That doesn’t mean Amazon FBA is right for every brand, or in all circumstances. As you expand your eCommerce capabilities, the Amazon FBA vs. FBM debate can become difficult to resolve.

This post will help by walking you through the details of both options, along with some tips on inventory management and additional automation opportunities you should consider.

What is Amazon FBA Inventory Management?

Amazon FBA (Fulfillment by Amazon) Inventory Management is a system that allows your business to organize, track, and optimize your store product inventory in their fulfillment centers.

The platform handles critical inventory and order management tasks like:

• monitoring stock levels
• forecasting product demand
• replenishing inventory
• fulfilling orders
• handling returns

How Amazon FBA Inventory Management Works

When a customer places an order, Amazon handles the picking, packing, shipping, and customer service, providing sellers with a streamlined and efficient way to fulfill orders and reach a broader customer base.

Amazon FBA Setup Steps:

Setting up an Amazon FBA account is the first step to leveraging the platform’s fulfillment capabilities. Follow these simple steps and benefit from streamlined order fulfillment, access to Prime customers, and the means for providing excellent customer service.

Step 1: FBA Setup 

Create your Amazon selling account and log in to Seller Central to set up FBA.

Step 2: List Your Products 

Add your products to the Amazon catalog and indicate them as FBA inventory.

Step 3: Product Preparation 

Follow Amazon’s packing guidelines and shipping requirements to ensure your products are prepared safely and securely for transportation to a fulfillment center.

Step 4: Send to Amazon 

Create a shipping plan, print Amazon shipment ID labels, and send your shipments to designated Amazon fulfillment centers.

What is Amazon FBM?

Amazon FBA isn’t the only way to manage the process of getting online orders shipped to consumers. The company also offers Amazon Fulfillment by Merchant (FBM), where sellers either manages or works with a third party to handle areas such as inventory placement, storage, shipping, processing returns and customer service issues.

Key Differences Between Amazon FBA and FBM

Evaluating Amazon FBA vs. FBM requires thinking across a range of business factors, some of which will be more important than others depending on the size of your company, typical order volumes and your strategic goals.

Startup Costs and Fees

Be prepared for a wide range of fees when you get started with Amazon FBA. These not only include per-unit fees but monthly charges for storing inventory, return fees for some product categories, package prep fees and more. In contrast, Amazon FBM only involves paying an annual subscription fee.

On the flip side, fulfilling your own orders means you’ll have to have your own warehouse (or work with a partner with more cost-effective services than Amazon’s) and other in-house resources for picking, packing and shipping your products.

Control Over Shipping and Customer Interaction

Amazon FBA is akin to many traditional outsourcing services, which free up the companies that use them to concentrate on areas like developing better products, marketing and nurturing customer relationships.

In some cases, though, staying close to customer needs and expectations can become harder when you fulfill orders through intermediaries, which is where Amazon FBM might be the better approach. Amazon FBM also means you’re not affected by sudden changes in fulfillment policies and support options that Amazon makes occasionally.

Inventory Management and Logistics

Unless you already have a background or experience in order fulfillment, option for Amazon FBM will require extensive learning and development across your company. This isn’t as big of an issue for companies when they first launch, but the complexity can increase as your volume of orders goes up. Of course, handing off everything through Amazon FBA means you’ll never master these areas, either.

Scalability and Growth Potential

Most brands want to continually add more customers, increase revenue and expand into international markets. Taking the Amazon FBA approach allows you to scale and grow without worrying about the impact on order fulfillment. If you decide to go the Amazon FBM route instead, you’ll just have to develop a business plan that takes into account the potential need for more warehouses, staff and other resources.

Pros and Cons of Amazon FBA

There’s a lot to be said for using Amazon FBA, but also a few tradeoffs:

Pro: Stress-free shipping

The process of picking, packing and transporting products from a warehouse to a customer’s doorstep can be highly complex, time-consuming and expense. Amazon FBA provides an option to completely outsource this area so brands can focus their attention entirely on marketing, selling and developing their products.

Con: Higher expenses

Selling your own products can require significant capital expense. Using Amazon FBA means you’ll be responsible for a range of storage and fulfillment fees, as well as the costs of sitting on inventory if sales don’t reach expected levels.

