The basics: What are FBA, FBM, and SFP?

Ecommerce is filled with acronyms and going to review three important Amazon ones here.

First, the basics. FBA stands for Fulfilment by Amazon, a service provided by Amazon to handle the customer service and shipping of the seller’s products. Since Amazon is taking over the hardest part of logistics, sellers can benefit by streamlining their operation and reducing overhead costs.

FBM stands for Fulfilment by Merchant, and it’s self-explanatory: the seller handles the selling and shipping of the products. The seller lists the item on Amazon, provides customer service, and ships the order from his warehouse.

SFP stands for Seller Fulfilled Prime, and it is a hybrid program that allows sellers to participate in the Amazon Prime program by quickly fulfilling and shipping orders for Prime customers.

It is also sometimes referred to as Merchant Fulfilled Prime or MFP. The benefit of SFP is that items receive the Prime badge and listings are more likely to win the Buy Box. The requirements for qualifying for SFP are very high, but the benefit is that sales will increase due to the faster shipping offered by Prime.

With those three acronyms out of the way, how do you know what service is best for you?

Ideally, you’ll want to automate and streamline your business as much as possible. For that reason, we recommend FBA because it reduces the need to handle customer service and fulfillment. You only need to ship your inventory to an Amazon fulfillment center, and Amazon handles the rest.

There are even services that will prepare your products for Amazon fulfillment centers, leaving you free to develop your business. FBA will free you from having to pack and ship the orders, and you won’t have to worry about having warehouse space to store all your inventory.

But there are instances where FBM and SFP may be necessary. Amazon fulfillment centers will not take any product with hazardous materials, and their hazmat review can be rigorous.

If this is the case, then you’ll have to go with FBM for hazardous materials. You can win the Buy Box by participating in SFP if your metrics are good enough. SFP will give you several benefits: a higher chance of winning the buy box and the Prime badge.

FBM can also be useful for high-end items. Due to the high number of scams for electronics like Apple iPhones, you should seriously consider FBM so that you can control the returns process. Otherwise, Amazon may refund a fake return like an iPhone 7 swapped out for an iPhone 4).

Although Amazon may reimburse you for these cases, it’s still a frustrating process to put in a removal order, check the item, and then file a claim with Amazon. Even then, there’s no guarantee that Amazon will refund the scam, and you’re out the cost of the item, along with time and fees.

Prime eligibility has some very high standards. Prime members expect fast shipping. Often, you’ll be required to pay for 2-day shipping or overnight shipping to guarantee quick delivery and maintain your metrics. Even for light items that are a few ounces, you’re going to be spending a lot of money on shipping.

You’ll want to be sure to get the shipping rates for your item before you decide on SFP. The high cost of shipping alone makes SFP worthwhile only for products that have a high margin. Additionally, any delay in the order processing, like an employee absence will easily hurt your metrics.

Whatever you decide, you’ll want to do your research and pick the method that best suits your business. The last thing you want to do is to jump into a program without doing your research. You could end up making a costly mistake like paying more than expected for shipping for SFP.

Learn more about other Amazon services from our articles below:

The basics: How does Amazon’s Fulfillment by Merchant work?

Fulfillment by Merchant, also known as FBM, is the most basic way to sell on Amazon. For anyone new to the Amazon platform, it’s the best way to learn how to navigate Amazon, and from there, the world of ecommerce.

There are many advantages to FBM, and it’s arguably the best way to start on Amazon so that you can learn the process. FBM is just what it means: you handle customer service and fulfillment (packing and shipping) for the items you’re selling.

This is not to be confused with Seller Fulfilled Prime, or SFP, which allows merchants to sell items with the Prime badge provided they meet criteria like shipping speed. SFP is an opt-in program for FBM sellers. Read more about the different selling processes.

First, what are some of the advantages of using FBM?

By default, new sellers will be fulfilling their own orders. When you list an item for sale on Amazon as a new seller, it’ll automatically be self-fulfilled unless you change the setting to allow Amazon to provide customer service and fulfill the order.

