Amazon has become one of the most popular and successful online marketplaces globally, with millions of active sellers. Every Amazon seller has two fulfillment options while running a business in this top marketplace: Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM).
Both options have their own benefits and drawbacks. Hence, sellers need to understand the differences between the two fulfillment methods to pick out which best suits their business needs.
In this article, we will cover the following key points of Amazon FBA vs FBM: A head-to-head comparison:
#1. Shipping fees
#2. Delivery time
Let’s dive right in to make the best decision for your business on Amazon!
FBA vs FBM: What to Know?
Before getting started, we want to be clear with you about the term Amazon we mention in this article, which means Amazon Marketplace. It is different from Amazon Retailer. For a better understanding, read the article about Amazon vs Amazon Marketplace.
Now, let’s get back to FBA vs FBA. What’s Amazon FBA? What is Amazon FBM? They are two different fulfillment methods used on Amazon. While the first method is preferable, with approximately 90% of sellers using it, only 38% of users use the latter. More specifically:
- FBA only: 64%;
- FBA and FBM: 22%;
- FBM only: 14%.
For a more detailed explanation of the question: “What is FBA Amazon vs FBM?”, keep reading the following parts.
What is FBA?
Let’s start with the Amazon FBA meaning. What does FBA stand for? FBA, or “Fulfillment by Amazon,” is Amazon’s service that helps sellers handle every step in the fulfillment process.
To be more clear, here is how Amazon FBA works. Sellers send their products to Amazon’s warehouses. When an order is placed, Amazon handles the product’s picking, packing, and shipping to the customer. Amazon also takes customer service and returns.
Pros and Cons of Amazon FBA
Pros | Cons |
- Access to Amazon Prime customers. | - High FBA fees: Amazon fulfillment fees and inventory storage fees. |
What is FBM?
Regarding Amazon FBM meaning, it stands for Fulfilled by Merchant, an alternative to Amazon’s FBA program. When choosing Amazon fulfilled by a merchant, sellers are responsible for fulfilling and shipping their own orders.
So, how does Amazon FBM work? FBM enables sellers to list their products on Amazon and fulfill orders themselves. They take control of customer service and product returns as well. Instead of storing products in Amazon fulfillment centers, sellers can store their products in their warehouses or use a third-party fulfillment provider. They can even apply to Amazon’s Multi-Channel Fulfillment service (MCF) to fulfill orders from other sales channels.
Pros and Cons of Amazon FBM
Pros | Cons |
- More control over the fulfillment process. | - Not eligible for Amazon Prime and fast shipping. |
FBM sellers can still participate in Prime shipping on Amazon if they register for Seller Fulfilled Prime (SFP). This Amazon program allows sellers to offer Prime shipping to their customers without using Amazon’s fulfillment network. With SFP, sellers use their resources to fulfill orders, but they must meet Amazon’s strict performance requirements, including:
- Fast and reliable shipping;
- High-quality customer service;
- Low cancellation rates.
When using SFP, sellers have some similar benefits to FBA, such as the potential to boost sales from Prime customers.
Amazon FBA vs FBM: A Head-to-Head Comparison
While both FBA and FBM have their own advantages and disadvantages, it’s important to understand the differences between the two to choose the best option for your business. Let’s have a quick look at the table below to understand these two programs better.
Criteria | FBA | FBM |
Amazon Prime fast shipping | Yes | Eligible for SFP |
Buy Box advantages | Yes | No |
Amazon SEO advantages | Yes | No |
Fulfillment | By Amazon | By sellers |
Customer service, return, and refund | By Amazon | By sellers |
Inventory control | No control | Total control |
Packing and labeling requirements | Strict requirements | Optional |
Fees | Referral, fulfillment and storage fees (Higher storage fees in holidays) | Referral fees |
Suitable products | Small and lightweight products | Bulky and heavy products |
#1. Shipping fees
When it comes to shipping fees, Amazon FBA and FBM have different cost structures. With FBA, sellers must pay fees to have their products shipped through Amazon’s fulfillment network. These fees cover the cost of packing, shipping, and handling the products to customers.
On the contrary, Amazon FBM sellers are responsible for handling and shipping their own products, which includes storage, labor, and shipping costs.
