Amazon FBA vs FBM Comparison Guide

What is the difference between Amazon FBA and FBM?

Fulfillment by Amazon (FBA): A method of selling on Amazon in which sellers (or sellers' suppliers) send their products directly to Amazon's warehouses. Amazon then stores the inventory and ships it directly to the customer (usually via their 2-day Prime shipping). They also manage customer support.

Fulfillment by Merchant (FBM): A method of selling on Amazon in which sellers list their products on Amazon, but manage all storage, shipping, and customer support themselves (or through other third parties).

Which one should sellers use?

From small businesses and home sellers to major brands with well-established supply chains, Amazon sellers of all kinds can benefit from Amazon FBA and FBM fulfillment. But how do you choose the right product for your business?

First, consider your sales strategy:

Private Label: Create your own product label /brand

Wholesale: Buy products directly from brands or distributors with additional inventory to sell on Amazon

Retail Arbitrage: Buying discounted products through retailers to sell on Amazon

Online Arbitrage: Buy discounted products online to sell on Amazon

Dropshipping: Buying products directly from the manufacturer, the manufacturer fulfills the order and ships directly to the customer

Handmade: Create /make your own products to sell on Amazon

Then, there are six main factors you should consider before you choose a fulfillment method on Amazon.

lProduct size and weight

lCustomer experience control

lSeller feedback

lInventory turnover rate

lLogistics _

l Fees and charges

Below, this article will detail these factors.

Below is a quick overview of which method you should use based on these factors.

You should use FBM if

You want more control over your customers

Your excellent customer service practices are in place

You are selling a product that is too large or too heavy

You are ready for logistics

You can reduce the costs involved in fulfilling your own products

Your inventory turns slowly

You should use FBA if:

The products you sell are small and lightweight

You can hand over control to Amazon

You want Amazon to handle your customer service

Your inventory turns quickly

You don't have the logistics in place

Your fees will be higher if you fulfill your own products

Can you use FBA and FBM at the same time?

Can. In fact, 34% of Amazon sellers sell both FBA and FBM.

If you have a wide variety of products, you might consider using both to benefit from both.

For example, let's say you sell two types of products. One product is oversized and flips slowly. The second product is small in size and turns over quickly. To maximize your profits and minimize your expenses, you will use FBM to sell large/slow selling products and FBA to sell small/fast selling products.

1. Item size/weight

Amazon's fee structure and logistics favor FBA sellers with small size, light weight, and fast turnaround . Conversely, Amazon's fees (especially FBA fees and storage fees) are not conducive to selling oversized, overweight products.

To determine which shipping method is best for your product, you can use Amazon's FBA revenue calculator to forecast fees and expenses.

Example 1. You are selling the garlic press FBM as pictured below. Assuming your price is $7.99 and your product shipping cost is $6.20, then it costs $1.20 to sell on Amazon and the product costs $1.50. In this case, by selling FBM, you will lose $0.91 per trade.

$7.99 – ($6.20 + $1.20 + $1.50 = $8.90) = – $0.91

However, if you sell the same garlic press through FBA, the cost will be lower. While the cost of the product and the fee to sell on Amazon remain the same ($1.50 and $1.20, respectively), the fee to fulfill the product is $3.64 instead of $6.20.

$7.99 – ($3.64 + $1.20 + $1.50 = $6.34) = $1.65

Finally, by selling FBA, your profit is $1.65 per item (20.65% profit margin).

Example 2. You are selling a kayak FBM as pictured below. Let's say your retail price is $75, the cost of fulfilling the product is $28.00, the fee is $11.25, and the cost of goods sold is $15. In this case, you would make a profit of $20.75 (27.67% profit margin).

$75 – ($28 + $11.25 + $15 = $54.75) = $20.75

However, if you are selling the same kayak via FBA, you must consider both the cost of shipping the product to Amazon and the end user (FBA fees described below). In the end, you only made a profit of $4.13 (5.51% profit margin).

$75 – ($44.62 + $11.25 + $15 = $70.87) = $4.13

How do I ship Prime products using Amazon FBA and FBM?

Both FBA and FBM sellers can ship products through Prime. Prime is a program Amazon offers its shoppers to reward them with perks like one- or two-day shipping. According to Amazon, Prime sellers compete more effectively than non-Prime members.

Products shipped by Amazon will automatically receive Prime benefits. However, seller-fulfilled products can only be sold through Prime if the seller is part of the Amazon Seller Fulfillment Prime program.

At the time of writing, there is a waiting list to join the program, so entry is not guaranteed.

2. Control of customer experience

FBM sellers store their own products, ship their own products, and handle all customer service for their Amazon sales.

