Explore the basics of Amazon FBA vs FBM with Dustin and Kris of Two Amazon Sellers and a Microphone. This podcast will help you understand the differences and plan for how you want to manage your Amazon business.
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We are live. We are live in here. We’re gonna wait up for a little bit. See a few guys coming in. Dustin, how’s things going?
– It is going great. Beautiful day here in Kansas City.
– Yeah, it’s not so bad out. Fall Weather is definitely coming, which is nice to see. How’s your week been?
– Very good. Great week of talking to Amazon sellers.
– Cool. Well, we’ll go ahead and get started. My name is kris. I’m with Sellozo. With me today again is Dustin. Dustin Kane is also a Sellozo. I’ll let you introduce yourself, Dustin.
– Well, you’re doing a good job. I’m an account executive at Sellozo. Just like you. Sellozo, for those of you that don’t know, is a platform that helps you automate and optimize your advertising. And so we… there’s also a lot of reporting features as well that are in our platform. But Kris and I have the privilege of talking to sellers on a daily basis just about all aspects of their Amazon business. And we’d love to talk with you guys out there as well but we’re enjoying this. This is our third live series now. We’ll be doing this a lot. And today we’re gonna cover the FBA vs. FBM topic. This is for… especially for new sellers or even down the road sellers just understanding what that is and what the… how using them differently can help your business. So feel free everybody out there to go ahead and put… If you’ve got a question, please put that in the comments and we will, we’ll get to that on this live video. For sure, for sure. Lemme get some stuff going here. Kind of blowing up some things. So hopefully some people show up. Good deal. Cool, so let’s go ahead and get into this, Dustin. You and I get to talk with sellers every day. We hear this question like, what’s FBA what’s FBM? Kind of what the pros and cons are. Both you and I are doing FBA, but we have done FBM at the same time. And we’ll kind of dive into what the differences are between these. And if you got any questions about what the differences are between FBA and FBM, just leave us a question. You just put a comment in there and Dustin and I will talk about what the differences are. And we can help you with any type of aspect that you’re confused about that. So FBA vs. FBM I will move to the next screen and you could take it from here.
– Absolutely. Hi, so FBA and FBM are the types of fulfillment options you have when you’re selling on Amazon. FBA means fulfilled by Amazon, and that’s where you’re actually shipping all of your inventory into Amazon and Amazon then will individually ship the units out once they’re sold. So there’s a lot of obvious benefits to FBA. And we’ll dig into that a little bit more as we scroll down. Then you have FBM, which is fulfilled by merchant. So it’s fairly self-explanatory. When an order comes in on Amazon, Amazon is gonna send you a note and then you have to fulfill the order either from your house or your warehouse or wherever you’re storing your inventory. So two different models. One thing that’s I think really important to note is whenever you’re shopping on Amazon and you see that prime badge. That means that the person is selling at FBA for the most part. there’s a couple outliers, but that’s not gonna be the case for most of us sellers. But yeah, when you see that prime badge and there’re customers getting free shipping that product’s being sold as an FBA product.
– Keep on rolling.
– All right. So now let’s talk about why FBA is… What are the pros and cons. And I think, Kris there, you mentioned, we are both sellers, we’ve been selling for a long time on Amazon. And FBA is sort of one of the things that really changed the game and E-commerce that allowed a small company or a small startup or somebody like you and I, we literally started our companies from scratch with the full power of basically an international distribution set up. So it really does make a big difference and has changed the game. And there’s many reasons, we’ll talk about why you’d want to take advantage of it. So the pros of using FBA we touched on is your products are prime eligible. So if you’ve got two similar products on Amazon next to each other, and one is prime and the other one is, does not have the prime badge. And it’s got like, it says, shipping is $399, there’s no question which product is gonna get the majority of the conversions. It’s gonna be the prime one. The majority of people in the United States have a prime membership. They’re used to the free shipping. They just can’t even look at the $399. It throws them off immediately. Plus there’s the trust factor of how, what the cost, the typical customer how much they trust Amazon’s shipping and return process. All of that is represented by that prime badge. So that is a huge pro. If you’re a wholesaler, you’ll win the buy box more often Amazon definitely will put FBA products ahead of FBM products. The one that made it great for you and I is we are no longer having to have a warehouse or ship our own products daily. If you get a 150 orders a day that’s what you’re gonna be doing. 150 things. And so we’ll talk more on that as we go. But then obviously there’s the… your low shipping rates. Amazon has partnered with basically every shipper out there and everything is discounted rates in terms of, everything going out. So those are the pros. You wanna touch on it?
