Amazon FBA vs FBM: Which Shipping Model Is Better for You?

1. Introduction





In the dynamic world of Amazon selling, the choice between FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant) shipping models can significantly impact your business's success. These two fulfillment methods are the cornerstones of Amazon operations, each with its own set of characteristics, advantages, and challenges.



This article will delve deep into the differences between FBA and FBM, exploring aspects such as shipping processes, costs, customer service implications, and more. By the end, you'll have a comprehensive understanding of which model might be the better fit for your Amazon business, whether you're a seasoned seller looking to optimize your operations or a newcomer eager to make the right start.

2. Understanding Amazon FBA

2.1 What is FBA?

FBA, or Fulfillment by Amazon, is a comprehensive service that allows sellers to outsource their order fulfillment tasks to Amazon. In this model, sellers send their products in bulk to Amazon's fulfillment centers. Once the products are in Amazon's warehouses, Amazon takes over the reins for storage, picking, packing, shipping, and customer service for those items. It's a one - stop - shop solution that aims to simplify the selling process for merchants.



For example, a small - time electronics seller based in the UK can store their smart gadgets in Amazon's European warehouses. When a customer in Germany places an order, Amazon will handle all the logistics from retrieving the product from the warehouse to delivering it to the customer's doorstep in Germany.

2.2 How FBA Works

· Seller Prepares and Ships Inventory: The process begins with the seller preparing their products according to Amazon's guidelines. This includes proper packaging, labeling with FNSKU (Amazon - specific barcodes), and choosing a shipping method to send the inventory to Amazon's fulfillment centers. Sellers can use services like Amazon - partnered carriers or third - party logistics providers to transport their goods.

· Amazon Receives and Stores Inventory: Once the products arrive at the fulfillment center, Amazon's staff checks the inventory for any discrepancies in quantity, quality, or packaging. If everything is in order, the products are stored in Amazon's warehouses, with their location tracked within Amazon's sophisticated inventory management system.

· Customer Places an Order: When a customer browses Amazon and places an order for an FBA - fulfilled product, Amazon's system immediately identifies the nearest fulfillment center with the available stock.

· Amazon Picks, Packs, and Ships: The order is then sent to the appropriate fulfillment center, where employees (or in some cases, robots) pick the product from the shelves, pack it securely, and label it for shipping. Amazon then selects the most efficient shipping carrier and method to deliver the product to the customer, often providing tracking information for the customer to monitor the delivery progress.

· Customer Service and Returns: If the customer has any questions, issues, or wants to return the product, Amazon's customer service team takes care of it. For returns, Amazon will either restock the item if it's in good condition or dispose of it in an environmentally friendly way, depending on the product's state.

2.3 Pros of FBA

Fast Shipping and Prime Eligibility

One of the most significant advantages of FBA is the ability to offer fast shipping. Amazon's vast network of fulfillment centers, combined with its advanced logistics technology, enables quick delivery. Many FBA - shipped products are eligible for Amazon Prime, which offers benefits like free two - day shipping (in some regions even same - day or one - day shipping), free streaming of movies, music, and more. Prime members, who are known to be high - spending and frequent shoppers, are more likely to purchase products that are Prime - eligible. This can lead to a significant boost in sales. For instance, a seller of fitness equipment saw a 40% increase in monthly sales after enrolling their products in FBA and making them Prime - eligible, as customers were attracted to the quick delivery option.

Amazon - Handled Customer Service and Returns

Amazon takes on the responsibility of customer service and returns for FBA products. This is a huge relief for sellers, especially those who may not have the resources or expertise to handle large volumes of customer inquiries or returns efficiently. Amazon's customer service representatives are available 24/7 in multiple languages. If a customer has a problem with a product, they can contact Amazon directly, and Amazon will handle the issue. This not only saves the seller time and effort but also helps in maintaining a high seller rating and account health, as Amazon's efficient handling of customer issues leads to higher customer satisfaction.

2.4 Cons of FBA

High Costs (Storage, Fees, etc.)

