Amazon FBA vs. FBM: Which Is the Best Choice for Your Business?
When selling on Amazon, there are usually two primary ways to fulfill orders: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Each of them has their advantages and disadvantages. Properly evaluating and conducting some research on each will directly allow you to maximize your profits and business growth.
This article analyzes both models so you can make an informed decision for your business.
1. What FBA offers
Fulfillment by Amazon (FBA) is a service provided to sellers where they store, pack, and ship products on your behalf. Under this service, the seller is responsible for sending their inventory to the respective warehouses, and Amazon handles customer service. This includes returns.
Important FBA Features:
Increase Sales Potential: Products enlisted in FBA boost their chances of being sold because they are available for Amazon Prime, which allows them to be seen by millions of new customers.
Increased Handling: Products are shipped faster and in a more reliable manner since it is processed through Amazon, which is a logistics provider.
Buyer Satisfaction: Inquiries and returns are a huge task to manage, and sellers lose quite a bit of time from them, so having Amazon manage these services will save time for the sellers.
Cost Efficiency: The increased sales potential of Prime, along with the lower operational costs, allows FBA sellers to have a better chance of winning the Buy Box.
Challenges with FBA:
Storage Fees: The increased monthly and long-term storage fees can become problematic, especially for slow-moving stock.
Less Control: You are limited in your oversight because Amazon handles packaging and shipping.
Prep Requirements: Your product must be prepared in accordance to stated policies before being shipped to Amazon’s fulfillment centers.
2. Understanding Amazon FBM
FBM, or Fulfillment by Merchant, means the seller lists the product on Amazon but takes care of inventory, shipping, and customer service—either in-house or via third-party logistics (3PL).
Key Benefits of FBM:
More Control: The seller controls the entire process of fulfilling an order, including packaging and customized branding.
Lower Fees: No fees from FBA means less cost, which can increase margin.
Ideal for Large or Custom Products: Bulky products that are expensive to store, or require special handling can be better managed by the seller.
Challenges with FBM:
No Prime Badge: Unless using Seller Fulfilled Prime, products are not Prime-eligible.
Slower Delivery Times: You need to have efficient logistics because Amazon has expectations.
Customer Service Burden: You must directly deal with inquiries, returns, and refunds yourself.
3. Cost Comparison Analysis
FBA Costs:
Fulfillment costs (per unit)
Monthly and long-term storage fees
Removal and disposal costs
Labeling or prep fees (if necessary by Amazon)
FBM Costs:
Shipping materials and postage
Warehousing or storage space (if applicable)
Customer service tools or support staff
Returns management
Profit margins should always consider operational costs like these. On the surface, FBA may look expensive but saves time and labor. FBM may look cheaper, but the logistics and customer service costs can add up quickly.
4. Who’s Best for FBM/FBA?
Because of the less involved approach, FBA is easier for beginners. Most new sellers take advantage of Amazon’s delivery system and the Prime badge, which greatly increases sales potential. In contrast, FBM may be better for sellers that already have infrastructure set up and are experienced with logistics.
FBA Pros for Beginners:
Take advantage of strategically high demand for trending products.
Access to the Amazon’s vast fulfillment center network.
Reduced workload FBA Pros for Beginners:
Lower cost of entry
Flexibility and control
Faster for new or niche products to market
5. When to Switch to FBA?
Those who have small and light storage for goods.
Items sold are in demand and move quickly.
You aim to grow at a rapid pace without handling logistical issues.
You’re interested in Prime members and unlocking Buy Box access.
For instance, a mobile phone accessories seller might use FBA to facilitate sales during holidays because Amazon’s logistics enables timely deliveries.
6. When to Select FBM
You have large, heavy, or delicate items.
Your brand demands specific packaging and personalized kitting.
Your fulfillment center already has all the necessary warehouses, shipping, and logistical infrastructure.
The item is slow-moving and costly to keep in Amazon’s warehouses.
For instance, a seller offering custom handmade furniture might use FBM to personalize each delivery while retaining direct control over quality assurance.
