In this article, you will learn the differences between Amazon FBM vs FBA and the advantages and disadvantages of both models for your business. This article also gives you some tips on how you can optimize your shipping as an Amazon seller in order to sustainably increase your sales figures.

The Basics of FBA and FBM

Before you learn more about the pros and cons of FBM and FBA, you need to understand the basic differences.

What is FBA? (Fulfillment by Amazon)

FBA (Fulfillment by Amazon) – or shipping by Amazon – allows you to ship your goods directly from the manufacturer to Amazon. Amazon then takes care of shipping to the end customer, processing returns and providing first-level customer support – i.e. answering all of your customers’ questions about delivery.

To do this, you need to create a delivery plan in Amazon Seller Central. In this plan, you specify which items you want to send to Amazon, in what quantity and how they are packaged.

You then decide how you would like to send the products to Amazon – either by picking them up from Amazon or, for example, by using a parcel service provider.

Amazon will then assign you a delivery address and time in one of their fulfillment centers. You must deliver on time within these specifications so that Amazon will accept your goods. It may happen that you have to send your goods to several logistics centers.

The reason for this is that different logistics centers are optimized for different product groups – oversized products must be stored differently than food or hazardous goods.

What is FBM? (Fulfillment by Merchant)

FBM (Fulfillment by Merchant) – or self-shipping – means that you ship your goods directly to the end customer. You simply accept the orders on Amazon.

After shipping, you must provide a tracking number for your order. Amazon’s target here is that a tracking number must be provided for 95 percent of all shipments.

You should also consider that the rate of late deliveries should not exceed 4 percent. You can see this in the seller performance metrics monitor.

The costs of FBA and FBM

Basically, Amazon sales fees apply to both the sale of FBA and FBM products. Depending on the category, these amount to 7 to 15 percent of gross sales. There are basically two additional types of costs associated with FBA:

Fees for storage of products (per cubic meter per month)
Fees for shipping products (per unit)

In addition, there may be costs for processing returns or remission orders (returning the goods from Amazon to your warehouse).

Fees for storing products

The fees for storing your products are calculated per cubic meter per month. Depending on the goods involved, different fees apply. In addition, Amazon is charging higher fees in the fourth quarter because storage capacity is in greater demand due to the Christmas season.

Shipping fees

Amazon charges you a one-time flat rate for shipping. The amount of this flat rate varies depending on the dimensions and weight of your packaged product. Additional charges may apply if you ship across international borders to other countries.

Quickly calculate Amazon FBA fees

With the browser extension X Ray from Helium 10 you can easily calculate the Amazon FBA fees. To do this, research a similar product from the category in which you want to sell and start calculating.

The advantages and disadvantages of FBA and FBM

In this paragraph we will go into detail about the advantages and disadvantages of FBA and FBM.

The advantages of FBA (Fulfillment by Amazon)

Perhaps the most important advantage of Amazon FBA is that items shipped by Amazon generate more revenue than items shipped by Amazon. Unfortunately, there are currently no meaningful statistics on this, but experience clearly shows that the FBA program is worthwhile.

The following advantages are responsible for this.

Automatically eligible for Prime shipping

Items shipped through the FBA program are automatically eligible for Amazon Prime shipping. An article on Internetworld shows that registered Prime customers have a conversion rate of 74 percent when surfing on Amazon. All other customers on Amazon, however, only convert at an average rate of 13 percent .

Separate filter for FBA products

FBM sellers can also register their products for Prime. However, Amazon offers a separate filter for products with “FREE Shipping by Amazon”.

45% higher chance of getting the Amazon Buy Box

The Amazon Buy Box – or shopping cart box – is responsible for 90 percent of sales on Amazon. It is the box on the product page with the “Add to cart” button.

Simplified processes and scalability

If you use Amazon’s FBA program, you can automate and outsource your entire logistics. The advantage here is that you do not have to negotiate contracts with external logistics partners or connect interfaces in order to ship your goods on time.

Storing your products is easy and convenient via Amazon Seller Central.

Plus, you do n’t have to hire employees if you want to ship more. Amazon’s infrastructure allows you virtually unlimited growth.

The Disadvantages of Shipping by Amazon (FBA)

However, Fulfillment by Amazon also has some disadvantages:

High storage fees: Especially for wide product ranges or products with high volume, Amazon’s storage fees are significantly higher than the costs of having your own warehouse.
Calculation error: Amazon often classifies your products in a more expensive product group. If you don’t notice this, you suddenly end up paying higher fees.
Little control: In your own warehouse, you can decide whether a return can still be sold—with FBA, saleable products can be sorted out.
Long storage times: Items take too long to be stored, especially before events such as Black Friday or Christmas, meaning they are no longer ready for sale in time.
Not suitable for large items: FBA is usually more suitable for small items due to the high storage fees. Freight items are generally more profitable via FBM.

The advantages of FBM (Fulfillment by Merchant)

Self-shipping also has some advantages over Amazon’s shipping program – these are particularly interesting for established companies.

