Jan 18th 2021
Resources
- Facebook Ads for Amazon [Video Course]
- Drive Traffic To Amazon [Ultimate Guide]
- Get More Amazon Reviews [Ultimate Guide]
Bottom Line: there are two ways Amazon sellers can fulfill orders, Amazon FBA vs FBM. You can let Amazon store, pick and ship your products, or manage it yourself. Both offer their own advantages. FBA is easier for new businesses, while FBM offers more control and (mostly) lower fees. You can also utilize both fulfillment methods, which is a good way to protect against losses if one channel experiences delays.
Fulfillment is a vital part of running an e-commerce business. Today, shoppers want their orders to arrive ASAP. If you can’t offer that, they customer’s going to go somewhere that does.
It’s a big reason that Amazon is atop the e-commerce world in 2021. Fast, free shipping is the #1 reason that 79.8% of consumers say they shop on Amazon.
Amazon sellers can choose from two fulfillment methods: FBA and FBM. Getting it right is a must, as you don’t want to be offering slower, more expensive shipping than your competitors.
Summary of Contents
In this post we’ll cover:
- Fulfilled by Amazon (FBA): what it is, and how much it costs to sell with FBA.
- Fulfilled by Amazon (FBM): what this means, and how to sell with FBM.
- Other fulfillment-related terms, such as Seller Fulfilled Prime (SFP) and Multi-Channel Fulfillment (MCF).
- Advantages for FBA sellers.
- Advantages for FBM sellers.
- Whether you can use FBA and FBM.
- Final verdict on FBA vs FBM, and how to switch fulfillment methods.
Read on, and we’ll explain how each method works, and which is better for you – FBA vs FBM.
What is FBA?
FBA stands for Fulfilled By Amazon. When a lot of people think about selling on Amazon, Amazon FBA comes to mind.
With FBA, you let Amazon pick, pack and ship orders.
Amazon also handles customer service and returns, and any other tasks related to shipping.
This system allows Amazon sellers to take their hands off a big part of the business, and focus on other areas.
With fulfillment by Amazon, you’ll ship products directly to Amazon’s fulfillment centers. There they’ll be stored, and Amazon will pack and ship inventory when necessary.
How much does FBA cost?
There are two types of fees you’ll be charged with FBA: fulfillment fees and storage fees.
Fulfillment fees cover picking and packing orders, shipping and handling, customer service and product returns. Fees are charged per unit, based on size and weight.
See what constitutes standard size vs oversize here
The fee structure as of December 2019 is:
Standard sized items
- Small – 10oz or less – $2.41 per unit
- Small – 10oz to 16oz – $2.48
- Large – 10oz or less – $3.19
- Large – 10oz to 16oz – $3.28
- Large – 1lb to 2lb – $4.76
- Large – 2lb to 3lb – $5.26
- Large – 3lb to 21lb – $5.26 + $0.38/lb above first 3 lb
Oversize items
- Small oversize (71lb or less) – $8.26 + $0.38/lb above first 2 lb
- Medium oversize (151lb or less) – $9.79+ $0.39/lb above first 2 lb
- Large oversize (151lb or less) – $75.78 + $0.79/lb above first 90 lb
- Special oversize – $137.32 + $0.91/lb. above first 90 lb
There are additional charges of $0.40/unit for clothing items and $0.11/unit for items with lithium batteries.
Storage fees are charged monthly, per cubic foot your items are taking up. The prices are different depending on the time of the year (storage fees go up closer to the holiday season).
The fees are:
Standard sized items
- January – September: $0.69/cubic foot
- October – December: $2.40/cubic foot
Oversize items
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- January – September: $0.48/cubic foot
- October – December: $1.20/cubic foot
There are a few additional fees for fulfillment by Amazon, including:
- Long-term storage fees (for stock that has been in fulfillment centers for more than 365 days)
- Removal order fees (if you need to take any of your items out of circulation)
- Returns processing fees (for orders where Amazon offers the customer free returns shipping)
- Unplanned service fees (if your inventory isn’t properly labeled or prepared when it comes to the fulfillment center)
See full details on Amazon FBA pricing here
What is FBM?
FBM means Fulfilled By Merchant. With this method, you’re required to store, pack and ship products yourself.
Most of the time, you don’t actually do this yourself – instead, FBM sellers work with a third-party logistics (3PL) company to manage ERP supply chain management.
Listing and selling a product with FBM is mostly the same as FBA. You set up product listings the same way, only you choose a different fulfillment method.
With Fulfillment By Merchant, once orders come through, you’re responsible for making sure orders go out to customers.
The only Amazon fees fulfillment by merchant are the base Amazon seller fees ($39.99 for the Professional selling plan, or $0.99 per item for the Individual selling plan).
You will still have to pay for storage and shipping. But you can likely find cheaper alternatives to FBA with third-party fulfillment centers.
How to list a product with FBM
Listing on Amazon for FBM is simple, and you can even change the shipping method at any time.
