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Amazon has revolutionized the way we shop. The ecommerce giant placed the world’s largest marketplace at our fingertips. And when the COVID-19 pandemic rolled in, Amazon became a lifeline for businesses and shoppers alike, cementing its role as the go-to platform for online retail.
Now, even as physical stores make a comeback, online shopping in this platform continues to dominate the retail landscape—and for good reason. For sellers, Amazon offers access to millions of potential customers and endless opportunities to grow. But, as with any business, your success on this platform hinges on the strategies you choose.
One of the most important decisions you’ll face when you start selling on Amazon is your fulfillment method. This refers to how orders are packed and shipped to customers.
On Amazon, you can either let the platform handle it all through Fulfillment by Amazon (FBA), or take matters into your own hands with Fulfillment by Merchant (FBM). Each option has its pros and cons, and the choice you make could be the difference between guaranteed profits and getting bogged down in logistics.
So, in this article, we’ll explore the ins and outs of FBA and FBM to help both new and seasoned sellers find the best approach for their business.
The choice between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) boils down to who handles your logistics.
With FBA, Amazon takes the reins. You send your products to Amazon’s fulfillment centers, and when an order comes in, their team takes care of packing, shipping, and even customer service. It’s a hands-off approach for sellers who prefer to focus on scaling their business rather than managing logistics.
In contrast, FBM—also known as Merchant Fulfilled Network (MFN)—puts you in control. You handle everything from packaging to shipping orders directly to customers. This traditional model allows you to manage the entire process, which may be ideal for sellers who want more oversight or have unique shipping requirements.
Amazon FBA lets sellers outsource the heavy lifting of order fulfillment to Amazon. For smaller businesses with limited resources, this service can be a game-changer, as it takes care of storage, packing, shipping, and even customer service. With about 64% of Amazon sellers using FBA in 2022, it’s clearly a popular choice.
But is it the right option for you? Let’s take a closer look at how FBA works.
Getting started with FBA is straightforward:
Send to Amazon: Once your products arrive at Amazon’s fulfillment center, they take over. From inventory management to order processing and shipping, Amazon ensures that your customers receive their orders, freeing you from the hassle of managing logistics.
The most apparent advantage of FBA is less work for you when fulfilling orders. For smaller sellers, this means more time to focus on other aspects of the business, like marketing, management, and product development. But the benefits of FBA go beyond just convenience:
However, FBA isn’t without its drawbacks. While it offers convenience, the fees and surcharges can quickly add up.
One key metric Amazon uses is the Inventory Performance Index (IPI), which monitors factors like excess inventory and sell-through rates. Sellers need a minimum score of 500. Falling short could lead to higher storage fees and restrictions on how much stock you can send to Amazon’s warehouses.
Additionally, FBA fees are based on product size and weight, with large or bulky items incurring higher storage costs. This makes it essential to evaluate whether it’s more cost-effective to use FBA or store such products in-house or with another third-party service.
And though FBA relieves you of customer shipping responsibilities, you’re still tasked with shipping inventory to Amazon’s fulfillment centers. With millions of products stored there, labeling errors can result in your items being mixed up with those of other sellers, leading to customer dissatisfaction or worse—account suspension if faulty or counterfeit items are sent under your name.
Amazon’s strict labeling and packing requirements aim to prevent this, but failing to meet their standards can cause delays, extra fees, or even multiple shipments for a single order, cutting into your profits.
Finally, with FBA, you lose control over key elements of the fulfillment process, such as storage, delivery timelines, and handling fees. This also means you forgo the ability to personalize or brand your packaging, which could be a missed opportunity to leave a lasting impression on your customers.
Fulfillment by Merchant means the seller is responsible for completing each order. This means managing everything—from packaging, labeling, and shipping to handling returns and exchanges.
For new sellers or those with a manageable number of orders, FBM can be a viable option. However, as your sales volume grows, you may need to reassess whether FBM can keep up with the demands of your business, or if a more automated solution like FBA is necessary.
If you already have an Amazon Seller account, there’s not much else you need to do after listing your products. You’ll need to select “Merchant” as your fulfillment option for every product listing you will fulfill yourself. After that, the next steps are ensuring that your shipping templates on the Seller Central dashboard match your logistical capacity and managing your storage or warehouse efficiently.
The main advantages of using FBM are the following:
You are also more in control of business decisions if you’re on FBM. You are responsible for where and how you store and organize your inventory. You can even choose your packaging, which is essential if you run an eco-friendly store and want to avoid using plastic as much as possible.
If it gets a bit overwhelming, you can use several third-party services to ease the workload. For starters, Threecolts, Jungle Scout, and Helium 10 provide excellent Amazon business tools.
Handling fulfillment yourself can quickly become overwhelming as your sales volume increases. What might work for a few orders a day can become unsustainable as your business grows. You might require significant time and resources that could otherwise be spent on marketing, product research, or expanding your brand.
Additionally, FBM sellers must manage customer service on their own. While this can be a good thing, it also means handling returns, complaints, and inquiries. These can be time-consuming and detract from other critical business tasks.
Shipping is another hurdle. FBM sellers are often limited to nearby regions or forced to pay higher shipping costs for distant customers, which may impact profit margins. Moreover, FBM sellers miss out on Amazon’s bulk shipping rates, putting them at a disadvantage compared to FBA sellers.
