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As a new seller on Amazon, one of the first major decisions you will come across is what fulfillment method to use. Amazon FBA vs FBM is a topic without a “one size fits all” answer. Depending on your business goals, products, and other criteria you may find that FBA (Fulfilled by Amazon) works better for you. Likewise, you may find your business works better using the FBM (Fulfilled by Merchant) fulfillment option.
In this article, we will explain just what FBA and FBM are, the pros and cons of each option, and what type of sellers benefit from each option. We will also discuss how you can use both options in your business and how and why this works. Before we look into FBA vs FBM let’s first understand what each one means.
Let’s get started.
What is Amazon FBA?
According to a 2023 study by JungleScout, 86% of sellers on Amazon use FBA as their fulfillment method. This makes it by far the most popular option and it is easy to see why.
FBA stands for Fulfillment by Amazon and like the name suggests it means that Amazon handles the shipping and customer service side of your business. As soon as a customer purchases your product Amazon handles the rest. Shipping, delivery, customer service, and returns are all dealt with by Amazon directly.
Instead of shipping to individual customers, FBA sellers can ship their bulk inventory directly to Amazon’s facilities where it will be organized and shipped out to individual orders.
As a seller this allows you to focus on the important parts of growing your business while allowing Amazon to handle everything else. Instead of packing boxes and printing shipping labels, you can focus on marketing, sourcing, and finding new products to sell.
Another huge benefit for FBA sellers is Prime Shipping. With over 75% of Amazon shoppers also being Prime members the expectation for 1-2 day shipping times is growing. As an FBA seller, you gain access to Prime shipping by default as well as the Prime badge for all your products.
What is Amazon FBM?
FBM stands for Fulfilled by Merchant and, as you may have guessed, means that you, the seller are responsible for shipping the product directly to the customer.
Unlike FBA sellers, who ship their products directly to Amazon’s warehouses, FBM sellers must store their products in their own homes or storage facilities. FBM sellers are also responsible for packing, labeling, and shipping each product directly to the customer. They also have to look after all customer service issues and product returns.
With all of this extra work, you may be wondering if there are any upsides to this method.
While we will go into more detail later, there are several benefits to being an FBM seller. Firstly, FBM sellers don’t have to deal with Amazon storage and packing fees. This is especially important in Q4 when storage fees skyrocket for FBA sellers.
Another huge benefit for FBM sellers is the ability to test potential products quickly. As an FBM seller you could potentially, purchase a new product, list the product on Amazon, and sell and ship the product all in one day. This is impossible for FBA sellers where it often takes weeks for Amazon to receive their inventory, check it in, and then have it listed for sale.
Top 6 Factors to Weigh the Pros and Cons of FBA vs FBM
Product Type and Size
One of the first things to consider when comparing Amazon FBA vs FBM is the products you are selling. The fees Amazon charges FBA sellers for packing and shipping their products depend on the size and weight of that product. For this reason, some products will be cheaper to ship through FBA and others will be cheaper to ship yourself through FBM.
In general small, lightweight, high-velocity products are much cheaper to ship through FBA while bulky, heavy, and high-value products are cheaper with FBM.
While this is a good rule of thumb, it is always a good idea to run a potential product through a profit calculator like Seller Amp to decide what makes sense for your business.
Another thing to consider is that some products are not eligible for Amazon FBA. Items like hairspray, pest control, perfume, and shoe polish cannot be sold with FBA and must be sold exclusively with FBM.
Buy Box Eligibility
The ability to compete and win the Buy Box is crucial if you want to succeed as an Amazon seller. This extends to your decision of Amazon FBA vs FBM.
One of the biggest benefits for FBA sellers is their preferential treatment regarding the Buy Box. FBM sellers typically need to price significantly lower than FBA sellers if they hope to win the buy box. Likewise, FBA sellers can typically keep their prices higher than a competing FBM seller and still consistently win the Buy Box.
If you are considering using FBM as a new seller it’s important to do your research. Check potential products using KEEPA or Seller Amp to see the Buy Box history. How often do FBM sellers win the buy box? Generally, if it is less than 20% of the time, you should consider avoiding that product.
As an FBM seller, we recommend focussing on listings with fewer FBA sellers competing for the buy box. Unique or customizable items are a great choice along with seasonal items where you will often encounter fewer FBA sellers.
Shipping Speed, Costs, and Control
Another key decision factor when comparing Amazon FBA vs FBM is shipping speed. With over 75% of Amazon consumers having a Prime membership 1-2 day shipping times are becoming the expectation.
For Amazon FBA sellers this is great, as by default they have access to Amazon’s world-class fulfillment network and guaranteed 1-2 day shipping times. This also provides FBA sellers with a Prime badge that shows up next to all of their products. While it may not seem that important, recent studies show that having a Prime badge on your listing can increase conversion rates by over 50%.
