If you're selling on Amazon, one of the most critical decisions you'll make is choosing between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). This amazon fba vs fbm comparison will help you understand the fundamental differences between these two fulfillment methods and determine which approach aligns best with your business goals. The choice you make will impact everything from your profit margins and customer experience to your daily operations and growth potential. With Amazon accounting for nearly 40% of all U.S. ecommerce sales, getting your fulfillment strategy right isn't just important—it's essential for your success.
Both FBA and FBM offer distinct advantages and challenges. FBA provides the convenience of Amazon's world-class logistics network, while FBM gives you complete control over your fulfillment process. In this comprehensive guide, we'll break down the costs, benefits, drawbacks, and ideal use cases for each method, helping you make an informed decision that maximizes your profitability and operational efficiency.
Fulfillment by Amazon is a service where Amazon handles the entire fulfillment process on your behalf. You send your inventory to Amazon's fulfillment centers, and they take care of storage, picking, packing, shipping, customer service, and returns. Essentially, you're leveraging Amazon's massive logistics infrastructure to deliver products to your customers.
The FBA process is straightforward. First, you create your product listings on Amazon and prepare your inventory according to Amazon's requirements. Then, you ship your products in bulk to one or more Amazon fulfillment centers. Amazon stores your inventory until a customer places an order. When an order comes in, Amazon picks, packs, and ships the product directly to your customer. They also handle all customer inquiries, returns, and refunds related to fulfillment.
Your products automatically become eligible for Amazon Prime's free two-day shipping, which is a significant advantage given that Prime members spend an average of $1,400 annually on the platform compared to $600 for non-Prime members. This Prime badge can dramatically increase your conversion rates and visibility.
Understanding FBA costs is crucial for maintaining profitability. Amazon charges several types of fees for FBA services. Fulfillment fees cover picking, packing, and shipping, and they vary based on product size and weight. For a standard-size item weighing one pound, you might pay around $3.22 per unit. Monthly storage fees depend on the cubic footage your inventory occupies in Amazon's warehouses—currently about $0.87 per cubic foot for January through September and $2.40 per cubic foot during the October-December peak season.
Long-term storage fees apply to inventory that sits in Amazon's warehouses for more than 365 days, currently charged at $6.90 per cubic foot. Additionally, you'll pay referral fees (typically 8-15% of the sale price depending on category) and potentially other charges like removal fees if you need to retrieve unsold inventory.
Fulfillment by Merchant means you handle all aspects of order fulfillment yourself. You store inventory at your own warehouse or facility, and when a customer orders, you're responsible for packing the product, arranging shipping, providing tracking information, and managing customer service and returns.
With FBM, you maintain complete control over your fulfillment operations. When an order comes through Amazon, you receive a notification and must ship the product within your specified handling time. You're responsible for choosing your shipping carrier, ensuring timely delivery, uploading tracking information to Amazon, and meeting Amazon's performance metrics for on-time delivery and valid tracking rates.
You can fulfill orders from your home, a warehouse, or through a third-party logistics provider (3PL). The key difference is that you maintain ownership of the fulfillment process rather than outsourcing it to Amazon.
FBM costs are more variable and depend on your specific setup. You'll pay for your own storage space, whether that's a garage, warehouse, or 3PL facility. Shipping costs vary based on your carrier agreements, package dimensions, weight, and destination. You'll also need to factor in labor costs for picking, packing, and shipping orders, plus any packing materials like boxes, tape, and bubble wrap.
While you still pay Amazon's referral fees (the same as FBA sellers), you avoid FBA's fulfillment and storage fees. For many sellers, especially those with existing warehouse space or low-margin products, this can result in significant savings.
When conducting an amazon fba vs fbm comparison on costs, the answer isn't straightforward—it depends entirely on your specific situation. FBA typically costs more per unit due to fulfillment and storage fees, but these costs are predictable and scale automatically with your sales volume. You know exactly what you'll pay for each unit sold.
FBM can be more cost-effective, especially for large, heavy, or slow-moving items. If you're selling a 20-pound product, FBA fees could eat up a significant portion of your profit margin, whereas you might negotiate better shipping rates independently. However, FBM requires you to manage variable costs like warehouse rent, utilities, labor, and shipping supplies, which can fluctuate and become complex to track.
For example, a seller moving 1,000 units monthly of a small, lightweight product might pay $3,000-$4,000 in FBA fees but only $1,500-$2,000 handling fulfillment themselves. However, that calculation doesn't include the time value of managing fulfillment operations or the potential sales lift from Prime eligibility.
