Shifting Gears: Moving from Amazon's FBM to FBA fulfillment model
Discover the potential benefits and challenges of switching to Amazon's FBA program.
The automotive aftermarket industry has experienced significant growth in recent years, with eCommerce playing a pivotal role in this expansion. Many sellers in this industry have been using Amazon's Fulfilled by Merchant (FBM) model to sell their products. As competition increases and customer demands evolve, it's essential to consider alternative strategies that can help optimize profits.
In this blog, we'll discuss the pros and cons of transitioning from an FBM model to Amazon's Fulfillment by Amazon (FBA) program and introduce the new "Buy with Prime" option.
Amazon's Fulfillment by Amazon (FBA) program is a comprehensive service that helps eCommerce sellers optimize logistics and enhance customer experience. With FBA, sellers store their inventory in Amazon's fulfillment centers, where Amazon takes care of picking, packing, shipping, and customer service for the orders. This enables sellers to benefit from Amazon's vast fulfillment network and expertise, offering fast shipping, access to Prime benefits, and a streamlined return process. FBA is an attractive option for businesses of various sizes, including those in the automotive aftermarket industry, aiming to optimize operations and boost customer satisfaction.
On the other hand, the Fulfilled by Merchant (FBM) model allows sellers to maintain control over their inventory and shipping processes. Sellers (or their suppliers if dropshipping) using FBM are responsible for storing, packing, and shipping their products directly to customers. Although FBM offers more control, it may not provide the same level of efficiency and customer benefits as FBA.
- Improve "Buy Box" win rates: Using Amazon's Fulfillment by Amazon (FBA) program can significantly increase your chances of winning the Buy Box. The Buy Box is the section on an Amazon product detail page where customers can directly click "Add to Cart" or "Buy Now." Amazon's Buy Box algorithm takes various factors into account, including price, shipping speed, seller performance metrics, and fulfillment method. FBA helps you improve in several of these areas
- Access to Amazon Prime benefits: By using FBA, your products become eligible for Amazon Prime, which means faster shipping and better customer service for your buyers. This can lead to increased customer satisfaction, loyalty, and repeat business, especially among automotive customers who often require parts quickly for repairs.
- Reduced shipping costs: Leveraging Amazon's vast fulfillment network can lead to reduced shipping costs and faster delivery times for your automotive parts and accessories. This can be particularly beneficial for large, heavy, or bulky items commonly found in the aftermarket industry.
- Streamlined operations: Amazon FBA handles all aspects of fulfillment, including storage, picking, packing, and shipping, allowing you to focus on other areas of your business, such as marketing and product development.
- International expansion: FBA can simplify the process of selling your automotive products internationally, specifically if you own your own brand, providing access to a broader customer base and the potential for increased sales.
- Additional fees: Amazon FBA comes with various fees, including storage fees and fulfillment fees. These can add up and impact your overall profitability if not managed correctly.
- Inventory management challenges: Transitioning from FBM to FBA requires a shift in inventory management strategy. You'll need to monitor stock levels, manage reordering, and account for potential issues like slow-moving or obsolete inventory.
- Loss of control over shipping process: Using FBA means relinquishing control over the shipping process, which could be a concern for automotive sellers who need to ensure the correct parts are shipped to customers.
- Returns and warranty issues: Automotive parts and accessories may have higher (and more costly) return rates or require warranty support, which can be more challenging to manage when using FBA. You'll need to establish a robust returns and warranty process to maintain customer satisfaction.
If you are already selling/planning to sell through Amazon’s FBA program, you may also want to look into their new “Buy with Prime” program, (which has take place of Amazon's Multi-Channel Fulfillment program) an innovative solution that replaces Amazon's "Fulfilled by Merchant" (FBM) program, allowing sellers to leverage Amazon's benefits while selling products on their own websites.
By participating in the "Buy with Prime" program, sellers can offer exclusive benefits such as faster shipping, easy returns, and access to special promotions to their customers, even when selling outside of Amazon's marketplace. This program can significantly impact the visibility, sales, and customer loyalty for your automotive aftermarket products. But of course, balancing costs and benefits is key. Participating in the "Buy with Prime" program can lead to increased sales, but it also comes with additional costs such as higher shipping fees and increased returns. It also requires adhering to Amazon's strict performance metrics, such as maintaining low order defect rates, fast shipping, and responsive customer service.
Switching from a Fulfilled by Merchant model to Amazon FBA can be a significant change for your automotive aftermarket eCommerce business. While there are pros and cons to both approaches, the key to making the right decision lies in a careful, close analysis of your eCommerce data. By understanding your business's unique needs and objectives, you can determine which model is the best fit for optimizing profits and driving long-term success in the automotive aftermarket industry.