While FBM sellers don’t have to pay Amazon fees for handling and shipping their products, they still need to consider the costs involved in doing it themselves. If these costs end up being more than the fees charged by Amazon, it may be more cost-effective to use FBA instead.
#2. Delivery time
Amazon FBM vs FBA also differs in the aspect of delivery time. FBA sellers benefit from Amazon’s vast network of warehouses and carriers. That can help speed up delivery times and provide customers with a consistent shipping experience. Additionally, Amazon Prime members receive free two-day shipping on eligible FBA products, which can be a major selling point for sellers.
At the same time, with FBM, sellers are responsible for handling and shipping their own products, which can lead to longer delivery times. Particularly, if the seller is not located near the customer, the time for shipping might prolong. Hence, FBM sellers need to have a reliable shipping system in place to ensure that orders are shipped promptly and arrive in a reasonable amount of time.
#3. Inventory management
Amazon FBA vs FBM has different approaches when it comes to inventory management.
One of the main Amazon FBA benefits is that Amazon manages inventory, including tracking stock levels, monitoring expired or damaged products, and reordering inventory as needed. This greatly benefits sellers who want to focus on other aspects of their business. This is because FBA sellers will have more time and resources that would otherwise be spent on inventory management.
However, FBA sellers must pay storage fees and a fulfillment fee for each item managed by Amazon, which can be expensive for sellers with low-volume or oversized items. FBA sellers also have less control over inventory management. This can be an issue if they have unique or high-value products that require special handling.
In contrast, Amazon FBM sellers have more control over inventory management, including the ability to customize storage and handling processes to meet their specific needs. This can be particularly beneficial for sellers with products that need special packaging. Nonetheless, FBM sellers are totally responsible for managing their inventory. It might be time-consuming and require additional resources such as warehouse space and staff. Furthermore, FBM sellers have to handle and ship their own products, which can be a disadvantage if they don’t have a well-established shipping system.
So the choice between FBA vs FBM will depend on the specific inventory management needs of the seller, as well as their budget and goals.
#4. Customer Services
There is also a huge difference between FBA vs FBM regarding customer service.
For FBA sellers, Amazon takes responsibility for customer service related to order fulfillment, including handling returns, exchanges, and refunds. FBA sellers benefit from Amazon’s customer service team, which can help resolve customer issues quickly and efficiently.
In contrast, FBM sellers have more control over the customer service experience and can build more personal relationships with their customers. They can also deal with customers to receive partial refunds instead of full refunds, as Amazon will do. However, it can be challenging for sellers who lack customer service experience or have limited labor resources.
What to Consider When Choosing Amazon Fulfillment Services?
As an online business owner, it is essential to consider which Amazon fulfillment services are right for you. Below are some aspects that can help you determine whether FBA or FBM is better for you.
#1. Products
When choosing between Amazon FBA vs FBM, it’s vital to consider the type of products you sell. FBA is generally better suited for smaller, lighter, and fast-selling products, as Amazon’s fulfillment centers are optimized for these types of items.
FBM, on the other hand, can be a better option for large or slower-selling products, as sellers can avoid storage and fulfillment fees charged by Amazon. FBM is a good fit for products requiring specialized packaging that Amazon’s fulfillment centers can’t handle.
Do you have no idea which goods you should sell on Amazon? Check our article about the best products to sell on Amazon to decide which items are right for your business.
#2. Customer services
FBA can be a good option for sellers who want to take advantage of Amazon’s customer service team. FBA can also provide higher customer satisfaction, as Amazon’s shipping and handling processes are highly reliable and efficient. What is more, Sellers who choose Amazon FBA don’t have to worry as much about negative feedback from customers because Amazon takes care of most of the fulfillment process. If an FBA seller receives negative feedback, they can ask Amazon to remove it.
FBM, on the other hand, can be a better fit for sellers who want to build personal relationships with their customers. However, FBM sellers have more responsibility for the fulfillment process. That means they have a higher risk of receiving negative feedback if problems involve packing and shipping. To avoid negative reviews, FBM sellers need to pay attention to the quality of their products, how quickly they send them out, and how they communicate with customers.
#3. Expense & fees
When considering Amazon Fulfillment Services, it is important to take into account the associated costs and fees besides the referral fees. The cost for Fulfillment, storage, and shipping might be the difference between Amazon FBM fees and FBA ones.