This is where FBA shows a clear advantage. FBA products automatically qualify for Amazon Prime, which is crucial considering that over 200 million people worldwide have Prime memberships. Prime members actively filter search results to show only Prime-eligible products, meaning FBM sellers often become invisible to this valuable customer segment.
FBA sellers also have a significant advantage in winning the Buy Box—the prominent "Add to Cart" button that drives approximately 82% of Amazon sales. Amazon's algorithm heavily favors FBA sellers when determining Buy Box eligibility because Amazon can guarantee fast, reliable shipping. Even if you offer the same price as an FBA competitor, they'll likely win the Buy Box more often.
FBM sellers can achieve Prime eligibility through Seller Fulfilled Prime (SFP), but this program has strict requirements including a 99% on-time delivery rate, one-day handling time, and shipping to all U.S. addresses. Most sellers find these requirements challenging to maintain consistently.
FBM offers superior control over your operations. You can customize packaging with branded materials, include promotional inserts, add personalized thank-you notes, or bundle products uniquely. This control extends to inventory management—you can quickly adjust prices, pull products for inspection, or redirect inventory to other sales channels without waiting for Amazon to process removal orders.
FBA sellers sacrifice this control for convenience. Your products sit in Amazon's warehouses, often distributed across multiple fulfillment centers. You can't easily access inventory for photography, quality checks, or bundling. Amazon's packaging is standardized, offering no opportunity for brand differentiation at the unboxing moment.
However, FBA's lack of control comes with significant operational simplicity. You don't need to manage a warehouse team, negotiate with shipping carriers, or handle customer service calls about delivery issues. This frees up your time to focus on product sourcing, marketing, and business growth.
FBA includes customer service for all fulfillment-related inquiries. If a customer contacts Amazon about shipping delays, damaged products, or returns, Amazon handles it entirely. They process returns, inspect returned items, and decide whether to return them to your inventory or dispose of them. This is incredibly valuable for scaling your business without proportionally scaling your customer service team.
With FBM, you're responsible for all customer service interactions. You must respond to messages within 24 hours, handle return requests, provide return shipping labels, and process refunds. While this gives you more control over customer relationships and the ability to potentially save sales through personalized service, it also requires more time and resources.
Amazon's A-to-Z Guarantee protects customers regardless of fulfillment method, but FBA sellers benefit from Amazon's expertise in handling claims and their willingness to absorb some costs to maintain customer satisfaction.
FBA excels at scalability. Whether you sell 10 units or 10,000 units monthly, Amazon's infrastructure handles the increased volume seamlessly. You don't need to hire additional warehouse staff, lease larger facilities, or negotiate new shipping contracts. This makes FBA particularly attractive for sellers experiencing rapid growth or seasonal spikes.
FBM scalability depends on your infrastructure. If you're fulfilling from home, you'll quickly hit a ceiling where your garage or spare bedroom can't accommodate more inventory or order volume. Scaling FBM requires strategic planning—leasing warehouse space, hiring staff, implementing inventory management systems, and potentially working with 3PLs. This can be capital-intensive and operationally complex.
FBA makes the most sense in specific scenarios. If you're selling standardized products that fit within Amazon's size and weight guidelines, FBA is often the better choice. Products with healthy profit margins that can absorb FBA fees while remaining competitive are ideal candidates. Fast-moving inventory that won't accumulate long-term storage fees particularly benefits from FBA.
New sellers often find FBA advantageous because it eliminates the need to build fulfillment infrastructure from scratch. You can test products and scale quickly without significant upfront investment in warehousing and logistics. If you're running a lean operation or managing Amazon as a side business, FBA's hands-off approach lets you focus on product selection and marketing rather than operational logistics.
FBA also works well for sellers targeting Prime members specifically or those in highly competitive categories where Prime eligibility and Buy Box dominance are essential for visibility. If your products are in categories like toys, electronics, or home goods where customers expect fast, free shipping, FBA's Prime badge becomes a competitive necessity rather than a nice-to-have feature.
FBM is often the better choice for oversized, heavy, or bulky products. Amazon's FBA fees for large items can be prohibitively expensive—sometimes $50+ per unit. If you're selling furniture, exercise equipment, or other large products, you can often ship them more economically yourself, even after factoring in your labor and shipping costs.
Low-margin products benefit from FBM because every dollar in fees significantly impacts profitability. If you're operating on thin margins, the difference between FBA and FBM fees might determine whether your business is profitable. Custom, handmade, or made-to-order products also suit FBM better since you need flexibility in production and fulfillment timelines.