FBA comes with a range of costs that can add up quickly. There are storage fees, which are charged based on the volume of the products stored in Amazon's warehouses. These fees can increase during peak seasons like the holidays. Additionally, there are order - handling fees, which include picking, packing, and shipping costs. For example, a seller of large - sized furniture items may find that the storage fees in Amazon's warehouses are quite high due to the large volume occupied by the products. Small - scale sellers or those with products that have inconsistent sales volumes may find these costs difficult to manage, as they have to pay for storage even during slow - selling periods.

Limited Control over Inventory Management

Sellers have less control over their inventory when using FBA. Amazon decides where to store the inventory, and in some cases, products may be split across multiple fulfillment centers. This can make it challenging for sellers to accurately track and manage their stock levels. Moreover, if a product has been in the warehouse for an extended period (over 365 days in some cases), Amazon may charge long - term storage fees, which can be substantial. Sellers also have to rely on Amazon's inventory management system, and any glitches or inaccuracies in the system can lead to issues like overselling or stockouts.

3. Unpacking Amazon FBM

3.1 What is FBM?

FBM, or Fulfillment by Merchant, is the self - fulfillment model where sellers are responsible for the entire order - fulfillment process. From the moment an order is placed to its final delivery at the customer's address, the seller manages all aspects. This includes handling inventory, choosing the shipping carrier, packing the products, and even dealing with any post - purchase customer service issues. For example, a handicraft seller on Amazon creates unique handmade jewelry in their home studio. When a customer orders a necklace, the seller, not Amazon, takes on the task of getting the necklace from their studio to the customer's hands.

3.2 How FBM Works

· Receiving the Order: Sellers are notified of a new order through Amazon's seller platform. The order details, including the customer's shipping address, contact information, and the items purchased, are provided to the seller. For instance, a book seller on Amazon receives an order for a best - selling novel. They immediately see the order in their seller dashboard, which shows the customer's address in Australia and the quantity of the book ordered.

· Selecting a Shipping Method: Sellers have the freedom to choose from a wide range of shipping carriers and services. This could include international carriers like FedEx, UPS, or DHL, or even local postal services. They consider factors such as shipping speed, cost, and the carrier's reliability. A seller of small electronics might choose a carrier that offers express shipping options for customers who need their products quickly, while for less - urgent orders, they might opt for a more cost - effective standard shipping service.

· Processing the Package: Once the shipping method is selected, the seller retrieves the product from their inventory (which could be stored at their home, a small warehouse, or a third - party storage facility). They then carefully pack the product, ensuring it is well - protected during transit. For example, a seller of fragile glassware will use bubble wrap, packing peanuts, and a sturdy box to prevent breakage. The seller also attaches the shipping label provided by the chosen carrier.

· Shipping the Order: The seller then drops off the package at the carrier's designated location, such as a post office or a courier service center. Some carriers even offer pickup services, where they come to the seller's location to collect the packages. After the package is shipped, the seller updates the order status on Amazon's platform and provides the tracking number to the customer, allowing them to monitor the progress of their delivery.

3.3 Pros of FBM

Lower Initial Investment

One of the most appealing aspects of FBM is the low initial investment required. Since sellers don't need to send large quantities of inventory to Amazon's fulfillment centers in advance, they can start selling with minimal upfront costs. This makes it an ideal option for small - scale entrepreneurs, hobbyists, or those testing the waters with new product ideas. For example, a budding entrepreneur who wants to sell custom - made candles on Amazon can start with just a few dozen candles in stock. They don't have to worry about the high costs associated with bulk manufacturing, shipping to Amazon's warehouses, and paying for storage. This low - risk approach allows them to learn the ropes of Amazon selling without a significant financial commitment.

Greater Control over Shipping and Branding

Sellers using FBM have full control over the shipping process. They can choose a carrier that aligns with their brand values, whether it's a carrier known for its eco - friendly practices or one that offers excellent customer service. Additionally, they can take advantage of the packaging to showcase their brand. By using custom - designed boxes, branded packing slips, or adding small promotional items like business cards or samples, sellers can create a memorable unboxing experience for the customer. A skincare brand selling products via FBM can include a personalized thank - you note and a sample of a new product in the package, enhancing the brand - customer relationship.

