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Amazon FBA vs FBM: Which fullfillment method is better for amazon business ?
Last year, more than 60% of Amazon’s sales were driven by third-party sellers, many of whom are small and medium-sized enterprises. it’s clear that Amazon sellers employ a variety of strategies to achieve success. One major factor that sets sellers apart is their chosen fulfillment method: either Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM).
Nearly all Amazon sellers (82%) use Amazon FBA, and 34% use Amazon FBM. Broken out, Amazon sellers sell:
FBA only: 64%
FBA and FBM: 14%
FBM only: 22%
We’ll take a look at the primary differences between these two fulfillment methods — including which requires more experience and which is more profitable — as well as the factors you should consider when choosing whether to fulfill with Amazon FBA or FBM (or both!).
What’s the difference between Amazon FBA and FBM?
Here are the main differences between Amazon FBA and FBM:
Fulfillment by Amazon (FBA):
A fulfillment method on Amazon where the seller (or their supplier) ships products directly to Amazon’s fulfillment centers. Amazon takes care of storing the inventory, as well as picking, packing, and shipping all orders. They also manage customer service for orders fulfilled through FBA.
Fulfillment by Merchant (FBM):
A fulfillment method on Amazon where the seller lists their products on the platform but is responsible for handling storage, shipping, and customer support independently or through a third-party fulfillment center
Which Amazon fulfillment method should sellers use?
For both small businesses or at-home sellers to major brands with elaborate supply chains, all sorts of Amazon sellers can benefit from both Amazon FBA and FBM fulfillment methods. But how do you choose what’s right for your business?
There are seven major factors you should consider before you select a fulfillment method on Amazon.
- Size and weight of the product
- Control of customer experience
- Seller feedback
- Inventory turnover rate
- Logistics
- Expenses and fees
- Prime badge
Below, we’ll go into full detail on each of those factors, but first, is a quick overview of which fulfillment method you should use based on the 7 factors.
You should use FBM if…
- You want more control over your customers
- Excellent customer service practices are in place
- The products you sell are oversized or heavy
- You already have logistics in place
- You’re able to mitigate the expenses involved in fulfilling your own products
- Your inventory turns over slowly
You should use FBA if…
- The products you sell are small and lightweight
- You’re okay surrendering control to your customers to Amazon
- You want Amazon to handle your customer service
- Your inventory turns over quickly
- You do not have logistics in place
- Your expenses would be higher if you fulfilled your own products
Can Amazon sellers use both FBA and FBM fulfillment methods?
Yes. It indicates that 9% of Amazon sellers sell both FBA and FBM.
If you offer a wide range of products, it might be beneficial to use both FBA and FBM to take advantage of each.
For example, say you sell two types of items: one is large and sells slowly, while the other is small and moves quickly. To optimize profits and cut costs, you can use FBM for the large, slow-moving product and FBA for the small, fast-selling one.
Additionally, you can list both FBA and FBM under the same ASIN. Some sellers do this to ensure they can continue fulfilling orders through FBM if their FBA stock runs out.
7 factors to consider before choosing a fulfillment method on Amazon
While FBA is an amazing service that most Amazon sellers take advantage of, it may not work for every product sold on the platform. Let’s go over the top 7 factors you should consider when choosing how to fulfill your products on Amazon.
1. Item size/weight
Amazon’s fee structure and logistics are advantageous for FBA sellers dealing with small, lightweight products that sell quickly. On the other hand, FBA fees and storage costs make it less ideal for selling large, heavy items.
To determine the best fulfillment option for your product, you can use Amazon’s FBA revenue calculator to estimate fees and expenses.
For example, FBM might be a better option if you’re selling a non-inflatable kayak. Such a large item would occupy significant space in Amazon’s fulfillment centers and incur high shipping costs. If you have the resources to handle shipping, it may be more cost-effective to fulfill it yourself.
Before inputting the costs of goods, it will cost $305.13 in just Amazon fees and fulfillment fees if you use FBA. For the FBM example, I input the fulfillment cost as $100. If we can ship this product for that amount, we would profit roughly $100 more per unit — plus, save on monthly storage fees ($27.65 per unit) if a product this size was stored in FBA.
Make sure you calculate your products costs before deciding which fulfillment method works best.