The listing process for FBM is largely the same. The only difference in your listing details is where you stipulate how the product is to be shipped:
- “I want to ship this item myself” (fulfillment by merchant)
- “I want Amazon to ship & provide customer service for my items” (fulfillment by Amazon)
There’s a simple checkbox for you to choose either FBA or FBM.
Once you’ve set your product to merchant-fulfilled, you’ll go to the “Manage Orders” screen in Seller Central to view your orders and confirm when they’re sent out.
To sell with FBM, you’ll need access to your stock and the ability to arrange fulfillment of it yourself, obviously. So consider this if you’re switching over from FBA.
Additional Shipping Methods: SFP & MCF
There are two more acronyms you’ll come across related to fulfillment and FBA vs FBM. These are SFP (Seller Fulfilled Prime) and MCF (Multi Channel Fulfillment).
What is SFP?
SFP means Seller Fulfilled Prime.
This means you’re selling and fulfilling orders with FBM, but you’re qualified to offer Amazon Prime 2-day shipping.
Usually, FBM sellers can’t offer Prime shipping, and show the Prime badge on the listing (this is a big plus for FBA sellers). However, if you (or your fulfillment partner) is approved by Amazon, you can still be a part of Amazon Prime, yet fulfill orders yourself.
To be eligible for Seller Fulfilled Prime, you need to maintain positive shipping and fulfillment performance metrics, to prove you can offer shipping on the same level of speed and reliability as Amazon Prime.
If you’re using a 3PL company to fulfill your orders, it’s up to them to provide shipping that satisfies Amazon’s requirements for SFP. Luckily many fulfillment centers have been working with Amazon FBM sellers for a long time and have a suitable network in place to offer Seller Fulfilled Prime.
The value of Amazon Prime for your products cannot be understated. That’s why it’s important to look for a 3PL that can offer Prime shipping when you’re shopping around for fulfillment centers.
Learn more about SFP, or Seller-Fulfilled Prime
What is MCF?
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MCF is Multi Channel Fulfillment.
This is part of FBA, wherein you fulfill orders from outside of Amazon with your FBA inventory.
You can create manual orders, or integrate with your own store, to use Amazon as your fulfillment method even when you’re selling somewhere else.
Orders are shipped out in Amazon-branded boxes, and the cost is higher than regular FBA rates. So it’s not the best long-term strategy if you get a lot of orders through your own site.
However, it’s a good way to manage fulfillment if you have a small number of orders through off-Amazon channels, yet you want to keep the benefits of FBA for your Amazon listings.
Learn more about Amazon Multi Channel Fulfillment
What Are The Advantages of FBA?
Struggling to decide between Amazon FBA vs FBM? Here are some of the biggest advantages for Amazon FBA sellers:
Guaranteed Amazon Prime shipping
Amazon Prime is a big reason for many people to shop on Amazon. In fact, 7% of Prime members buy something online daily, or almost every day.
This means it’s a huge plus to have the Amazon Prime badge on your listing. When customers know they can get fast, free shipping from Amazon, they’re more likely to buy, especially compared to a product that charges extra for shipping.
FBA sellers get more clicks to the listing (from the Amazon Prime badge in search results), and a higher conversion rate as well.
Easier to win the Buy Box
The Buy Box is incredibly important for Amazon sellers. It’s the section on the side of the page with the “Add to Cart” button. Without the Buy Box, customers have to click the “buy from other sellers” link to buy from you.
Almost all of the sales on Amazon come through the Buy Box. So, if you lose the Buy Box to someone else, you lose most of your sales.
Amazon generally gives preference to sellers who use FBA when deciding who has the Buy Box. This is because Amazon is confident they can ship products on time and with no problems, while merchant fulfilled products are more of a mystery.
FBA products also make more money for Amazon, thus is makes sense that they would want to push people to buy from FBA vs FBM.
Less management required
FBA takes a LOT of work off your plate.
Most Amazon sellers know how many little tasks it takes to keep your business operating. Managing and shipping orders, as well as handling customer service and returns related to fulfillment, likely requires a full-time staff member.
You can save on this by using FBA, giving you or your team more time to focus on other areas of your business.
Nearly infinite storage
Storage space is not an issue with Amazon FBA, as Amazon has massive fulfillment centers all over the US (and the world, if you’re an international seller).
If you’re storing your stock at home, you’ll only have so much space to put everything, limiting the volume you’re able to sell.
With an independent fulfillment center, you have more space. However, these centers are not close to what Amazon offers you.
Location independent
One of the great things about FBA is it lets you run an e-commerce business from anywhere in the world. Many entrepreneurs have been able to start up and run their business without needing to be in a specific location, thanks to FBA.
This opens the door for much more flexible business models and better lifestyles than being tied down to one place.
Summing Up: the pros of fulfillment by Amazon (FBA) include guaranteed Amazon Prime shipping, easier to win the Buy Box, less management required and making it easier to manage your business remotely. FBA sellers almost always make more sales, thanks to the Buy Box and being able to offer Amazon Prime.
