If you sell on Amazon, you likely are aware that Fulfillment by Amazon (FBA) sellers have certain advantages over Fulfilled by Merchant (FBM) sellers – including exposure to more potential buyers and faster delivery.
However, FBA comes with a few caveats as well. While FBA does offer many benefits, that doesn’t mean it’s always the best option for online sellers. Here’s a quick look at a few downsides.
- Profit problems. The higher fees associated with FBA – which cover storage fees and that extra push to Amazon’s customers – mean you’ll likely see less of the money paid by buyers than if you choose FBM.
- Inventory issues. When Amazon houses your stock, you can’t physically see your inventory; if inventory piles up, you could be faced with more aggressive pricing for stale inventory.
- Shipping strains. Amazon has strict prohibitions on shipping certain items, including anything flammable. If you sell beauty products or craft supplies, you could be affected by these limitations and may be better off handling fulfillment on your own.
- Capital quandaries. FBA requires a certain amount of stock, which can be cost-prohibitive for some small e-commerce sellers who may prefer to build inventory as orders come in. And even if you do have the capital, you could end up with excess inventory if your product doesn’t find buyers.
The Bottom Line
The Amazon name can open many doors – and result in enviable sales – for e-commerce sellers, and FBA includes useful tools to streamline the selling and billing processes, but they do come at a price. In addition, some sellers may appreciate or feel more comfortable with a more hands-off approach, with Amazon handling returns, exchanges and other administrative tasks that can cost your business time and money. However, prospective Amazon sellers should carefully weigh the pros and cons of FBA and FBM, carefully considering your product line, any time or staffing limitations, and your financial goals.