Bottom Line: there are two ways you can fulfill orders, Amazon FBA vs FBM – having Amazon store, pick and ship your products, or managing 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.
You can choose from two fulfillment methods when you sell on Amazon: FBA and FBM. Getting it right is a must, as you don’t want to be offering slower, more expensive shipping than your competitors.
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, Amazon handles storage, packaging, shipping and everything related to fulfilling orders. Amazon also handles returns, and other customer service tasks related to shipping.
This system allows you to take your hands off a big part of the business, and focus on other areas.
When you sell with FBA, you have your supplier send products straight to Amazon. They are then stored in Amazon’s warehouses, and shipped out when you get an order.
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.
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
- 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
- January – September: $0.48/cubic foot
- October – December: $1.20/cubic foot
There are a few additional fees that may come up, 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)
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, you’ll work with a third-party logistics (3PL) company to manage your supply chain.
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 FBM, once orders come through, you’re responsible for making sure orders go out to customers.
The only fees charged by Amazon for selling with FBM 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 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” (FBM)
- “I want Amazon to ship & provide customer service for my items” (FBA)
There’s a simple checkbox for you to choose which option you want to go with.
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 the FBA vs FBM debate. These are SFP and MCF.
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 with FBM you can’t offer Prime shipping, and show the Prime badge on your listing (this is a big plus for selling with FBA). 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 SFP, 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 3PL companies have been working with Amazon sellers for a long time and have a suitable network in place.
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 partners.
What is MCF?
MCF is Multi-Channel Fulfillment.
This is part of FBA, wherein you fulfill orders from outside of Amazon with your Amazon 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.
What Are The Advantages of FBA?
Struggling to decide between FBA vs FBM? Here are some of the biggest reasons to go with Amazon FBA:
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.
So, by using FBA, you’ll get more clicks to your listing (from the Amazon Prime badge in search results), and you can expect 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
Amazon FBA takes a LOT of work off your plate.
When you run an Amazon business, you’ll soon realize 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.
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, due to Amazon FBA.
This opens the door for much more flexible business models and better lifestyles than being tied down to one place.
What Are The Advantages of FBM?
FBA doesn’t work for everyone, and every situation. There are strong reasons to fulfill orders yourself, with FBM.
All the benefits of Amazon FBA come at a cost. Amazon’s fees for storage, preparation and shipping are not cheap, and really cut into your margins. 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.
Fulfilling orders yourself allows you to take full control of your orders. This can help out in a lot of situations, and allow you to go above and beyond with your customer service.
You can personally ensure that orders are correct, instead of putting your trust totally in Amazon’s hands. You can add freebies and put together custom orders for customers, and cater to special requests.
Better, more personal service is a great way to get more positive reviews from your customers.
It’s also easier to take products out of circulation and inspect them if customers complain of quality issues or defects (with FBA you’ll have to get your stock sent back to you, and then send it back again).
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.
Products like these – oversize items, heavy items, or products you’re just not sure will sell a lot – will make more sense to fulfill yourself.
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
You can use FBA to fulfill sales from non-Amazon sales channels, such as your own site or marketplaces like eBay or Walmart, with the multi-channel fulfillment feature.
However, this is quite expensive, and not ideal if you’re moving a lot of product on other channels.
If Amazon isn’t your primary sales channel – say, for example, you get a lot of sales from your own Shopify site – you may want to think about using a 3PL provider.
This lets you manage all your products at the same place, and save a lot of money fulfilling your off-Amazon sales.
Can You Sell With FBA and FBM?
You can absolutely 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, over this time 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.
In this situation, having a system in place to switch to FBM meant you could continue offering <1 week shipping, and take sales away from competitors who were still stuck on FBA.
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 FBM vs Amazon FBA: 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 number of tasks taken off your plate by FBA 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, you’ll be 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.
How to Switch from FBA to FBM
If you’ve been debating FBA vs FBM and want to make the switch, here are the steps you need to follow.
Choose a fulfillment partner
Before switching your listing over to FBM, you should settle on a new fulfillment partner.
Choose a 3PL company that fits your needs, and send a shipment in. It’s important to make sure you have stock at your new fulfillment partner before switching over, so you don’t have a period where your product is out of stock.
Convert your listing to FBM
Sign in to your Amazon Seller Central account. Click on Inventory, then Manage FBA Inventory (or just Manage Inventory).
Find the product you want to switch, and click Edit. Find and choose Change to Fulfilled by Merchant.
Alternatively, if you want to use both FBA and FBM, go ahead and add a new product. Set it up the same as your FBA listing, but choose Fulfilled by Merchant instead.
Create a removal order
If you’re switching from FBA to FBM, and no longer plan to sell any stock from FBA, you’ll want to get this stock removed, to avoid paying long-term storage fees.
Create the removal order from within your Seller Central account. You can choose to have the remaining products sent to you, or directly to your 3PL.
Final Thoughts – FBA vs FBM
Fulfilling orders correctly, safely and on time is the most important part of selling online.
Mess this up, and you’re going to get returns, bad reviews, and low account health metrics.
If you want to rank high, maximize your sales and conversion rate, and keep your customers happy, make sure you choose the right fulfillment method (and the right logistics partner).
The right decision will also save you on fees, giving you the ability to build a better and more profitable Amazon business.
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