There are three options when you decide to go into Amazon.com to expand your enterprise. One is to use their service of Fulfilment by Amazon (FBA). Another one is Fulfilment by Merchant (FBM, or sometimes referred to as MFN, as in Merchant Fulfilment Network). The third option, you can always go both.
The main difference between the two options is in terms of shipment. In FBA, Amazon picks the item from their warehouse and then handles the packing, shipping and customer service chores. Of course, these services are covered by the FBA fulfillment fees. Amazon, however, also collects for the long and short-term storage fees of your items.
In contrast, FBM basically refers to the sellers having to handle all the packing and shipping of items to the customers directly from their own homes or warehouses. This would also entail that they handle customer service chores, such as returns. The only role that Amazon plays in your business would be a place to sell and as a promotional platform.
When you decide to go for FBM remember this. The definite advantage to this mode of fulfillment is that you pay less than those who opt for the FBA. The main strength of the FBM is that as an entrepreneur you have a greater control over your products. Meaning, even though it would mean that the extra work for having to handle the packing and shipping of your products, it also means that you personally oversee that they are being handled the way they should be handled.
In terms of profit, this means there can be fewer items that reach customers damaged and therefore, you will have fewer returns. You can make yourself stand out by making personalized packages from your other competitors in Amazon. Also, as the person who knows the product best, you take care of customer service where you can personally interact with your customers. This way, providing the best answers to their questions.
Of course, the downside to this is that you will have to manage everything. FBM is best for entrepreneurs who want to be hands-on in every aspect of their business. This is also best for those who only have a small number of items or their products are unique. Keep in mind, however, that it will affect how your products show on the Amazon search site if you provide low-quality service in shipping (i.e. late/incorrect shipping) your products to customers.