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 that with hazardous materials, and their hazmat review can be rigorous. If this is the case, then you’ll have to go with FBM for these types of items. 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.
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, and Amazon will then suspend your account.