3.4 Cons of FBM

Slower Shipping Times

A major drawback of FBM is the typically slower shipping times compared to FBA. When shipping from a seller's location (often outside the country where the customer is based), it can take several days to even weeks for the product to reach the customer. For example, a seller in China shipping a product to a customer in the United States via standard international shipping may take 10 - 15 business days. In contrast, FBA - fulfilled products can often be delivered within 1 - 2 days. This long shipping time can deter customers, especially those who are used to the fast - paced delivery options offered by Amazon Prime. It can also lead to lower customer satisfaction, as customers may become impatient waiting for their orders.

Seller - Handled Customer Service Hassles

With FBM, sellers are responsible for all customer service aspects related to the order. This includes answering customer inquiries about the product, shipping status, handling complaints, and processing returns. This can be a time - consuming and challenging task, especially for sellers who are also managing other aspects of their business. For instance, if a customer receives a damaged product, the seller has to deal with the issue directly, which may involve arranging for a replacement, issuing a refund, or communicating with the carrier to file a claim. Handling these customer service issues efficiently requires significant resources and can be overwhelming for small - scale sellers.

4. Head - to - Head Comparison



4.1 Cost Analysis

· FBA Costs：

Initial Investment: Sellers using FBA need to consider the costs of shipping their inventory to Amazon's fulfillment centers. This includes the cost of freight (whether by air, sea, or land), customs clearance fees (if shipping internationally), and any additional handling charges. For example, if a seller in the United States is shipping 1000 units of a small consumer electronics product to an Amazon fulfillment center in Europe, the air freight cost could be around 5000 - 8000, depending on the weight and volume of the shipment.



Ongoing Costs: Amazon charges storage fees, which are calculated based on the volume of the products stored. These fees can vary by season. During the peak season (October - December in the US), the storage fees for standard - sized products can be as high as 2.40 per cubic foot per month. There are also order - handling fees. For a small - sized item weighing up to 1 pound, the order - handling fee might be around 3 - $4 per unit, which includes picking, packing, and shipping.



· FBM Costs

Initial Investment: The initial investment for FBM is relatively low. Sellers don't have to pay for shipping large volumes of inventory to Amazon's warehouses in advance. They only need to have enough capital to purchase the products they plan to sell and cover basic packaging materials. For instance, a small - scale handicraft seller can start with just a few hundred dollars worth of inventory and some simple packing supplies like boxes and bubble wrap.



Ongoing Costs: FBM sellers are responsible for shipping each order individually. The cost of shipping depends on the carrier and the destination. Shipping a small package from the United States to the United Kingdom via a standard international carrier like USPS First - Class Package International Service might cost around 10 - 15 per package. Sellers also need to factor in the cost of packaging materials, which can add a few dollars per unit. If they outsource the packaging to a third - party, there will be additional service fees.



· Cost - Comparison Example: Consider a seller of lightweight books. If the seller uses FBA, for 1000 books stored in Amazon's warehouse for a month (assuming each book takes up 0.05 cubic feet of space), the storage fee would be 120 (0.05 cubic feet * 1000 books * 2.40 per cubic foot per month). If 100 books are sold in that month, and the order - handling fee is 3 per unit, the total order - handling cost would be 300. So, the total FBA - related cost for that month would be 420. If the same seller uses FBM and ships 100 books at 12 per package (including packaging materials), the total cost would be 1200. However, if the sales volume is very low, say only 10 books sold in a month, the FBM cost would be 120, which is much lower than the FBA cost in this case as the FBA storage fees still need to be paid regardless of the low sales volume.

5. Shipping Speed and Customer Experience

· FBA Shipping Speed

FBA offers fast shipping options, especially for Prime - eligible products. In many regions, customers can receive their orders within 1 - 2 days. In some major cities in the United States, Amazon even offers same - day or one - day delivery for certain products. This fast delivery speed significantly enhances the customer experience. For example, a customer who orders a last - minute birthday gift on Amazon and selects an FBA - fulfilled product can have it delivered in time for the celebration, which leads to high customer satisfaction.



