Amazon FBA vs FBM: Which is Right for My Business?

Amazon might be the world’s predominant ecommerce force, but even the most all-conquering of enterprises had to start somewhere — and in Amazon’s case, it was the garage of Jeff Bezos, as the future staple of Forbes’ list of real-time billionaires launched his fledgling online book-selling business in the mid-1990s.

Fast forward three decades and Amazon is comfortably one of the globe’s biggest and most successful brands, recently becoming one of only a handful of U.S. companies to reach $2 trillion (yes, trillion) in stock market value.

Today, Amazon is not only the world leader in ecommerce but also its premier online marketplace, with an estimated 9.7 million third-party merchants selling their products through the platform and tapping into Amazon’s colossal customer base.

If you’re planning to become an Amazon seller yourself, you can choose to fulfil customer orders in one of two ways: FBA or FBM. The former effectively involves handing control of order fulfilment over to Amazon, while the latter means you sell products on the platform while managing the logistics yourself.

But which method is best for your business? In this guide, we break down the differences between Amazon FBA and FBM, weigh up the pros and cons, and help you decide which model to choose.

What is Amazon FBA?

FBA stands for Fulfilment by Amazon. It’s a model whereby online sellers ship their inventory to one of Amazon’s many fulfilment centres and leave Amazon to effectively do the rest — they manage storage, process orders, pick and pack stock, and ship items directly to the customer. They even handle returns and most aspects of customer service.

How does Amazon FBA work?

After a seller creates an account and lists their products on Amazon Seller Central, they ship their inventory to Amazon. Amazon stores the products, makes them available for sale, and from the moment an order is placed, takes care of packing the item (in Amazon-branded packaging), shipping it, and dealing with any order- or delivery-related queries.

Naturally, this means there’s little responsibility on sellers when it comes to logistics — other than shipping stock to Amazon in the first place — which makes for a pretty convenient, low-effort process. In return, though, Amazon charges sellers for storage space, fulfilment services, and sometimes additional fees for long-term storage of slow-moving products.

Who is Amazon FBA suitable for?

Amazon FBA is typically suited to sellers looking for a more “hands-off” approach to fulfilment, where shipping, returns, and customer service are all managed by Amazon on their behalf. It’s often an ideal fulfilment solution for those without their own established warehousing and shipping operations, who want to leverage Amazon’s vast and powerful logistics network.

Here are a few examples of the types of seller Amazon FBA might be suited to:

• Online sellers looking to outsource logistics and have all aspects of fulfilment managed on their behalf.
• Sellers handling high-volume products who want to scale quickly without managing inventory or fulfilment directly.
• Businesses that want to reach Amazon Prime customers, benefiting from faster shipping and increased visibility.
• Those who prefer to outsource returns and refunds handling, reducing the operational burden on their side.
• Sellers who want to focus on marketing and product development rather than operational logistics.

What is Amazon FBM?

FBM stands for Fulfilment by Merchant. In this model, merchants sell their products through the Amazon platform, but unlike with FBA they handle everything fulfilment-related themselves — FBM sellers are responsible for their own storage, picking, packing, and shipping, and they also process returns and handle all customer issues and queries.

How does Amazon FBM work?

As with FBA, FBM sellers start by creating a Seller Central account and listing their products — but the difference is these products are stored and fulfilled via the seller’s own warehouse. When a customer places an order, the seller is responsible for picking and packing the item from their own inventory and shipping the product directly to the customer.

This gives sellers greater control over their logistics operations — allowing them to customise packaging and work with preferred shipping carriers, for example — but managing all fulfilment in-house can be time-consuming and labour-intensive, particularly as FBM sellers are responsible for aspects like customer service and returns.

Who is Amazon FBM suitable for?

Amazon FBM is designed for sellers who want to tap into Amazon’s vast customer base but prefer to retain control over their own logistics and fulfilment processes. It’s also a good option for merchants who want to offer a more bespoke, personalised customer experience or those operating on tighter margins who need to manage costs carefully.

In general, Amazon FBM would suit the following types of sellers:

• Sellers who prefer full control over their inventory, packaging, and shipping processes.
• Businesses with established warehousing and logistics capabilities, or those with unique packaging or branding needs.
• Sellers with larger, bulkier, or lower-margin products, where FBA fees would be too costly.
• Entrepreneurs who sell across multiple channels (e.g. their own website, eBay) and want to manage fulfilment from a central location.
• Sellers who are comfortable handling customer service, shipping issues, and returns without Amazon’s assistance.

What are the main differences between FBA and FBM?

The distinction between FBA and FBM ultimately comes down to two things: convenience and control. With FBA, sellers benefit from the convenience of handing storage, shipping, and customer service over to Amazon; FBM sellers, on the other hand, may have a more significant workload but they retain a greater degree of control over their logistics processes.