– Some of the cons here is complicated fees. There’s a lot of different FBA fees that go on when Amazon charges you for an order. So complicated the fee is not really understanding where your fees are. That can be difficult to know because Amazon really doesn’t give you that much information about where you’re getting taxed. There’s different tax fee there’s restocking fees, there’s all types of fees. So if you don’t have a tool that lays it out or shows you where all your fees are that can be difficult to know. Luckily we have that option as well, it’s on the app. Long-term storage fees. So a lot of people like back in the day especially when you and I started we had just saved a thousand units or saved 700 units. And just let them sit there that Amazon would charge you long-term storage fees but it was like a longer period. I think it was like every 18 months or maybe every nine months… I can’t remember exactly the terminology where it was but it wasn’t every month. And then they taxed you every month. So now making sure that you only send the amount of inventory that you may sell like a month or two month period, that’s super important. Cause you don’t wanna get those long-term storage fees cause that’ll just eat into your profits. And then limited access. So there’s not a lot of… Recently Amazon started to limit how much inventory you can send in. So it’s kind of hard to launch a new product or maybe even replenish inventory on your bestseller because there’s limited amount of space available for each individual skew. So that’s kind of a con. I wanna touch base on a little bit of pro there, again, you and I have talked to sellers daily and some sellers are like “Oh, I’ll just do an FBM.” And we’ll touch base here just a sec on that. But I promise you that it’ll increase your sales if you do FBA. It’s a no brainer. You don’t have to do all your skews if you don’t want to. You can always pick and choose a little bit of your skews that you wanna play with. So if you’re just kind of want to touch a little bit on your FBA, you wanna maybe just dab your toe into the water a little bit. Pick a couple skews. Maybe I wouldn’t even pick, maybe pick your worst seller and change it to FBA and see it uptick. Cause just by changing it to FBA, that should increase your sales alone. Let’s get into FBM.
– Sure thing.
– So FBM pros, you have the inventory, you have access to the inventory, the inventory is in your garage, within your warehouse. You can get access to it when it’s on the Amazon’s warehouse, they are controlling it. There’s been times where I’ve ordered something and I’ve gotten something back completely different that I didn’t even order. Like I didn’t even order this. So I don’t know why I got it but this is why FBM is kind of a pro. You have access to the inventory. It’s lower cost. So you’re not paying all the fees that Amazon charges for an FBA shipment. Faster turn rates. You can ship it immediately. You could turn your inventory faster. And then there is an optional self-fulfilled prime. Now, this is becoming more of an issue where sellers are gonna have to meet Amazon’s type of policies before they do self-fulfilled prime. So I see this kind of maybe going away and having more sellers do FBA or Amazon forcing more sellers to do FBA but I’ve done FBM at the very beginning, and I feel like it’s more beneficial to do FBA. Now that being said, you could test out FBM but I would quickly transition to FBA if it was me around this. What kind of cons have you got there, Dustin?
– Well, this is basically the inverse of the conversation we’ve just had about FBA. I mean that if you do FBM, you’d become the warehouse, you gotta package everything up. You’ve got to print your shipping labels. You’ve gotta ship them somehow on time. Whether that means driving them to UPS or having them pick it up. So that can be a big con. The other thing is to compete. You have to typically lower your selling price significantly below the FBA offer, or there’s no real reason for the buyer to choose you over them. So there’s a lot of… there can be a lot of negatives there. Interestingly, there are products though where FBM can make sense for sure. Number one, if you are a large company and you already have your distribution laid out and you’ve got your warehouses where you can your staff can easily do those orders and you can get that seller fulfilled prime badge and you can meet all the requirements. You can get all the shipments in under two days like Amazon requires for you to meet that. Then you could be potentially saving money on that, on those orders, about that way. I think there are options where FBM can make sense for sure, but 99% of the products FBA is absolutely where you just wanna be.