Amazon's efficient logistics system also provides accurate tracking information. Customers can easily monitor the progress of their delivery from the moment it leaves the fulfillment center until it arrives at their doorstep. This transparency in the delivery process is highly valued by customers.



· FBM Shipping Speed

FBM typically has slower shipping times. Since the products are shipped directly from the seller's location (which could be a home - based storage, a small warehouse, or even overseas), it can take several days to weeks for the product to reach the customer. For example, a seller in Asia shipping to a customer in North America using standard international shipping might take 7 - 15 business days for the product to arrive.



This long shipping time can be a deterrent for customers. Research shows that a significant number of customers are less likely to purchase a product if the estimated delivery time is more than 5 - 7 days. The slower shipping speed can also lead to negative reviews and lower customer loyalty. For instance, if a customer orders a product for an upcoming event and it arrives after the event due to slow FBM shipping, they are likely to be disappointed and may not purchase from the seller again.

6. Inventory Management and Control

· FBA Inventory Management：

Advantages: Amazon's inventory management system is highly sophisticated. Sellers can access real - time data on their inventory levels, including how many units are in stock at each fulfillment center. This data helps in making informed decisions about restocking. Amazon also takes care of inventory storage in a safe and organized manner, reducing the risk of damage or loss due to improper storage. For example, a seller of delicate glassware can be confident that Amazon will store their products in a way that minimizes the risk of breakage.

Disadvantages: Sellers have limited control over where their inventory is stored. Amazon may distribute the inventory across multiple fulfillment centers, which can make it challenging to manage. If a seller wants to perform a quality check on their inventory or make some modifications, it can be difficult to access all the units. Additionally, if the inventory levels are not managed properly, sellers may face long - term storage fees, which can be costly.



·FBM Inventory Management

Advantages: Sellers have complete control over their inventory. They can store it in a location of their choice, whether it's a rented warehouse or a storage unit at their home. This allows for easy access to the inventory for tasks like quality control, packaging customization, and restocking. For example, a seller of handmade products can quickly access their inventory to add a personalized touch to each item before shipping.

Disadvantages: Sellers need to have a good understanding of inventory management principles. They are responsible for forecasting demand, ordering the right amount of stock, and ensuring that the inventory levels are neither too high (leading to overstocking and increased storage costs) nor too low (resulting in stockouts and lost sales). Without proper inventory management software and skills, it can be easy to make mistakes. For instance, a new FBM seller might overestimate the demand for a particular product and end up with a large amount of unsold inventory taking up valuable storage space.

7. Product Ranking and Visibility on Amazon

· FBA Product Ranking：Amazon's search algorithm generally gives a boost to FBA - fulfilled products. These products are more likely to appear in the top search results. This is because Amazon values the fast shipping and reliable customer service associated with FBA. For example, when a customer searches for "wireless headphones" on Amazon, FBA - fulfilled headphones are more likely to be among the first few products displayed.

The high visibility of FBA products can lead to increased sales. As more customers click on and purchase these products, it further improves their ranking in the search results, creating a positive cycle. Sellers can also take advantage of Amazon's advertising tools more effectively with FBA products, as the algorithm tends to prioritize FBA - fulfilled items in sponsored product placements.

· FBM Product Ranking：FBM products often face more competition in terms of search rankings. Since they don't have the same advantages in terms of shipping speed and Amazon - handled customer service, they may not rank as high as FBA products. However, FBM sellers can still improve their product visibility through effective keyword optimization, high - quality product listings, and positive customer reviews. For example, a seller of unique, hard - to - find collectibles can use detailed product descriptions and relevant keywords to attract customers who are specifically looking for those items, even though their shipping speed may be slower compared to FBA.

FBM sellers may also need to invest more in external marketing efforts to drive traffic to their products. This could include social media marketing, influencer partnerships, or running their own advertising campaigns outside of Amazon to compensate for the lower organic search rankings on the Amazon platform.