Pro: Prime shipping

There’s a reason Amazon has managed to develop one of the most popular loyalty programs of all time. Free shipping for Prime members can make all the difference with customers who aren’t sure whether to go through with a purchase. Using Amazon FBA means your products can offer Prime shipping too, offering an immediate competitive advantage over brands that aren’t.

Con: Policy compliance

Selling with Amazon FBA means agreeing you’ll adhere to all its guidelines. These include the way products are added to its database, packaging and other specifications. It can take time to learn Amazon FBA policies and ensure you’re maintaining compliance on an ongoing basis.

Pro: Post-purchase journey management

Customers will remember (and reward) brands that help them with customer service issues and process returns without a hassle. Brands that use Amazon FBA effectively outsource their customer service operation, and the company has a proven track record in bringing efficiency to product returns.

Con: Inventory fluctuations

The flip side of Amazon’s best-in-class returns process is that customers may send more of your products back than expected, in some cases buying multiple versions or styles to try them first. Having Amazon serve as a fulfillment partner can also make it difficult to maintain full visibility into what you have in stock.

Pros and Cons of Amazon FBM

Similarly, companies thinking about Amazon FBM should weigh the following risks and rewards:

Pro: Increased profit

If you’re a brand selling high-value products (like luxury fashion and accessories) with relatively low order volumes, using Amazon FBM could potentially mean a wider profit margin than outsourcing your fulfillment processes.

Con: Greater resource investment

Even a profitable company will have to ensure they offset the absence of Amazon resources to help manage order fulfillment, returns and related tasks. The amount of warehouse space you’ll need to store products can also vary widely during periods like the holiday season, which makes planning how much time, effort and equipment you’ll be investing in these areas even more difficult.

Pro: Flexibility for personalized experiences

When you choose Amazon FBM you retain full control over how your products are packaged, which could allow you to personalize orders for your most valuable customers. You’ll also be able to make judgment calls on whether to waive fees or other policies when a loyal customer needs to process a return.

Con: The lack of Prime status

In most cases products fulfilled via Amazon FBM are not eligible for Prime. This cuts your brand out from a large number of established Amazon customers who regularly make purchases in order to justify their monthly membership fees.

Pro: More opportunities to gather and analyze data

Managing fulfillment on your own could help deepen insights in customer shopping patterns, distribution channel preferences and more. This opens the door to creating customer segments and a more tailored approach to marketing and selling your products.

Con: Greater risk of negative outcomes

If orders arrive slowly, late or the wrong product is delivered, you’ll only have your own fulfillment operation to blame. However those mistakes can add up, having an adverse affect on areas such as customer retention and customer lifetime value.

How the Amazon FBA vs. FBM Decision Can Affect Your Multichannel eCommerce

Many brands are not only selling their products on their own websites and online marketplaces like Amazon but via additional eCommerce channels. These channels can be highly proprietary and a lack of integration can cause problems in taking and fulfilling orders. If your company has reached this level of complexity, Amazon FBA might be the desired option due to factors such as:

Managing Inventory Across Multiple Channels

Amazon FBA includes Multi Channel Fulfillment (MCF) services, whereby sellers can use API plug-ins to connect popular eCommerce channels such as WooCommerce and Magento. Amazon also offers multi-channel listing software so you can making listings from a single location.

If you go with Amazon FBM, you’ll have to address this on your own or with a trusted third party with experience in multichannel eCommerce integration and product listing.

Ensuring Fast Shipping and Quality Control

Regardless of the Amazon FBA vs. FBM question, all customers will want the same thing: to have the right product arrive in a timely manner without any damage or other quality control issues.

Beyond speed of order fulfillment, some of the most common quality control problems stem from a lack of poor inventory management. Here’s how to address them:

• Stockouts: Inadequate inventory management can sometimes lead to frequent stockouts, where your products become unavailable for purchase. This results in missed sales opportunities, dissatisfied customers, and potential damage to your seller’s reputation.> Amazon’s re-stock guide helps to keep your stock up-to-date.

• Overstocking: Poor inventory management may lead to overstocking, where you hold excessive inventory that ties up capital and storage space. Overstocking can increase storage fees, inventory obsolescence, and reduce profitability.>The Manage Excess Inventory page in your Seller Central FBA account helps you maintain the right inventory levels.

• Inaccurate Order Fulfillment: Fulfilling customer orders is only possible with accurate inventory management. You could mistakenly accept orders for products that are no longer in stock, leading to cancellations, negative reviews, and customer dissatisfaction.>Amazon’s Inventory Management Dashboard is an excellent way to track your orders and inventory.