The only downside to this for FBA sellers is the additional shipping fees. As mentioned earlier, shipping fees for lightweight, smaller products are very reasonable. However, if you sell heavier, bulkier items it might make sense to go the FBM route.
For FBM sellers the advantage lies in flexibility. Since you are responsible for packing and shipping your products you have complete control over how they’re handled and prepared. You also have the freedom to choose the best carrier and shipping option for each order.
The big downside, however, is speed. Unlike FBA sellers who can guarantee 1-2 day shipping, FBM sellers are typically looking at 3-5 day shipping times. This has the impact of lowering conversion rates on your items as well as reducing your chances of winning the buy box against FBA sellers.
For FBM sellers, Seller Fulfilled Prime (SFP) offers a valuable option. While we won’t cover every detail here, SFP allows FBM sellers to earn a Prime badge on their listings, increasing their chances of winning the Buy Box. To qualify, sellers must complete a 30-day trial period, meet specific performance metrics, and consistently offer 1-2 day shipping times.
Storage Needs and Fees
A key factor for many sellers comparing FBA vs FBM is inventory management. Sending all of your inventory directly to Amazon certainly sounds convenient but it does come with some downsides. Likewise, not everyone wants to fill their garage or spare bedroom with hundreds of boxes either.
The FBA model has sellers ship their inventory directly from the manufacturer or prep center to Amazon. Amazon then organizes and redistributes this inventory to its distribution centers around the country where it will be shipped to a purchasing customer.
For FBA sellers it is important to calculate your product’s costs factoring in Amazon’s storage fees. This becomes incredibly important in Q4 where between October and December storage fees skyrocket. As of November 2024, the standard rate is $0.78 per cubic foot from Jan – Sept and $2.40 per cubic foot from October to December.
A second type of fee FBA sellers will want to avoid is long-term storage. This fee occurs when a product has been stored at Amazon for at least 180 days. Unlike the typical storage fees, long-term storage fees continue to rise every additional 30 days a product remains in storage. In most cases, you will want to try and liquidate any inventory as quickly as possible if it looks like long-term storage fees will take effect.
Unlike FBA sellers, FBM sellers do not have to deal with Amazon’s storage fees. Many newer FBM sellers choose to store their inventory in their own homes or garage while large sellers may rent out a warehouse. As an FBM seller, there are no worries in regards to long-term storage fees or Q4 price hikes.
Customer Service and Returns
Choosing between managing your customer service or letting Amazon handle it is a key decision in selecting FBA vs FBM. FBA sellers let Amazon manage all customer interactions and returns, while FBM sellers handle customer service directly. Each approach has pros and cons, and the choice depends on your specific business needs.
For FBA sellers, Amazon handles all customer inquiries, complaints, and returns for any product you sell. This means you can focus on other aspects of your business while Amazon’s customer service team handles everything in the background.
Another big benefit is the ability for FBA sellers to have negative feedback removed from their accounts. Since Amazon takes direct responsibility for packing and shipping your products as well as customer support they also take responsibility for negative feedback on your orders. This is especially important for newer sellers where a couple of bad reviews can limit your ability to get ungated.
The only downside for FBA sellers is that you have no control over your return policy. In cases where a buyer-caused issue has led to a return, there is little you can do except pay the additional costs when Amazon processes their return.
While FBM sellers have the additional responsibilities that come with customer service this also gives them more control over their business. Dealing directly with the customer allows FBM sellers to build stronger customer relationships by addressing issues personally.
For anyone considering FBM vs FBA, there are two main drawbacks, the first one is time. Handling every customer inquiry can be time-consuming and take hours out of your day that may be better spent elsewhere.
Another potential concern is negative feedback. Since FBM sellers handle their logistics it is much harder for them to have negative reviews removed from their account. For new sellers, a couple of one-star reviews for poor shipping speed can have a significant impact on your account health.
Cash Flow
Our last point to discuss when it comes to Amazon FBA vs FBM is cash flow. While FBM sellers can buy, list, sell, and ship a product all on the same day this is not the case for Amazon FBA.
For FBM sellers the cash flow cycle for selling on Amazon is quite straightforward. As mentioned above FBM sellers can purchase inventory in the morning, take it home, list it on Amazon in the afternoon, and make a sale in the evening.
This is incredible if you are looking to test out potential products or if you are selling seasonal products. While we will cover it more later, FBM sellers thrive in Q4 and a lot of that has to do with their flexibility and the speed at which they can list and sell items.
For FBA sellers managing inventory is the name of the game. The total time it takes for a shipment to leave your supplier and be listed for sale on Amazon can range anywhere from 14 days to 4-6 weeks. This timeframe often depends on Amazon’s fulfillment center check-in process, which can be especially slow in Q4. For this reason, accurately predicting product demand is critical to avoiding constant stockouts during high sales periods.