8. Which is Better for You--Consider Your Business Scale

·Small - Scale Startups：For small - scale startups with limited resources and a relatively small product range, FBM can be an excellent starting point. Since FBM requires less upfront investment in inventory storage and shipping to Amazon's warehouses, it allows these startups to test the market with minimal risk. For example, a new artisanal soap - making business can start by selling a few dozen soaps through FBM. They can use their home - based storage for inventory and handle the shipping themselves. This way, they can learn about their target customers, product demand, and market trends without the high costs associated with FBA. As they gain more experience and start to see growth in sales, they can then consider transitioning to FBA.

· Medium - Sized Growing Businesses：Medium - sized businesses that have a stable customer base and are looking to scale up may find FBA more beneficial. These businesses often have a larger inventory and need to ensure fast and reliable shipping to meet customer expectations. FBA's fast shipping and Prime eligibility can help them attract more customers and increase their market share. For instance, a medium - sized electronics retailer that has been using FBM and is now experiencing growth may find that the slow shipping times of FBM are starting to limit their sales. By switching to FBA, they can offer faster delivery, improve customer satisfaction, and potentially rank higher in Amazon's search results, leading to increased sales and business expansion.

· Large - Scale Established Enterprises：Large - scale enterprises with high - volume sales and a wide range of products can often afford to use both FBA and FBM strategically. They can use FBA for their best - selling products to take advantage of the fast shipping and high - visibility benefits. At the same time, they can use FBM for products with lower demand or for products that require special handling or customization. For example, a large - scale fashion brand can use FBA for its popular clothing lines, ensuring quick delivery to customers. For its limited - edition or custom - made products, which may have a lower sales volume but require more personalized service, they can use FBM to maintain control over the shipping and customer service process.

9. Evaluate Your Resources and Expertise

· Logistical Resources：If you have in - house logistics expertise and resources, such as a well - equipped warehouse, a team of employees for packing and shipping, and established relationships with shipping carriers, FBM can be a good choice. You can leverage your existing infrastructure to handle the order fulfillment process efficiently. For example, a company that has been in the traditional retail business and is now expanding to Amazon may already have a logistics setup in place. They can use FBM to continue using their existing resources and processes. However, if you lack logistical capabilities and don't want to invest in building them, FBA provides a ready - made solution. You can rely on Amazon's expertise and infrastructure to handle all the logistics, allowing you to focus on other aspects of your business, such as product development and marketing.

· Customer Service Resources：If you have a dedicated customer service team with the capacity to handle a large volume of inquiries, complaints, and returns, FBM may be a viable option. You can provide personalized customer service that aligns with your brand values. For example, a high - end art gallery selling artworks on Amazon can offer detailed product information and personalized after - sales service through their in - house customer service team. However, if you don't have the resources to handle customer service effectively, FBA's 24/7 customer service can be a major advantage. Amazon's team can handle all customer - related issues, ensuring high - quality service and maintaining your seller rating.

· Financial Resources：If your financial resources are limited, FBM may be the more affordable option initially. You don't have to pay the high upfront costs associated with shipping inventory to Amazon's warehouses and the ongoing storage and handling fees. This allows you to start selling with a lower investment. As your business grows and you generate more revenue, you can consider transitioning to FBA. On the other hand, if you have sufficient financial resources and are willing to invest in the long - term growth of your business, FBA can be a strategic choice. The potential increase in sales due to faster shipping, higher visibility, and better customer service can outweigh the initial and ongoing costs.

10. Conclusion

In the world of Amazon selling, the choice between FBA and FBM is not a one - size - fits - all decision. FBA offers the allure of fast shipping, high - quality customer service handled by Amazon, and enhanced product visibility, but comes with higher costs and less inventory control. On the other hand, FBM provides the benefits of lower initial investment and greater control over shipping and branding, yet is plagued by slower shipping times and more customer service responsibilities for the seller.



Ultimately, whether you choose FBA, FBM, or a combination of both, the key is to align your shipping strategy with your overall business objectives. By doing so, you can optimize your operations, enhance the customer experience, and drive the growth and profitability of your Amazon business. So, take the time to evaluate your situation, crunch the numbers, and make a decision that will set you on the path to success in the competitive Amazon marketplace.