– Especially for a new seller starting out. It probably wouldn’t hurt to do FBM first, just to kind of see the process that you’re gonna be doing manually. And as soon as you kind of get that down, kind of see how this is. I promise you you’ll stop. And you’ll be like: I don’t wanna do this anymore. I don’t wanna ship a hundred orders a day. I don’t wanna go to the post office every day. And then you just change it to FBA. And now you’re just doing it one time and sending it to Amazon. And now you let Amazon take care of it. You’re gonna pay a little bit in the fees obviously but your sales are gonna increase also. Cause people want that to get it faster. You’re gonna win the buy box more, you’re gonna show up better in organic ranking because when someone goes to Amazon types in that search term, they’re looking for a keyword, they’re looking for, there’s an option just for prime options. They’re gonna turn that on. If you’re not FBA, you’re not even gonna show up. So you could do both too. Like you can have a fill by merchant listing and an FBA listing, so you can do both, but FBA, and again, I keep harping on it, it’s probably the best option for me.
– Oh yeah, no, no doubt about it. And I think let’s just spend a second and let’s talk about the fees. If you’re a new seller and you’re going in to sell FBA, we’ll talk about a little bit of the fees. And then let’s talk about the process, what that looks like shipping it. Cause it’d be fun to talk about how we’ve spent many hours labeling products. And we can talk about how that looks but the fees for FBA, the two main ones are your pick and pack fee and your referral fee. So the referral fee, I guess what comes off of both FBA and FBM, and that’s just what Amazon charges you for being on their website and promote it, basically give access to all their customers. And then your pick and pack fees based on a ton of factors, weight, how big it is, etc. And so those are the two, but typically, and this is why you wanna maybe break down the numbers is typically for your average seller their product has about 33% is the cost of goods. about 33% is the expenses going to Amazon. and about 33% would be your profit. And that’s a sweet spot to try to stay in. If you were to get that 33% profit while selling FBA and you were selling a hundred units a day but it was a 33% profit. And let’s say you did FBM and by fulfilling it yourself, you’re able to get 50% profit but you only sell 10 a day or one a day. It’s a no brainer It’s an absolute no brainer that you’re gonna want… Those costs associated are worth it when you get that increase in sales velocity. It’s all you… we do talk to people. I mean, that gets people We talk quite a bit with people that get hung up on the expense it costs when you do FBA. But really, I mean, I can tell you right now–
– It’s a long-term play.
– It’s a longterm play, it’s–
– But if you’re stuck on like FBM I’ve seen people that could do fulfilled by merchant and they’ll charge like $699 for shipping. It’s like, well, that is gonna immediately kill you because no one’s gonna buy it. No one’s gonna wanna pay, especially an Amazon shopper. They’re not gonna wanna pay an extra $699 for shipping. If you just don’t want to do FBA, then just add the shipping to your retail price and make it free shipping. And that will still help get you more sales.
– Don’t be the $1299 and add $699 a ship just make it the full retail price. And that’ll be helpful as well.
– It’s funny you bring that up because at Sellozo we’re helping people automate their advertising, and when we talked to somebody, we would tell them if you’ve got an FBM product and you’ve got your shipping fees on there, don’t even turn on your ads. You’re gonna waste your money. The conversion rate is gonna be really low and you’re just gonna waste your money on ads. So that shows you how important that is.
– For sure. And even like having a little bit of reviews would be helpful too but that’s a different topic for a different day.
– Cool. Well, if you guys are watching you got any questions, it could be Amazon-related, Dustin and I, again we’ve been selling since 2014. We help sellers every day. We talk to Amazon sellers every day, selling on Amazon is lonely. Like there’s no one to talk to. So if you have questions, if you have questions about Amazon it can be either. Leave it in the comment and Dustin and I we’re gonna be happy to help.
– You don’t look that lonely over there. You got a partner–
– It’s about that time, and guess who shows up? UPS it’s difficult.
– That’s funny. So real quick, let’s talk about what it looks like, if you are gonna send FBA or sell FBA and what options you have of making that process easy as well. And essentially if you send in FBA, you’re just sending your products in bulk to Amazon, they’re warehousing it. They’re actually gonna distribute it all over their warehousing places all over the country. But for you as the seller, all you have to do is print labels that you put on your individual products. That’s the barcode that Amazon will scan so it can scan it in and out of inventory knows it’s your product. So you label those, put them all in a box. Amazon gives you a discounted shipping to send it in. They’ll tell you which warehouses to ship it to, you print it, put on a box, and then you’re done. So that’s the basic process of sending it in. Now, Kris and I, you definitely wanna go that way. so you get used to it. But now Kris and I are at the point where we have our manufacturers print our labels directly on the packaging. And also a lot of times you can have the inventory shipped directly from your factory straight to Amazon where you don’t even touch it. So then that’s sort of how you scale. Here is you’re gonna scale to get it to where you’re able to have all those tasks done by your supplier. And all you have to do is just tell ’em how many units you wanna order and where to ship it to. And they’ll get it in there. You have anything to add to that?