Another thing to consider is your available start-up capital. Due to inventory and supplier limitations, FBA sellers typically require more capital when starting their business. Unlike FBM sellers, who can potentially list a single item, FBA sellers usually need to buy inventory in bulk. This approach makes FBA a more costly investment upfront.
Assessing Your Business Goals: Which Method to Choose?
Choosing Amazon FBA vs FBM ultimately comes down to your individual business needs. Do you have limited upfront funds? What kinds of products do you plan to sell? Are you more concerned with time efficiency or developing a personal relationship with your customers? All of these questions will help you determine which fulfillment model works best for you.
For sellers with limited startup funds or anyone looking to start selling on Amazon without a big investment, FBM may be the way to go. While it does take more of your time, it is a quick way to get started in the e-commerce world without a huge budget for inventory. It’s also great for testing new products.
On the flip side, FBA offers sellers convenience and time efficiency. For anyone with a slightly larger budget, FBA gives you the time and freedom to focus on other aspects of your business.
If your goal is to grow your business, FBA may also be the better choice. One of the downsides with FBM is that more orders mean more packaging, shipping, and customer service. FBA sellers, on the other hand, don’t have to worry about these issues and can continue to scale their Amazon business without all the extra day-to-day labor.
FBA vs FBM: Why FBA is Best for New Amazon Sellers
For new sellers just starting on Amazon there is a lot to learn. How to source products, create listings, adjust prices, plan for upcoming sales, the list goes on. It is for this reason that we generally recommend FBA for new sellers.
FBA removes all the extra work that goes into creating a traditional e-commerce business. Instead of responding to customer emails and packaging orders to ship, FBA allows sellers to focus on learning the platform and the basics of selling online.
Allowing Amazon to take care of the logistics has some great advantages for new sellers. For one it mitigates the risk of receiving negative reviews due to poor shipping or packaging. With Amazon taking responsibility for shipping it is usually pretty easy to get these reviews removed from your account, which is incredibly important for newer sellers. Getting this negative feedback removed can be the difference between ungating new categories immediately or waiting several months.
The second reason is that having access to Prime Shipping means that your conversion rates go up, your customer trust goes up, and your ability to compete for the buy box also goes up. This makes it easier to gain momentum as a new seller and begin building up your account health.
All in all, FBA is a great starting point for new sellers. By simplifying the startup process and letting Amazon handle the logistics new sellers can grow their business in a safe, time-efficient way.
The Benefits of Using Both FBA and FBM in Your Amazon Strategy
Many sellers combine FBA and FBM in their businesses. A 2023 JungleScout study found that 22% of Amazon sellers use both fulfillment methods. In this section, we’ll explore the reasons for incorporating both FBA and FBM and the benefits of using a hybrid approach.
The major reason to use both methods is to get the year-round consistency of FBA along with the speed and flexibility of FBM. Sellers using both fulfillment methods, typically rely on FBA for the majority of their business while using FBM in specific circumstances.
One great opportunity to add FBM into your business model is with seasonal items. Products revolving around holidays like Thanksgiving, Easter, or Christmas along with products that are only used at very specific times of the year are great options for FBM.
Due to long-term storage fees, most FBA sellers will avoid products that are only really sold for short sections of the year. This is perfect for FBM though where you can buy the exact amount of inventory you need without the risks of having to store it year round.
However, the number one reason for sellers to consider adding FBM into their business is Q4.
Seizing Q4 Opportunities with FBM
One of the massive downsides for FBA sellers entering Q4 is the increase in inventory check-in times. Combine this with higher sales demand and the result is constant stockouts and backorders.
This is where FBM comes in.
In late Q4 listings which you would not typically be able to compete in as an FBM seller start to open up. With all of the FBA sellers on backorder, the buy box has to go to someone, and in most cases that becomes an FBM seller.
Unlike FBA sellers, FBM has the flexibility to buy and ship new inventory on the same day. This leads to huge opportunities in Q4 where FBA sellers across Amazon will be on backorder.
For many sellers, the potential profit of incorporating FBM into their business for Q4 far outweighs the extra work.
Final Thoughts: Deciding Between FBA vs FBM for Your Amazon Business
Comparing Amazon FBA vs FBM can feel challenging, but each option has unique benefits depending on your business goals. FBA is often the go-to choice for sellers looking to start in e-commerce without the time commitment associated with customer service and logistics.
FBM on the other hand gives sellers the flexibility to start selling straight from their own home with little overhead.
Ultimately the choice between Amazon FBA vs FBM comes down to what you want out of your business. By looking over the important factors mentioned in this article and knowing your situation we hope you can find the right fulfillment method for you. Good luck selling.