7. Combined Strategy: Best of Both Worlds
Depending on the type of product, many sellers use FBA and FBM interchangeably, which provides improved flexibility and cost-efficiency.
Hybrid strategy advantages:
Small, high-volume items can be sent FBA
Large, bulky, or seasonal items can be sent FBM
If one method faces interruption, diversify risk and ensure consistency.
8. Effect on Customer Satisfaction
Customer service is more personalized while using FBM, but the seller often using FBA offers quicker delivery and streamlined service.
FBA Experience:
Shipping is fast and trustworthy.
Returns are simple via Amazon.
FBM Experience:
Custom branded shipping, thank-you letters.
Communication with the seller is available.
9. Sales Channel Strategy
FBA provides international reach through Amazon’s Global Selling program. FBM is suited for multi-channel sellers (Etsy, Shopify, eBay, etc.) who maintain control over fulfillment.
The Conclusion: Which One Is Better?
There is no universally correct statement. The best choice is determined by your business model, type of product, budget, and objectives.
Choose FBA if:
You want to scale quickly by automating fulfillment.
If you sell exclusively on Amazon.
Choose FBM if:
You would rather have greater control and flexibility.
Selling niche or bulky products.
Consider hybrid if:
You want to balance costs and control.
You have a wide catalog of products.
In Conclusion:
Choosing between FBA and FBM is fundamental to your Amazon business strategy. Each option offers its unique set of advantages and disadvantages. Knowing your unique requirements, costs, and capabilities can put you in the best position for the strategic decision that facilitates growth in the long run. Begin with the model that fits best today and refine it as the growth occurs. Keep in mind that winning on Amazon is not only about the level of fulfillment but also about the value provided to customers and the adaptability to navigate the dynamic landscape over time.
FAQ:
1. What’s the difference between Amazon FBA and FBM?
FBA (Fulfillment by Amazon) means that Amazon takes care of storing, packing, and shipping your products and customer service, whereas in FBM (Fulfillment by Merchant), you or a third-party provider takes care of storage, shipping, and support.
2. Which option is better for beginners, FBA or FBM?
FBA is often better for beginners since it allows them to focus more on sales and marketing with the logistics taken care of. However, if someone has experience with shipping, FBM provides more control and lower fees.
3. Is FBA more expensive than FBM?
Yes, FBA usually has greater fees due to including storage, packing, shipping, and customer service. For sellers with lower volumes or those shipping large or heavy items, FBM may be cheaper.
4. Does FBA help my products rank higher on Amazon?
FBA products are eligible for Prime and increased visibility, therefore leading to more conversions and rankings. In addition, faster shipping, which FBA provides, is prioritized by Amazon.
5. Who would prefer FBM over FBA?
It is easier for sellers who have heavy, one-of-a-kind, or custom-made goods and already have a shipping procedure in place to use FBM. Additionally, if you want more control over your branding and inventory, this works well for you.
6. Can I use both FBA and FBM for one product?
Yes, this is referred to as a “hybrid model.” You can strategically use both FBA and FBM for the same product to have more sophisticated control over inventory for diverse customer needs.
7. Which model has better customer service, FBA or FBM?
With FBA, customer service is managed by Amazon and is efficient, fast, and dependable. Relatively, with FBM, the seller’s system and responsiveness completely dictate the level of customer service quality.
8. What are the differences in storage fees for FBA and FBM?
FBA has monthly storage fees and long-term fees for unsold inventory. FBM sellers keep inventory themselves or with a 3PL. This could be more or less expensive depending on how the seller structures their business.
9. Which model was better during peak seasons or holidays?
Peak season is usually good for FBA because of how well Amazon fulfills orders. However, there are always potential delays. Inventory needs to be sent to Amazon early, and that is a requirement. FBM is also complicated during peak seasons unless there is a strong system for fulfilling orders.
10. How do I choose FBA and FBM for my business?
Think about the type of products you are selling, how you are able to ship products, your budget, and how fast you want to grow. If you want hands-free order processing and access to Prime members, then go for FBA. Order processing costs less if you manage it yourself, so in that case FBM is a better option.
