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Warehousing & Fulfillment

Amazon FBA vs FBM: Is the Prime Badge Limiting Your Business?

Warehousing & Fulfillment
April 2, 2021
9 min read
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Rick Smith, founder and CEO of HyVIDA, shares how he doubled ecommerce sales year over year by finding an Amazon FBA alternative and streamlining multichannel fulfillment.

In Search of Amazon FBA Alternatives

If you’re looking for Amazon FBA alternatives, you’re not alone. Amazon is one of the first places most new brands get started, and while there’s no denying the power of the exposure alone that Amazon offers, many sellers feel severely limited by Amazon’s fulfillment network.

In my experience, Amazon FBA works like a well-oiled machine, and if your products fall right into their ideal product profile — small, lightweight, “regularly” shaped, and without any unique handling requirements — it’s hard to cost-justify using any other fulfillment method to stay within Prime requirements. However, if your product doesn’t fall precisely within that product profile, or if you want more control over your inventory and branding, Amazon FBA could be seriously hindering your growth.

A little over a year into launching our hydrogen water brand, HyVIDA, that’s exactly where we found ourselves. We knew we had a product that people loved, with customer reorder rates at double the industry average. However, the restraints put on us by FBA were keeping us from expanding our sku profile to meet new customers and complicating our multichannel fulfillment process across our more profitable channels. That’s when we made a bold decision — one that may surprise a lot of Amazon sellers. We dropped our Amazon Prime badge and switched to Amazon Fulfillment by Merchant (FBM).

There were several reasons we made the switch, but one of the most impactful was gaining visibility and control of our Amazon sales. This new level of control over our fulfillment actually helped us to harness the exposure we gained from Amazon to shine a light on our ecommerce site. We found that the minimal cost savings we realized by fulfilling through FBA were costing us the ability to pull our most effective growth levers. We saw that the very thing that we had been told was the key to success on Amazon (Prime status) might be limiting our business in the long-term. That’s when we went on the hunt for Amazon FBA alternatives and found that FBM opened us up to more possibilities than we had first realized.

Amazon FBA vs. FBM: Let’s Talk Details

You may already be seeing the limitations of FBA on your business but might be wary of dropping the Prime badge. Of course Amazon SFP will offer you the best of both worlds (Prime status and greater control), but if you’re either on the waitlist or don’t quite have the resources to build an SFP network to meet the new requirements, FBM is a viable option to kickstart ecommerce growth. Let’s talk about the main differences between Amazon FBA vs FBM and the changes we’ve seen in our business since making the switch.

  • Prime Badge: Conventional wisdom says that the Prime badge creates brand equity and can increase Amazon sales by up to 30%. But the truth of the matter is that the biggest expectation of Prime customers is free 2-day shipping, and you can offer that with or without the Prime badge. On your product listings, just display your free 2-day shipping promise where your Prime badge would be, and shoppers will be equally drawn to your listing.
  • Inventory Control/Visibility: This was a major reason we went looking for Amazon FBA alternatives for a couple of reasons. The first was that we have particular packaging needs that FBA was unable to meet. Our customers were receiving packages with an average of 1 to 4 dented cans, and as a high-end brand, this was unacceptable to us. The second was that we wanted to break up our 12-pack single flavor skus into smaller variety packs for new customers who wanted to try multiple flavors without making a big cost commitment on their first order. Amazon’s fulfillment would not support this, and it was limiting our ability to reach new customers and turn them into brand advocates.
  • Economies of Scale: As a high-end brand focused on bringing quality ingredients that our customers feel good about putting in their bodies, we aren’t cutting corners when it comes to manufacturing our product. That means that in order to grow our business we need to have laser focus on creating margin and taking advantage of efficiencies of scale wherever possible. One growth lever we wanted to pull was increasing our average order value (AOV) to offset our shipping and fulfillment costs, but with FBA we were paying exactly the same per case whether an order contained one case or five.
  • Control of Brand: This is a big one. We’ve put a lot of effort into branding our Amazon sales channel. We’ve registered our brand, which allows us to have a custom storefront, and fill it with eye-catching and conversion-driving content. We’ve also gotten really targeted with our search terms, honing in and doubling down on the highest-converting keywords for our brand. After putting all of this work into building our brand within Amazon’s limitations, it would be a real lost opportunity to have our product delivered in Amazon Prime packaging, with no opportunity to include promotional materials or flyers.
  • Customer Interactions: This is where you really have the opportunity to turn Amazon shoppers into loyal customers and to have an even greater impact on your margins by directing shoppers to your more profitable sales channels. I’ll dive a little deeper into  exactly the levers we pulled to turn Amazon into a channel that serves our ecommerce site, but FBM was the clear winner in Amazon FBA vs FBM when it came to this aspect.
  • Streamlined Fulfillment: Amazon is just one channel within our sales channel ecosystem. We’re selling on Walmart Marketplace, Faire.com, HyVIDA.com, and we will soon be in major grocery and convenience stores. When we were using Amazon FBA, we were segmenting our fulfillment process and fulfilling our non-Amazon channels through a 3PL. We had vastly different inbounding protocols for each fulfillment channel and zero flexibility when it came to inventory allocation. We realized that in order to really scale our multichannel strategy we needed to integrate fulfillment for all channels through a single network and platform, and we needed an Amazon FBA alternative to do that.

