious how to use both together, along with China fulfillment, EcommOps would love to take a look at your business and see how we can partner together.