Sellers using FBA, on the other hand, use Amazon to store and ship their products and handle customer service on their behalf. FBA sellers rarely, if ever, talk to their customers. As a result, FBM sellers have more control over their customers' experience.

3. Seller feedback

Amazon’s seller feedback system is a way for customers to communicate to Amazon their satisfaction with third-party sellers and the resulting transactions.

Seller feedback has two components:

Star Ratings: Just like product reviews, shoppers can rate seller performance on a scale of 1-5.

Comments: In addition to star ratings, shoppers can comment on why they give a seller a certain rating.

Note that seller ratings are not the same as product ratings /reviews. Seller ratings only cover elements of the actual transaction, such as shipping, whether the product matches the description on Amazon, and seller communication.

Because Amazon handles most of the steps involved in shipping FBA products, FBA sellers don't have to worry about seller feedback. In fact, if Amazon processes an FBA seller's transaction and the seller receives negative feedback, the seller can request that the feedback be removed.

Since FBM sellers have more control over their transactions, they are more likely to receive negative feedback from sellers on Amazon. Therefore, FBM sellers must pay more attention to the condition of the products they send, how fast they send it, and how they handle all communications with sellers.

4. Turnover

A seller's turnover rate is how quickly they sell and replenish their inventory. Turnover for FBA sellers is important because Amazon tracks how long inventory stays in this fulfillment center.

The longer a product stays in a fulfillment center, the more storage fees the product incurs. Amazon then starts charging sellers long-term storage fees if the product is in an Amazon fulfillment center for 365 days or more.

Therefore, sellers with slow product turnover should consider fulfilling their own products to avoid Amazon’s expensive storage fees.

5. Logistics

Picking, packing and shipping your own products can be time-consuming. Therefore, sellers who are new to Amazon and do not yet have their own fulfillment logistics are advised to start with Amazon FBA. This way, they can focus on other important elements of building a business with Amazon.

For sellers who have added Amazon as a new sales channel and already have fulfillment, they may still want to see if Amazon FBA can save them fulfillment fees, especially if they sell and ship high-turnover products.

6. Fees

Amazon FBA sellers must pay FBA fees to ship through Amazon's fulfillment network. FBA fees include the cost of picking, packing, and shipping goods for consumers. In a way, they are "shipping and handling fees" charged by Amazon.

While Amazon FBM sellers don't have to pay FBA fees, they must still consider the costs involved in handling and shipping their own products. This includes storage costs, labor costs, product packaging costs, and the actual cost of shipping the product.

If these costs are higher than letting Amazon handle the fulfillment, sellers should consider using Amazon FBA.

What are the main differences between FBA and FBM sellers?

In addition to the methods they use to fulfill their products, we found some key differences between sellers using FBA and those using FBM.

Which is more profitable: Amazon FBA vs FBM?

FBM sellers sell more, FBA sellers have large profit margins

33% of FBM sellers earn more than $25,000 a month compared to 26% of FBA sellers

37% of FBA sellers have a profit margin of over 20%, while FBM sellers have a profit margin of 32%

Which sellers start selling faster: Amazon FBA vs FBM?

FBM sellers launched their Amazon business faster than FBA sellers.

51% of FBM sellers started using Amazon in less than six weeks compared to 34% of FBA sellers

28% of FBM sellers are profitable in less than three months compared to 20% of FBA sellers

Which method takes less time to manage: Amazon FBA vs FBM?

FBA sellers spend less time in business than FBM sellers .

20% of FBM sellers spend more than 40 hours per week on Amazon business compared to 16% of FBA sellers

Both FBM and FBA sellers attribute their success on Amazon to having time dedicated to their business (53% and 52%, respectively)

What are the top product categories for FBA and FBM?

Other finds: Selling on Amazon FBA vs FBM

FBA sellers primarily focus on private label sales, while FBM sellers engage in other sales models at a higher rate.

67% of FBA sellers use a private label business model compared to 65% of FBM sellers

41% of FBM sellers use a wholesale business model, while 31% of FBA sellers

15% of FBM sellers use a dropshipping business model, while 10% of FBA sellers

FBM sellers tend to start with less startup capital

37% of FBM sellers start below $1,000 compared to 27% of FBA sellers

35% of FBA sellers start over $5,000 compared to 27% of FBM sellers

FBM sellers have far more product listings (more category diversity) on Amazon than FBA sellers.

More than half of FBA sellers (53%) have fewer than 10 products, while more than half of FBM sellers (59%) have more than 50 products.

FBM sellers have a higher share of all Amazon categories than FBA sellers

FBA sellers are less concerned about the impact of increased competition than FBM sellers

39% of FBM sellers are concerned that increased competition will drive down prices, compared to 32% of FBA sellers

32% of FBM sellers are concerned that Amazon is selling products in direct competition with their own, compared to 28% of FBM sellers