– Yeah, I’m gonna top on that. Like shipping directly from your supplier to Amazon, it can be confusing. So this is where you wanna make sure you either have like a good freight forwarder or even like an inspection service. Like a lot of people will skip the inspection. And then when your inventory shows up at Amazon, it’s in Amazon, and now when something goes wrong what if you get like a defect? You have to recall all that info… all that product back to your house. And then you gotta relabel that again don’t skip out on like getting an inspection definitely wanna an inspection. And there are services out there that will do an inspection and they’ll record it live for you. So you can do like a Skype call with them and you can see where your product looks like, you can make sure they’ve got the right bar codes on it. And you wanna make sure your supplier knows how to ship directly to Amazon. Some people get weird about this. I don’t want my supplier to know how to do it. Well, they probably do. And if they don’t, it’s pretty easy for them to figure it out. So don’t get hung up on that either. Make sure your supplier knows how to ship directly to Amazon. Cause that’ll just save you some money as far as shipment goes. That way it’s not coming to your house. And then you gotta ship it again to FBA, just ship it directly from the manufacturer to Amazon or a freight forwarder and make sure that you either get a good inspection or have a great freight forwarder to do it for you.
– And we’re gonna bring on actually in another live series here. Soon we’re gonna bring on a logistics expert to talk about all the shipping as well. Cause that can be a stumbling block for a lot of sellers. So I’m excited about that. In an upcoming live show we’ll be doing that as well. Kris, you wanna go to that last slide about the questions you wanna talk. You just wanna touch real quick here for anybody who’s interested on how they can get on a call with either you or me?
– Yeah, for sure. So again, we’re with Sellozo. Sellozo is an Amazon software that helps with automating your product ads on a daily basis in a nutshell but more than that is you have people like Dustin and I, that can help answer any questions you have about selling on Amazon. So if you have anything out there that you’re struggling with, or you just need to bounce an idea off somebody, Dustin and I have probably had the same issue that you’ve had and we can help get you a better answer or get you a resolution to that problem you’re having. So I just know we’ve been through this. We know selling on Amazon is difficult. It’s kind of… again, a lonely deal. You don’t really have anybody to talk to. You can go to these Facebook groups and talk to people. You get kind of mixed answers. You can join a course and those kind of get pricey. We’re not pitching any of that. It’s just a conversation talking about Amazon. If you have a comment, if you have a question leave a comment if you wanna talk to somebody go to our website and press the get started button book a call with Dustin and I, and we’ll do as best as we can to help. It doesn’t cost anything.
– I definitely encourage you to watch. And if you’ve got a question or any of you have question that you don’t have an answer to book a call, it’ll be helpful.
– And just to touch a little bit more about Sellozo the way that FBA changed the game for E-Commerce sellers because it essentially automated the entire process of fulfilling your orders. Sellozo is a tool that fully automates the day to day work in terms of your advertising. So there’s a lot of interesting things about this business, but as Kris and I can attest to the more you can automate things the faster you can grow and the more you can focus on the important things like finding new products and–
– Initiations, listing–
– Dealing with suppliers the whole bit. So yeah, we would, on top of answering any questions that you have or consulting in any way possible, we’ll also just give you a brief little run through of Sellozo, see if it’s a fit for your business as well.
– Cool. Well, what do you got planned this weekend?
– Baseball boys. I got a lot of… I’ll be watching a lot of baseball this weekend but fortunately it’s absolutely gorgeous. And then to cap the weekend off, of course, we’re gonna watch the chiefs.
– Did you happen to watch the game last night?
– No, I actually didn’t watch the game last night, but I looked at the score, looking at it was pretty good, pretty close game.
– It was good. It was not bad. It was not bad. We’ll call hold this right here and we’ll be back probably next week with another topic. So I appreciate you guys who have watched. Again, check us out.
– Thanks, Kris.
– See you, man.