What Are The Advantages of FBM?
FBA doesn’t work for everyone, and every situation. Fulfillment by Merchant (FBM) has certain advantages too. Let’s look at the advantages for Amazon FBM sellers.
Lower fees
All the benefits of Amazon FBA come at a cost. FBA fees are not cheap, and cut into your margins significantly. You can save quite a bit by handling this yourself, or working with a cheaper third-party facility.
Saving on fulfillment and storage fees not only puts more money in your pocket from each sale, it can allow you to price your products lower than your competitors and increase sales velocity.
Hands-on ability
Fulfillment by Merchant allows you to take full control of your orders. This can allow you to go above and beyond with your customer service.
FBM sellers can personally ensure that orders are correct – vs FBM, FBA requires to you trust Amazon to give your customers the experience they expect.
FBM sellers can also add freebies and put together custom orders for customers, and cater to special requests.
Better, more personal service is a great way for Amazon sellers to get more positive reviews.
It’s also easier to take products out of circulation and inspect them if customers complain of quality issues or defects. Fulfillment by Amazon requires you to create a removal order and have all stock pulled out of circulation in Amazon’s fulfillment centers.
Better for slow-moving, big or heavy products
Amazon FBA fees are especially harsh for certain types of products. If your products are large, heavy, or likely to be in Amazon’s fulfillment centers for a long time, it’s going to get really expensive.
Fulfillment by Merchant makes more sense for products like these – oversize items, heavy items, or products you’re just not sure will sell a lot.
You’ll save a lot on storage (particularly long-term storage fees), allowing you to make much better profits and price competitively.
Cheaper for multi-channel fulfillment
FBA sellers can fulfill orders from non-Amazon sales channels, such as your own site or marketplaces like eBay or Walmart, with multi channel fulfillment.
However, this is quite expensive, and not ideal if you’re moving a lot of product on other channels.
If you’re selling a lot of stock on different sites, it simplifies your workflow and cuts down costs if you manage all your fulfillment with a 3PL.
In this case, FBM works better, as you don’t need to worry about juggling multiple warehouses full of stock.
Can You Sell With FBA and FBM?
You don’t necessarily need to choose either FBA or FBM. You can use both.
In a report surveying over 1000 Amazon sellers, 66% used FBA to fulfill orders, and 6% used FBM. 29% used both FBM and FBA, however.
These days, it makes a lot of sense to diversify, and have a plan B. Utilizing both FBA and FBM does that for you.
March/April 2020 was an example of why diversification is important. For most businesses I’d recommend using FBA, as you can offer faster shipping this way.
However, during the start of the pandemic, Amazon was unable to handle orders as they usually do, which resulted in slower shipping times (averaging around a month) and inventory limits for restocking.
For a while, Amazon switched preference for the Buy Box to FBM sellers, as they could not keep up with all FBA orders.
In this situation, access to fulfillment by Merchant meant you could continue offering <1 week shipping, and take sales away from competing FBA sellers.
Whether or not this situation will happen again in the future is unknown, but it’s just one example where diversification can save your business.
You may not want to keep stock with a 3PL at all times. But you can scout potential providers and do a test run with them, so you’re confident you’ll be able to switch over to FBM if there is ever any trouble from Amazon.
Amazon FBA vs FBM: What is the Best?
The best fulfillment method for Amazon comes down to your own situation. The answer will likely differ from seller to seller.
Amazon FBA is the best if all or most of your sales come from Amazon, and you’re selling regular-sized, fast-moving products.
The lower workload for FBA sellers is extremely valuable. This allows you to put more focus on other areas of your business, and operate with a smaller team.
You’re also likely to sell more with FBA, as you can offer the benefits of Amazon Prime shipping, and you’re more likely to rank higher and control the Buy Box.
FBM is the best if your sales are slower or less predictable, if you have oversized or heavier products, or if you’re selling a lot on other channels.
In many cases, FBM sellers are able to save a lot on fees by finding a cheaper logistics partner, or even by managing orders yourself.
Consider moving to FBM if you expect stock to be sitting unsold for a while, or you have the kind of products that cost a lot to store and ship (heavy, oversize).
Additionally, if you get a lot of orders outside Amazon (for example, Walmart, eBay, Facebook, your own site), it will be easier and cheaper to manage all your orders from one fulfillment partner, rather than sending stock to many different places or using MCF (which is expensive).
If you sell with FBM, try to find a 3PL that offers Seller Fulfilled Prime, as you’ll get more conversions if you can offer the Prime badge on your listing.
Amazon FBA vs FBM: Our Verdict
If you’re on the fence between FBA or FBM, or just starting your business, choose FBA. However, consider using both, so you have one channel as a fallback in case the other has problems. If you don’t want to keep stock in both FBA and FBM at the same time, at least have a plan to be able to switch over, if necessary.