• Inefficient Replenishment: The inability to accurately forecast customer demand and manage inventory numbers can result in inadequate replenishment. Sellers may experience delays in restocking.>Use a tool like Amazon’s re-stock guide to avoid these holdups.

How Suvae.org Can Help You to Simplify Product Inventory Management

The good news is that the right technology solutions can streamline and automate many core eCommerce processes, no matter how your Amazon FBA vs. Amazon FBM comparison turns out. When brands work with Suvae.org, for instance, they gain access to capabilities such as:

Multichannel optimization solutions to ensure seamless order fulfillment

Suvae.org turns product data optimization and product feed development into a managed service. This means you can connect with popular eCommerce channels with ease and have full confidence in how orders are collected and processed for fulfillment.

Inventory management solutions for Amazon FBA sellers

The most successful eCommerce companies have a clear line of sight into what’s in stock and what’s not. Suvae.org’s platform acts like a hub between your products and key selling channels, allowing you to synchronize data between your product catalog and Amazon’s warehouses.

Integration with popular marketplaces like Amazon

Getting set up to sell on Amazon can take a lot of manual work, which increases the risk of errors. Suvae.org’s marketplace integration services handle everything from product listings to category mappings. In fact, Amazon is just one of more than 50 marketplaces where Suvae.org can help brands extend their reach.

Contact us today to schedule a demo and discover how Highstree.io can help you automate and centralize your marketplace workflow.

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Why inventory data is critical to online marketplace success

Ensuring a great customer experience across multiple channels relies on sending the correct stock data to each marketplace, enabling consumers to see what’s available for purchase. Accurate pricing and inventory information are just as crucial as presenting product features and an appealing image.

This is why many brands seek out marketplace integration services in the first place, though their needs could evolve significantly as they continue to expand.

Initially, a brand might update product feeds from a central warehouse hourly during the day and every few hours at night, depending on its location. Concurrently, historical sales data could determine the percentage of stock to distribute to each marketplace.

In practice, sales can unexpectedly fluctuate based on shifts in demand from one online marketplace to another. The existing cadence of product feed updates may not keep pace with purchases, increasing order cancellations. This not only impacts customer experience but also jeopardizes relationships with online marketplaces that base seller agreements on minimizing cancellation rates.

Innovation that addresses active inventory management

Suvae.org recently developed a real-time system to address these challenges. It allows brands to dynamically manage active inventory across multiple marketplaces at once. This involved changing the architecture of our existing solutions to adjust the way data is handled once a product had been ordered, but not yet fulfilled.

The functionality Suvae.org built introduces a series of dedicated “buckets” that manage inventory data in both physical and virtual warehouses, as well as a component that can calculate how inventory should be distributed based upon pre-defined business rules. Incremental orders could be “reserved” as they are created, for example, but the system also tracks when they were canceled or when the system needs to be reset.

Brands also need to store inventory values once orders have been distributed, of course, and Suvae.org’s active inventory solution added that too. It also includes a module to configure the flow of inventory data across channels and a way to visualize a brand’s inventory by marketplace and SKU, as well as the history of all updates from a brand’s product feeds.

The benefits of enhancing your ability to manage active inventory

1. Reduce your cancellation rate

Suvae.org’s active inventory solution will provide brands greater confidence that their customers will be able to find the products they want, regardless of the online marketplaces where they choose to shop. This also helps build a track record for increased accuracy, which allows brands to meet the key performance indicators of their marketplace partners.

2. Complete automation of a complex process

By calculating the precise stock value that gets sent to each marketplace, Suvae.org’s active inventory solution will also save brands from having to conduct a manual, historical analysis of which orders were canceled or the rate of cancellation.

3. Gain insight into sales performance across multiple online marketplaces

While the technology handles the heavy lifting, brands need to maintain clear visibility into the health of their business at all times. That’s why Suvae.org’s active inventory solution also provides reporting on the state of its inventory, orders, and SKUs. These reports are emailed to simplify distribution to all relevant stakeholders, empowering them to make informed decisions about the evolution of their sales and marketing strategy.

4. Ease of expansion to into additional online marketplaces

With more third parties opening up platforms for sellers, it will not be unusual for brands to make their products available across a wide range of partners. They will now be in a better position to do so, knowing thanks to the ability to dynamically synchronize pricing and inventory data across all shopping channels.