To offer up a rather flimsy food-related analogy, it’s a little like ordering a takeaway versus preparing your own meal from scratch — the former provides easy convenience and lessens your own workload, while the latter gives you greater control over the ingredients and cooking method, but requires a lot more planning and effort (don’t mention the washing up!)

These differences are naturally reflected in the costs, too. FBA sellers pay more to Amazon to outsource all aspects of order fulfilment, while the fees for FBM are considerably lower. That said, FBM sellers must manage their own costs when it comes to storage and shipping — and will have to factor in the expense of using a third-party shipping carrier.

Pros and cons of Amazon FBA and FBM

Of course, these two distinct fulfilment models both have their own benefits and drawbacks, and it’s important to factor these in when determining which method to opt for. For instance, FBA offers the advantage of convenient, hands-off inventory management, but it limits control and comes at a significant cost.

Conversely, FBM might be ideal for sellers who want more control and flexibility over their packaging and fulfilment processes, but this means a far heavier workload for in-house teams.

Here’s a breakdown of the most significant benefits and disadvantages of FBA and FBM:

✔️ Advantages of Amazon FBA

• Streamlined logistics. Amazon handles storage, picking, packing, shipping, and even customer service and returns, greatly reducing the seller’s workload.
• Prime eligibility. FBA products are automatically eligible for Amazon Prime, potentially increasing visibility and improving conversion.
• Faster shipping. All orders are sent via Amazon’s vast logistics network, ensuring speedy delivery times and enhancing customer satisfaction.
• Greater visibility. Products that are fulfilled by Amazon tend to be given priority in search results, meaning they’ll be more visible to potential customers.
• Higher sales potential. Access to Amazon’s fulfilment network, Prime eligibility, and a greater likelihood of winning the Buy Box can lead to increased sales.

❌ Potential drawbacks of Amazon FBA

• High fees. Sellers pay for storage, fulfilment, and various other services, which can add up — especially long-term storage of slow-moving products.
• Limited control. Sellers have no control over packaging, branding, or the overall customer experience, as Amazon uses its own standardised processes.
• Storage restrictions. Amazon sometimes imposes storage limits, particularly if inventory turnover is slow. This restricts how much stock you can send to FBA.
• Increased returns. While Amazon handles all returns, the convenient returns process can actually increase the number of returned products.
• Complex reimbursement process. Dealing with inventory loss, damage, or reimbursement claims from Amazon can be time-consuming and challenging.

✔️ Advantages of Amazon FBM

• Lower fees. FBM sellers avoid having to pay Amazon’s storage and fulfilment fees, which results in lower monthly costs and can increase profit margins.
• Greater control. Sellers retain complete control over packaging, branding, and customer service, allowing for a more personalised customer experience.
• Flexible inventory management. Sellers decide how to manage their own inventory, allowing for more tailored restocking and storage processes.
• Customisable returns policies. Sellers can set their own rules over refunds and returns, meaning more flexibility and potentially fewer returns.
• Easier for multichannel retail. Sellers can sell across multiple platforms without needing to split inventory between Amazon’s warehouses and other locations.

❌ Potential drawbacks of Amazon FBM

• Slower shipping. Without the advantage of Amazon’s vast logistics network, FBM sellers may struggle to offer the same delivery speeds.
• Increased workload. Sellers are responsible for all logistics, including storage, shipping, returns, and customer service, which can be labour-intensive.
• No automatic Prime eligibility. FBM sellers can request to enrol in Seller-Fulfilled Prime (SFP), but this can be a complex and time-consuming process.
• Limited visibility. FBM products tend to be given less exposure on Amazon than their FBA counterparts, potentially limiting sales potential.
• Other costs to manage. Though monthly fees are lower, FBM sellers have to manage their own storage and fulfilment costs, often leveraging third parties.

A feature-by-feature comparison of FBA and FBM

As we’ve explored, several factors go into deciding which Amazon fulfilment model is right for you as an online seller, from the cost structure to the degree of control you retain. But now, let’s dive a little deeper into some of the most important considerations and determine which method — FBA or FBM — comes out on top for each.

Convenience and ease

Remember that takeaway versus home-prepped meal analogy we touched on earlier? FBA involves outsourcing pretty much everything fulfilment-related to Amazon, so as a seller, you have no responsibility whatsoever for storage, picking, packing, fulfilment, or even returns. It’s the ultimate hands-off fulfilment model.

FBM still enables sellers to take advantage of Amazon’s huge customer base, but they do so while maintaining full responsibility for their own logistics — great for flexibility and control, though this means a significant workload (and often more complexity) for in-house teams, with FBM sellers managing every step of the fulfilment process themselves..

Winner: FBA. Amazon handles all FBA order management, including storage, packing, and shipping, and returns, making it the most convenient option.

Control over logistics processes

Selling through FBA effectively means sacrificing control in favour of convenience — FBA sellers have everything fulfilment-related managed for them, but they have no autonomy over how their products are packaged and no direct interaction with customers. They’re ultimately beholden to Amazon’s own policies and processes.