Using Fulfillment by Amazon, sellers must pay fees for storage and fulfillment based on the size and weight of their products. Although these fees can add up, FBA sellers still gain profits if their products have high sales volumes.
FBM fees, on the other hand, may be less expensive for sellers. This is because they can cut down on the storage and fulfillment fees charged by Amazon. However, FBM sellers must invest in their own warehouse space, staff, and shipping infrastructure, which can be considerable.
#4. Logistics
Logistics is another important consideration when choosing between FBA vs FBM.
If a seller is just starting out on Amazon and doesn’t have an established logistics system, it’s suggested that they use Amazon FBA. This way, they can avoid the time-consuming process of picking, packing, and shipping their own products and focus on building their business.
For sellers who have already been selling on other eCommerce platforms and have their own logistics systems in place, it’s still worth considering Amazon FBA. This is especially true if they sell products with a high turnover rate, as FBA can potentially save them money and time on fulfillment.
FBM, on the other hand, maybe a better fit for sellers who have established a strong logistics infrastructure and want to retain more control over the delivery process. FBM sellers can choose their own shipping carriers and methods, which can benefit them for unique or specialized delivery requirements.
FBA vs FBM: Which Should You Choose?
After going through every difference between FBA and FBM, now it’s time for you to decide. We have rounded up all the main key points that can help you make the right choice. Check them for more details.
FBA is a better choice for you if:
- Your products are small, lightweight, and high in sales velocity.
- You can’t handle order fulfillment on your own.
- You don’t have strong logistics systems or can’t find any reliable delivery partner.
- You can’t ensure your items will arrive in time and as fast as FBA shipping.
- You lack space for storing inventory.
- You don’t mind paying fees for FBA services.
- You don’t have enough labor to control your inventory, track stock levels, and monitor expired or damaged products.
- You don’t have the resources to handle customer service.
FBM is a better choice for you if:
- Your products are bulky, heavy, and slower-selling products.
- You can fulfill your orders and want to control returns and refunds.
- You’ve already established a firm logistics infrastructure or corporation with a trustworthy shipping company.
- You can guarantee to ship orders to customers timely.
- You have enough room to store your products.
- You want high-profit margins.
- You want to manage inventory to customize storage as needed.
- You can offer great customer support and want to build relationships with customers.
If you are a newcomer to Amazon, you can check our guide showing how to sell on Amazon and understand the essentials to start a business on this marketplace.
Fulfillment By Amazon: FAQs
- What is better: FBA or FBM?
Deciding between FBA and FBM depends on the seller’s needs and resources. FBA offers convenience and scalability, while FBM provides more control and flexibility. Before choosing the best fulfillment option for your business, it’s important to evaluate factors like:
- Products;
- Expenses and fees;
- Storage;
- Inventory management;
- Logistics;
- Customer service.
- Does Amazon favor FBA over FBM?
Amazon does not explicitly favor FBA over FBM, but FBA does offer some advantages that can make it more attractive to sellers. For example, FBA offers more efficient shipping and handling, as well as access to Amazon’s customer service team. Moreover, FBA sellers may benefit from increased visibility in Amazon’s search results and have more chances of winning Buy Box. Ultimately, the choice between FBA and FBM depends on the individual seller’s needs and preferences.
- What is an FBM seller?
Let’s start with the following: What does FBM mean? This term stands for Fulfillment by Merchants. That means FBM sellers use their own resources to fulfill orders on Amazon, including managing their inventory, shipping orders to customers, and providing customer service. FBM sellers have more control over the customer experience and may save on shipping and fulfillment costs. However, FBM sellers need to invest more time and resources into managing their business.
Final Words
In short, both FBA and FBM have their advantages and disadvantages for sellers. Hence, sellers must weigh all the pros and cons of FBA vs FBM and determine which path or combination best suits their business needs. With the options available today, there is no single right answer for every seller.
Alternatively, sellers can choose a hybrid approach that may work best. Use FBA for some products and FBM for others based on factors like product size, shipping demands, and fees. When FBA products are out of stock, sellers can also switch to FBM to keep offering.
Don’t forget to stay connected with LitCommerce by following our Retailers Blog and joining our Facebook community. There, you can find the most recent updates and trends in the eCommerce industry. If you have any questions or concerns, please don’t hesitate to message us anytime.