2. Control of customer experience
FBM sellers manage their own inventory, shipping, and customer service for their Amazon sales. In contrast, FBA sellers rely on Amazon to store, ship products, and handle customer service, with minimal direct interaction with customers. This gives FBM sellers more control over the customer experience.
If you prefer a more hands-off approach, especially for handling tasks like customer returns, FBA is the better option.
3. Seller feedback
Amazon’s seller feedback system allows customers to express their satisfaction with third-party sellers through two main components:
Star Rating: Customers rate the seller’s performance on a scale of 1 to 5.
Comments: Customers can also provide feedback explaining their rating.
It’s important to note that seller ratings differ from product reviews, as they focus solely on aspects of the transaction, such as shipping, product accuracy, and seller communication.
FBA sellers have less to worry about regarding feedback, since Amazon manages most fulfillment processes and can request the removal of negative feedback. Conversely, FBM sellers, who have more control over transactions, are more prone to negative feedback. Therefore, they need to pay closer attention to product condition, shipping speed, and communication with customers.
4. Turnover rates
A seller’s turnover rate is the speed in which they sell and restock inventory. An FBA seller’s turnover rate is important because Amazon tracks the length of time that inventory remains in these fulfillment centers.
The longer a product stays in a fulfillment center, the more storage fees the product accrues. Then, if products are stored in an Amazon fulfillment center for 180 days or longer, your inventory will start incurring an aged inventory surcharge (previously known as a long-term storage fee) and it will negatively affect your IPI score and ability to send more inventory to FBA.
Therefore, sellers with products that have slower turnover rates should consider fulfilling their own products to avoid Amazon’s expensive storage fees.
5. Logistics
Picking, packing, and shipping products can be very time-consuming. Therefore, new Amazon sellers without existing fulfillment logistics should consider starting with Amazon FBA to focus on building their business.
For sellers adding Amazon as a sales channel who already have logistics, it’s worth evaluating if FBA can reduce their fulfillment costs, particularly for high-turnover products.
6. Fees
Amazon FBA sellers incur fees for shipping products through Amazon’s fulfillment network, which cover picking, packing, and shipping costs—essentially their “shipping and handling expenses.”
FBM sellers avoid FBA fees but must account for their own handling and shipping expenses, including storage, labor, packaging, and shipping costs. If these costs exceed what it would cost to use FBA, sellers should consider opting for Amazon FBA instead
7. Prime badge
Products fulfilled by Amazon automatically qualify for Prime shipping and display the Prime badge on their listings. With over 200 million Amazon Prime members worldwide, customers expect fast delivery within 1-2 days.
This Prime shipping eligibility is a major benefit of FBA compared to FBM. However, FBM sellers can also offer Prime shipping through Seller-Fulfilled Prime.
What are the key differences between FBA and FBM sellers?
Beyond the methods they use to fulfill their products, we discovered a few key differences between sellers who use FBA and those who use FBM — according to data from our 2023 State of the Seller Report.
Which is more profitable: Amazon FBA vs FBM?
FBM sellers have more sales and larger profit margins.
- 28% of FBM sellers earn more than $25,000 per month in revenue versus 12% of FBA sellers
- 35% of FBA sellers have profit margins over 20% versus 38% of FBM sellers
Which sellers get started selling faster: Amazon FBA vs FBM?
- 42% of FBM sellers took less than two months to get started on Amazon versus 41% of FBA sellers
- 15% of FBM sellers realized a profit in fewer than three months versus 14% of FBA sellers
Which method requires less time to manage: Amazon FBA vs FBM?
FBA sellers spend a similar amount of time on their business as FBM sellers.
22% of FBM sellers spend 11-20 hours per week in the Amazon business versus 22% of FBA sellers
Both FBM and FBA sellers attribute their success on Amazon to having time to commit to their businesses (53% and 52%, respectively)
What fulfillment method do you use for your Amazon business?
Choosing the right fulfillment method, whether Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM), is essential for your success. At addMatrix, we help you determine the best strategy tailored to your needs, assist in implementing and optimizing the process for maximum efficiency, and create targeted marketing campaigns that showcase your delivery strengths. Partner with us to align your fulfillment method with your growth objectives!