List your items and sell immediately

The major advantage of FBM is that your item is immediately listed for sale on Amazon, so this option is a great way to start earning sales. Fulfilling your own orders will give you a better understanding of how Amazon works. Customer service (answering questions and handling returns) and picking, packing, and shipping, are all valuable skills, and it’s better that you understand how this works rather than jumping straight into FBA. You can even mix your items so that you’re selling some as FBM and some as FBA. This may be the better option for some since your product can start generating sales while your inventory is being processed for FBA.

If you’re creating a new listing, you may want to read our article on UPCs before you purchase a third-party block of codes.

Lower fees with FBM

Another advantage of FBM is that it doesn’t have any of the fees associated with FBA. FBA fees include storage fees, fulfillment fees, and possibly other fees depending on what you’re selling. The cost of preparing and shipping to an Amazon fulfillment center, coupled with FBA fees, can exceed the costs associated with shipping the item out yourself, especially for low-value items. While you may not pay Amazon these fees, you’re still paying them one way or another: you’re storing your product somewhere, and even if it’s at your home, you’re dealing with the stress of having every available square foot filled with inventory.

Depending on what you’re selling, your inventory may not move as quickly. If you have just a handful of expensive niche items, then you may be waiting months before it sells. If it doesn’t move after 6 months, then you’ll incur additional long-term storage fees with FBA. With FBM, you won’t have to worry about storage fees. While you may be paying a little more for the shipping, it may even out once you factor in storage fees.

Better customer service or quality control

The appeal of using FBA is that it’s an automated process. But if you’re selling more complex items, then having to rely on Amazon customer service to answer questions and process returns may not necessarily be a good idea since they’re not knowledgeable about the products. A product listing for a bath towel isn’t difficult to understand, but computer parts are more complicated.

Additionally, if you’re fulfilling your own orders, then you have the ability to look over the items that are shipping to ensure the quality of the product. Shipping from the factory straight to an Amazon fulfillment center without inspection can lead to higher return rates because of product defects. You can avoid this whole issue since you’ll be able to see if there’s anything wrong with the item before you ship it. Warehouse workers and automated systems that handle FBA orders may not necessarily care or know that the items they’re packing are obviously damaged (crushed, dirty, or obviously used).

While there are obvious advantages to FBM, there are two main disadvantages as well.

Lower likelihood to win the Buy Box

The Buy Box, which is the price of the item plus shipping, is one of the most important features for sellers. The Buy Box is conveniently located, and customers now expect that price to be the lowest. Any seller featured in the Buy Box will capture more than 80% of customers looking to purchase the item, making owning the Buy Box critical to success. If you look below the Buy Box, other sellers are featured, but they are not as prominent. One of the criteria Amazon uses for Buy Box eligibility is shipping speed, and sellers using FBA have a higher priority than FBM sellers.

One way to get around this Buy Box limitation is to enroll in Amazon’s Seller Fulfilled Prime (SFP), but the requirements are very strict because of the 2-day shipping expectation. This can lead to higher shipping costs (2-day or overnight), so enroll only once you’ve done your research, or you could end up losing a lot of money due to unexpected shipping costs.

You’ll want to improve your product ranking to increase your chance of winning the Buy Box.

A lot more work packing and shipping

If you’re becoming serious about selling on Amazon, then you’ll eventually need to automate aspects of your business. Even if your catalog of inventory is just a handful of items at a hundred or so each, then you’re still looking at packing and shipping those items yourself. You could be spending hours a day printing labels, packing, and shipping. You’ll also have to manually type in the tracking information unless you’re using a third-party service. The amount of time you spend here doesn’t necessarily grow your business. Instead, you’re bogged down handling a part of your business that can easily be delegated. If you want your business to grow, you’ll have to find ways to automate the more labor-intensive tasks like packing and data entry for accounting.

Ultimately, what whether you use FBM or FBA depends on what your goals for the business are. If your goal is to expand with minimal overhead, then using FBA is the best option since it’ll significantly reduce labor costs. But FBM may be a good choice if you’re selling certain items, like antiques or other products that have special packaging or shipping instructions. And it’s an excellent place to start for anyone new to the Amazon marketplace.