Finally, FBM products do not automatically qualify for Amazon Prime, which can deter customers. Prime eligibility is a major selling point, and many buyers prefer products that offer fast, free shipping. While Seller Fulfilled Prime (SFP) is an option for FBM sellers, the program’s stringent requirements make it difficult for smaller businesses to participate, further limiting their competitiveness.
We’ve explained the pros and cons of Amazon FBA and FBM, but how can you choose the best option? There are some factors to consider when deciding on your fulfillment model.
In general, Amazon’s storage fees are higher for bigger and heavier items. So, if your inventory consists mainly of huge, bulky goods, you should first calculate the cost of fulfilling these big-item orders via FBA versus FBM. Sometimes, in-house fulfillment might be more cost-effective because of FBA fees. You can use the Amazon Revenue Calculator to check the profitability of your products.
Amazon has a list of products that are restricted for sale through FBA. If you sell products that fall under these categories, FBM or another third-party fulfillment provider will be better. Additionally, even if your products are not restricted, if they require special handling—such as refrigeration—FBM would be a better option.
If you have fast-moving products or products that are bestsellers, you should consider FBA. Amazon regularly monitors FBA inventory and charges sellers for products that remain in their warehouse for a considerable time. Merchants who sell niche items or other slow-moving products might do better with FBM.
FBA is also more suitable for sellers who receive orders regularly and do not have the logistical power to fulfill all orders on time.
If branding is one of your business goals, FBA will dilute your branding opportunities. Because you cede control of fulfillment to Amazon, you won’t be able to give a personal touch to your deliveries. Go for FBM if you prefer having complete control over fulfillment, including packaging and custom orders.
In summary, FBM may be better for you if you:
On the other hand, you should consider FBA if you:
For new sellers, deciding between FBA and FBM sets the tone for your entire Amazon journey. Your fulfillment method will directly impact how you manage operations, control costs, and build customer relationships, so it's crucial to choose wisely.
FBA offers a smoother start for most newcomers. Amazon takes care of the heavy logistics—storage, packing, shipping, and customer service. This allows you to focus on building your brand and scaling your business without worrying about the operational details. The added bonus? Prime eligibility. Being able to offer Prime’s fast, free shipping can significantly boost your visibility and help you compete more effectively, especially when you’re just starting out.
However, FBM offers control and flexibility. If you have unique products that require special handling or want to maintain more control over packaging and shipping, FBM might be the better fit. You can avoid Amazon’s storage fees, maintain direct oversight of your inventory, and potentially offer personalized touches that set you apart from competitors. For new sellers with tighter margins or specific product needs, FBM offers flexibility that FBA can’t match.
So, which is best for new sellers? FBA is ideal if you’re looking to minimize the logistical burden and focus on growth. It’s especially useful if your products are small, light, and move quickly. FBM, on the other hand, is better suited for sellers who want full control over their fulfillment process or are selling niche products with lower turnover.
Ultimately, many successful sellers use a hybrid approach—starting with FBA to scale quickly, and later incorporating FBM for more flexibility as their business grows.
As stated above, the good news is that you’re not required to choose only one fulfillment option. As you’ll notice in your Seller account, you can select which products can be specified as FBA inventory.
This means you can take advantage of the benefits of each model by going for a hybrid fulfillment model. In fact, in 2022, about 22% of Amazon sellers surveyed by Statista used both FBA and FBM to fulfill orders.
You can use FBA for your high-demand products and lightweight goods and FBM or SFP for others. You can even list the same product for both FBA and FBM (create two separate listings) so that you can continue to offer it via FBM even if your FBA inventory has already sold out.
Regardless of which model to choose, do your due diligence and calculate the costs of using one model over another. This will help you make an informed decision and guide your cost analysis.
Fulfillment is an integral part of running an Amazon business. Fortunately, Amazon offers several options for fulfillment, so sellers can create a strategy based on their business model, operations, and future plans.
But even with the best strategies in place, unexpected fees, inventory mishaps, and more can chip away at your hard-earned profits. That’s why Threecolts offers a suite of tools to supercharge your Amazon operations, regardless if you’re using FBA or FBM.
For those using FBA, DimeTyd Sellers steps in as the most comprehensive profit recovery solution. It’ll help you recover lost funds from incorrect FBA fees and inventory discrepancies, without lifting a finger. With a dedicated case manager monitoring your account daily, you can ensure that every penny owed is traced back to you.
If you’re using FBM or a hybrid model, Threecolts also has solutions for you.
Tactical Arbitrage and ScoutIQ streamline product sourcing, helping you discover hidden deals and profitable items in minutes. For cross-border sellers, SellerRunning makes dropshipping a breeze by automating listings and protecting your earnings. Need to expand across multiple platforms? ExportYourStore keeps your inventory in sync while also selling on Etsy, eBay, Shopify, and beyond.
To stay on top of customer service, ChannelReply and Onsite Support centralize all marketplace messages. Meanwhile, FeedbackWhiz Alerts keeps you informed about reviews, FW Profits handles your accounting, and FW Emails guarantees customer satisfaction.
There’s also InventoryLab which simplifies your entire Amazon workflow from product research, listing, and inventory tracking. And SmartRepricer which ensures you stay competitive with automated price adjustments based on real-time market conditions.
In short, no matter your fulfillment strategy, Threecolts has the tools you need to boost efficiency and grow your business faster. So, don’t be afraid to explore different options. Just keep your head in the game and let the right tools do the heavy lifting.