Lower costs

If your goods are not turned over as often, the costs of maintaining your own warehouse are usually lower than with Amazon directly. For example, if you have high MOQs (minimum order quantities) for some items , it may make sense to store some in your own warehouse and ship some to Amazon for FBA.

Even if you have a wide and deep product range , you will still need to stock some items with low turnover that are less profitable via FBA. External logistics service providers rarely represent an alternative because they are usually more expensive than Fulfillment by Amazon.

More control

When you ship your goods yourself, you decide whether returns can be sold or processed. This means fewer goods are wasted and therefore has a positive effect on your purchasing decisions. In addition, return orders at Amazon incur additional costs.

Avoid storage problems and out of stock

Amazon’s logistics are under greater strain, especially before important sales promotions such as Black Friday, Christmas or Prime Day. This is why there are often delays in storing goods at these times.

Goods are usually moved between Amazon’s logistics centers and therefore cannot be sold. During these phases, it can be helpful to also offer the products via FBM in order to avoid running out of stock, especially during the busiest times of the year.

Large, bulky and individual products

Due to Amazon’s high storage fees, your own logistics is usually cheaper – or even the only possible option – especially for large and bulky items. But even if you sell customized items – for example with an engraving – you may only be able to ship your items via FBM.

The Disadvantages of Self-Dispatch (FBM)

Essentially, the advantages of FBA correspond to the disadvantages of FBM – here is a brief summary of the disadvantages of FBM:

Less growth for your top sellers
No automatic eligibility for Prime shipping
Products are excluded from the Prime shipping filter
45 percent lower chance of getting the Buy Box
More complex processing and harder to scale

FBA vs. FBM: Optimizing Shipping as an Amazon Seller

You’re probably asking yourself the question: “FBA or FBM?” to find the best possible shipping solution for your business – so here are a few tips on how you can optimize your shipping.

Get Prime shipping as a FBM dealer

Even if you ship via FBM, you can get the Prime badge for your products. According to Amazon, “Prime by Seller” leads to up to 25 percent more sales .

To do this, you must meet the following requirements:

You need a professional seller account
Your warehouse must be located in the delivery country
The on-time delivery rate must be 99 percent
The cancellation rate for orders must be below 0.5 percent
The “Buy Shipping from Amazon” feature must be used for 98 percent of all orders
Shipping with Amazon-supported carriers
Accepting Amazon Return Policy
Allow Amazon to process all customer service requests

Use FBM and FBA simultaneously

It makes sense to use FBM and FBA at the same time, especially during seasonal sales campaigns. This way , you can prevent your products from going out of stock due to storage delays.

You can also use FBM to reduce your costs . For example, with high MOQs (minimum order quantities from suppliers), it is best to only hold inventory for a maximum of 120 days with FBA.

You can store additional inventory cost-effectively in a separate warehouse and send it to Amazon whenever your FBA inventory lasts less than 30 days. To offer a product via both FBM and FBA, you must create another state in Inventory Management in Seller Central.

While an FBM status makes sense for all products, you should consider which products you want to ship via FBA in the first place.

This makes the most sense for the 20 percent of products that generate 80 percent of sales. To save costs, you can also offer all other products only via FBM – for example, accessories with low turnover.

If you want to establish a new product on the market, you should definitely offer it via FBA at the beginning – especially since the product tester program Vine can only be used for FBA products.

Save FBA fees with New Selection program

With the “New Selection Program”, Amazon offers you the opportunity to save FBA fees for items that are shipped via FBA on Amazon for the first time.

Depending on the size of the product, Amazon will waive storage and shipping fees for up to 100 units within the first 120 days of storage.

You can only access the program if you change the language of your Seller Central to English and search for “new selection” using the search at the top of the screen.

Find FBA errors and claim back fees

There are several reasons why Amazon is charging you too high FBA fees. These are:

Damaged and lost: If items are damaged or lost on Amazon, you can submit a request for an investigation and, in the best case, receive a refund.
Returns: Amazon immediately refunds the money to the customer when an item is returned. If the return is not received, Amazon must credit you after 60 days, but does not always do this.
Change in FBA fees: Sometimes the fees for FBA items change because the measurements were recorded incorrectly. In this case, you must request that your items be re-measured.
Especially if you ship many units and many different products via FBA, these errors accumulate and it is worth checking them at regular intervals.

You can do this yourself using the reports in Seller Central – but we recommend doing this using the Sellerboard tool. (Cost: around 10 euros per month)

Conclusion: Amazon FBA or FBM

There is no right or wrong with FBA or FBM . Both shipping models have their individual advantages and disadvantages. It also depends on which products you sell.

If you have your own warehouse, it makes sense to offer all products at the same time via FBM to reduce out-of-stock times. With a deep and broad product range, FBA makes sense especially for the 20 percent of products that generate 80 percent of sales.

FBA brings more growth to your products through an additional filter, automatic eligibility for Prime and a higher probability of winning the Buy Box.

In order to optimize your shipping costs , it also makes sense to optimize your inventory so that you only keep 30 to a maximum of 120 days of inventory per unit on Amazon.

You can use the New Selection program for new products to save on FBA fees and check regularly whether Amazon is charging you too high FBA fees.

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