Ready to get your active inventory under control? Building your brand using online marketplaces shouldn’t be limited by concerns around what’s in stock and what’s not.
Connect with Suvae.org to learn more about the solution we’ve developed to bring greater peace of mind, and the ability to continue on your path to growth.

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When you’re running a luxury brand, you need to keep your customer focused on the digital experience they see, and of course the styles and quality of the products you’re selling.

Consumers should never have to think about the way you approach effective inventory management – even though it represents a critical element in keeping them satisfied and loyal.

What is Inventory Management?

You’re only as valuable to customers as your ability to supply them with what they want. That’s the real definition of inventory management: a way to eliminate the risk of disappointing shoppers.

Think through the typical eCommerce customer journey: they visit a website or marketplace and spend minutes or even hours contemplating a purchase.

When the moment of truth comes, they click “Buy” or “Add to cart.”

If the words “Item not in stock” comes up, the only option is to have them join a waitlist and to recommend alternate products. In many cases, of course, the customer will likely choose to shop elsewhere, perhaps never to return.

Inventory management is also critical during the fulfillment process. In fact, a recent survey found nearly half of consumers feel that delivering correct and accurate orders is essential to earning their trust.

Why use Omnichannel Inventory Management?

Many brands find effective inventory management relatively simple if they are primarily focused on physical retail with only one or two locations.

Things get much more complex as you pursue a growth strategy, particularly as you add eCommerce channels beyond your own web site.
Third-party marketplaces such as Amazon or Zalando can offer exposure to a larger number of shoppers, for instance. Selling through social media services such as Facebook and Instagram, meanwhile, can ensure your brand is top of mind when consumers are ready to buy.

This is where brands typically look for a retail inventory management system.
Operating as an omnichannel seller depends upon being able keep on top of stock and respond to sudden changes in customer demand. You need real-time visibility into inventory and sales updates across every channel, along with integrations with third-party eCommerce platforms and advanced reporting capabilities.

According to a study of eCommerce merchants conducted earlier this year, almost a quarter (22%) now operate three different distribution centers. These warehouses may be spread across multiple countries or even continents. Choosing the right eCommerce inventory management software ensures you can decentralize the process of tracking and fulfilling orders and never giving customers an unpleasant surprise.

How to overcome the complexity of Omnichannel Inventory Management for Marketplaces

As you consider which inventory management tool is right for your brand, keep in mind the following considerations:

Determine the scope and complexity of inventory splits

Your business goals might include making your products available to any customer who wants them, regardless of location, but that means being able to manage your catalog at a per-warehouse level.

Traditional retail inventory management systems usually don’t offer inventory splitting to address specific marketplace or market scenarios. Unless you have the in-house capabilities to completely customize your tech stack, inventory splitting is an essential component of an eCommerce inventory management system.

Evaluate the current and future cadence of inventory updates

Perhaps you’re a retailer where inventory updates are happening once an hour, at which point the values of your products are changed across multiple third-party marketplaces.

As your sales activity continues to grow, however, that cadence might not be frequent enough to prevent stockouts and cancelled items. Marketplaces naturally frown upon merchants where this happens regularly because it reflects on their customer experience as well as the merchant.

Instead, look for an inventory management tool that can update marketplace inventory even more often than your eCommerce channel. With an order reservation algorithm, for instance, you’ll be able to support less frequent inventory updates for products that may have limited availability.

Think through marketplace-specific needs for inventory thresholds

A physical store operating in a bustling city will need to have more inventory on hand than one set up in a remote rural community. In a similar way, some marketplaces will prove more effective for you as a sales channel than others.

Make sure you opt for an eCommerce inventory management system that allows you to take a more granular approach to controlling the minimum stock you’ll need to satisfy customers based on where they’re most likely to shop.

What Suvae.org brings to eCommerce Inventory Management

Growing your eCommerce sales often leads to working with a wide ecosystem of channels and marketplaces, and getting the details right demands a best-in-class inventory management tool.

Suvae.org embeds eCommerce inventory management capabilities that can act as a hub between your products and all the channels where you want to sell them. This includes synchronizing inventory for marketplaces with warehouses and stores.

Book a free consultation with us to learn what effective inventory management could look like for your business.

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