How to use Amazon FBM to Drive eCommerce Sales

One of the most important reasons we chose Amazon FBM vs FBA for our business was the ability to drive brand preference and send repeat customers to our ecommerce site, where we realize much higher margins and capture valuable re-targeting information. These were a few of the levers we pulled with our new fulfillment partner to direct Amazon shoppers to our ecommerce site, increase our AOV, and build lasting relationships with our customers.

  • Site-Specific Discounts: With our new fulfillment partner we can include a coupon code redeemable only at HyVIDA.com in our Amazon shipments. With our incredible reorder rate, we’ve seen a lot of success with this initiative.
  • Deeper Discounts on Bulk Orders: Now that we have those economies of scale in our fulfillment and shipping costs, we can give deeper discounts on bulk orders to entice shoppers to add more items to their cart, driving up our AOV.
  • Promo New Products: We can include free samples of new products in our Amazon FBM shipments in preparation for a new product launch or to introduce a new customer to more of our catalogue.
  • Offer Financing: This is specific to our ecommerce site. Once we’re able to direct customers to HyVIDA.com, we offer financing after a minimum spend threshold through the Four app in the Shopify store. It’s risk-free for us. Four takes a small percentage of the sale, pays us immediately, and collects the payments from the customer. This is another way we’ve been able to drive up our AOV and realize greater savings on fulfillment costs.
  • Seasonal Offers: With a flexible fulfillment partner we can put together a seasonal gift pack, building them as we need them rather than pre-packaging them, sending them to Amazon, and just hoping that we sell through them by the end of the season.
  • Build Customer Relationships: After a shopper makes a purchase on our ecommerce site, we can build a meaningful relationship with them in a way that Amazon won’t allow for. We can share our content, ask for reviews, and send new product announcements. These are the kinds of relationships that will turn into advocates for our brand who will post about us on social media and tell their friends how much they love our product.

Amazon FBA vs FBM: Let’s Talk Numbers

So, did we see the 30% drop in Amazon sales that everyone told us we would if we would if we dropped the Prime badge? The short answer is no. The long answer is, not only did we continue to grow our Amazon sales, we more than doubled sales on our ecommerce site year over year. Those growth metrics were directly impacted by our decision to start looking for Amazon FBA alternatives to engage with our customers on a more meaningful level, and the growth is not slowing down. In February our ecommerce sales were 60% higher than January, and we’re on track to grow our Amazon sales by another 25%.

At the end of the day, you don’t have to let Amazon Prime tell you how you have to run your business. If you want to turn Amazon into a tool in your toolbox, FBM could be the first step. To really make FBM work for you, it’s pivotal to find a fulfillment partner that is strategically-minded and committed to your success when you’re looking for Amazon FBA alternatives. You need the flexibility to iterate, to test into new markets and strategies, and to flex your sku profile when you need. What Amazon fulfillment offers in the way of speed and efficiency, it ultimately sacrifices on flexibility and scalability, and that could very well be standing in the way of your next big step forward.

Looking for an FBA alternative? Reach out to an Amazon fulfillment expert at Ware2Go.

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