Once you've set up your listings and worked on the traffic drivers to get eyes on your product detail page you need to work out the best way to get your products to the Customer. There are two main ways of doing this; Fulfilment by Amazon (FBA) and Merchant Fulfilment Network (MFN aka FBM).
Subject to the nature of your selection we generally recommend using FBA for 3 reasons:
1) Every product in FBA automatically becomes Prime eligible (which is estimated to improve conversion by 30-40%)
2) You are afforded far greater protection in the event of customer raising A-Z claims in the event of misdelivery
3) Similarly, if the item is damaged in transit, Amazon will take the blame, reimbursing the Seller as well as striking through any negative feedback left by the unhappy Customer.
Merchant Fulfilling makes sense for those with unsuitable product types (e.g. modular products which need more than one box to be shipped to the Customer), those with established warehousing and fulfilment operations and like to keep those they currently employ in those roles and Sellers who have multiple sales channels (e.g a Bricks and Mortar shop, shopify store, and are on other marketplaces) to have a single inventory pool to draw stock from. Sure, you could use Multi Channel Fulfilment but unless you've got a good integrator and don't mind your eBay orders turning up in Amazon boxes, this isn't the best solution. MFN also does not make your selection Prime eligible unless you enrol into Seller Fulfilled Prime (SFP).
Therefore which should you use, FBA or MFN?
We would actually recommend using both. You are perfectly allowed to have multiple SKUs from the same Seller account under the same ASIN.
This is because you could split Amazon's Customers into two segments: Prime and non-Prime. Prime Customers would inevitably opt for the Prime-eligible FBA SKU which would be shipped to them quickly and included in the Prine package. If you only had an FBA offer, non-Prime customers would have to pay the non-Prime shipping fee of £4.49 regardless of product size (99p for Small and Light items). Therefore to maximise conversion of non-Prime Customers you could offer a merchant fulfilled SKU with free shipping. The Prime SKU will invariably win the Buy Box but, depending on the number of competitor offers on the ASIN, the MFN SKU should show in the 'Other sellers on Amazon' section below the Buy Box. This would be more attractive to non-Prime Customers who can then avoid paying the non-Prime FBA shipping fee.
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