FBM is essentially the other way round, with FBM sellers taking a more hands-on approach to order fulfilment — this means dealing with everything from warehouse storage to customer complaints, but the upside is they maintain total control over how their inventory, their orders, and the overall customer experience are managed.

Of course, this means they have greater autonomy over things like packaging, which can be important for brand recognition and awareness. FBM sellers also have more control over how they communicate with customers, and set their own rules around factors such as returns.

Winner: FBM. For sellers who wish to retain control over the fulfilment process and customer experience, FBM is the obvious choice.

Product visibility and sales potential

You’re likely familiar with Amazon Prime — a paid-for subscription service that unlocks benefits such as free, super-fast shipping — and this represents a key factor in driving visibility and conversion of your products on Amazon.

Why? Well, Prime-eligible products — those which bear Amazon’s so-called Prime “badge” — typically benefit from increased visibility on the platform (they’re often listed higher than non-Prime products in search results) and also have a greater likelihood of winning the Buy Box from competitors.

Amazon FBA users automatically qualify for Prime, which means they reap the rewards of this greater visibility and sales potential. While Prime is available to FBM sellers through Seller-Fulfilled Prime (SFP), qualification isn’t a given — it typically involves a trial period of up to 90 days, and requires the seller to meet a range of eligibility criteria.

Winner: FBA. Products sold through FBA are typically given more exposure, while their automatic Prime eligibility can enhance visibility and Buy Box win potential.

Customer service and returns

Of course, order fulfilment doesn’t always stop the moment the customer receives their order. In many cases, there’ll be follow-up issues and questions to deal with — the customer might wish to return an unwanted item, for example, or have a complaint about their delivery.

One of the primary draws of FBA — particularly for sellers with limited time and resources — is that Amazon will deal with all order-related queries and shipping enquiries, while they’ll also handle the entire returns process, including issuing refunds to customers. It should be noted though that the seller will still be expected to respond to product-specific questions.

With FBM, responsibility falls squarely at the seller’s feet — unless they outsource this aspect to a third party, FBM sellers deal with all customer queries and return requests themselves. The advantage is that they can offer a more bespoke customer experience, but of course this requires a lot more manpower and cost to manage.

Winner: FBA. While FBM offers greater control over the customer experience, FBA hands responsibility for all customer service and returns to Amazon.

Scalability

As demand grows and/or you expand your product range, you need to be able to ensure your logistics processes can scale with you — otherwise you risk overburdened resources, spiralling costs, and unimpressed customers.

When you sell through Amazon FBA, you don’t really need to factor in warehouse space or staff capacity as you grow, because you’re leveraging Amazon’s own storage facilities and fulfilment teams — this doesn’t give you limitless scaling potential, of course, but it certainly makes it possible to scale relatively quickly and easily.

FBM is suitable for scaling businesses too, particularly as it opens up another potentially very lucrative sales channel, but rapid growth might require investment in additional storage space, new staff, more advanced technology, or enlisting the services of a third-party logistics provider.

Winner: FBA. When demand grows, FBA sellers do not necessarily need to invest in additional warehousing or staff.

Cost

Both FBA and FBM sellers pay a referral fee per item sold, which amounts to around 15% for most product types but can vary depending on the category.

However, Amazon FBA sellers pay far more in terms of monthly fees — which is to be expected as Amazon are doing more of the logistical ‘legwork’ — including both standard and long-term storage fees, with the latter understandably being much higher. There are also fulfilment fees based on the size and weight of each item fulfilled.

FBM sellers avoid having to pay these additional fees, but of course, this doesn’t necessarily mean in-house fulfilment is cheaper or more cost-effective. Managing logistics independently can be costly and unpredictable, especially when accounting for factors like warehousing, packing materials, labour, and shipping rates.

Winner: FBM, tentatively. FBM sellers pay fewer monthly costs to Amazon and avoid long-term storage fees, but must manage the cost of logistics themselves.

So, FBA or FBM — which is better?

While we’d love to offer a definitive answer here, the truth is that it all depends on your specific needs, objectives, resources, and product types.

Amazon FBA tends to suit those looking to scale quickly without wanting to manage logistics in-house. Products that are fast-moving, small, and lightweight typically benefit more from FBA because the associated fees are lower, while automatic Prime eligibility can significantly boost visibility and sales.

On the other hand, FBM is better suited to sellers preferring to maintain full control over their fulfilment processes, with the capacity to manage shipping and customer service independently. FBM can be more cost-effective for businesses with the infrastructure to handle logistics, or for those selling large, bulky, or low-margin items.

In short:

FBA is ideal when you’re selling high-volume, fast-moving products and want to scale quickly without handling logistics.

FBM is preferable for sellers with low-margin, bulky products or those who require more control over the fulfilment process and customer experience.