If you already have warehouse space, fulfillment staff, or infrastructure from other sales channels (like your own website or other marketplaces), FBM lets you leverage these existing assets. You're essentially utilizing sunk costs rather than paying Amazon for redundant services. Multi-channel sellers often prefer FBM because they can fulfill Amazon orders alongside orders from other platforms using the same system.
FBM also works for sellers with fragile products that require special handling or packaging that Amazon's standardized process can't accommodate. If your products need custom packaging to prevent damage, you'll have better control with FBM.
Many sophisticated Amazon sellers don't choose between FBA and FBM—they use both strategically. This hybrid approach lets you optimize each product's fulfillment method based on its specific characteristics. You might use FBA for your best-selling, standard-sized products that benefit from Prime eligibility while using FBM for oversized items, slow-moving inventory, or products with thin margins.
The hybrid model provides flexibility during inventory transitions. If you're running low on FBA inventory and waiting for a shipment to arrive at Amazon's warehouse, you can temporarily fulfill orders yourself to avoid stockouts. Conversely, during peak seasons when you're overwhelmed with orders, you can shift more inventory to FBA to handle the increased volume.
Some sellers use FBM for product testing. They'll fulfill new products themselves initially to gauge demand, customer feedback, and return rates before committing to sending bulk inventory to Amazon's warehouses. Once a product proves successful, they transition it to FBA for scalability and Prime benefits.
However, managing a hybrid approach requires more sophisticated inventory management and can be operationally complex. You need systems to track which products are fulfilled through which method, ensure you're not creating duplicate listings, and manage inventory across multiple locations. The complexity is worth it for many sellers, but it's not recommended for beginners still learning Amazon's ecosystem.
To determine the right choice for your amazon fba vs fbm comparison, ask yourself these critical questions. First, what are your product dimensions and weight? Calculate actual FBA fees for your specific products—you might be surprised how quickly costs add up for larger items. Second, what are your profit margins? Products with 30%+ margins can typically absorb FBA fees, while lower-margin products might require FBM to remain profitable.
Consider your current operational capacity. Do you have space, time, and resources to handle fulfillment, or would outsourcing to Amazon free you to focus on higher-value activities? Think about your growth trajectory. Are you planning to scale rapidly, or do you prefer controlled, gradual growth? FBA supports rapid scaling more easily than FBM.
Evaluate your competitive landscape. Are your competitors primarily using FBA? In highly competitive niches, you might need FBA just to remain visible and competitive. Finally, consider your long-term business goals. Are you building a brand that might eventually move off Amazon, or is Amazon your primary channel? Your fulfillment choice should align with your broader business strategy.
If you choose FBA, focus on inventory management to avoid long-term storage fees. Use Amazon's inventory performance dashboard to identify slow-moving items and create promotions or remove them before they incur additional fees. Send inventory in smaller, more frequent shipments rather than large bulk shipments to better match supply with demand.
Optimize your product packaging to minimize dimensional weight. Sometimes, reducing package size by an inch can move you to a lower fee tier, saving dollars per unit. Take advantage of Amazon's partnered carrier program for shipping inventory to fulfillment centers—you'll often get better rates than negotiating independently.
Monitor your storage utilization and IPI (Inventory Performance Index) score. Amazon rewards sellers with high IPI scores through lower storage fees and unlimited storage capacity. Keep your score above 500 by maintaining healthy sell-through rates, fixing listing problems quickly, and avoiding excess inventory.
For FBM sellers, invest in a good shipping scale and label printer to streamline your fulfillment process. Compare rates across multiple carriers—USPS, UPS, FedEx, and regional carriers all have different strengths for different package types. Consider using a multi-carrier shipping software that automatically selects the cheapest option for each shipment.
Develop efficient packing stations with all materials within reach. Time is money in fulfillment, and optimizing your workspace can significantly increase your throughput. Buy packing materials in bulk to reduce costs—boxes, tape, and bubble wrap are much cheaper when purchased in larger quantities.
Set realistic handling times in your settings. While faster handling times can improve your metrics, setting times you can't consistently meet leads to late shipment rates that hurt your account health. It's better to promise two-day handling and consistently deliver than promise one-day and frequently miss the deadline.
Yes, you can switch between fulfillment methods at any time. To switch from FBM to FBA, you'll need to create a new FBA listing or convert your existing listing, then ship inventory to Amazon's fulfillment centers. To switch from FBA to FBM, you can create a removal order to get your inventory back from Amazon, though you'll pay removal fees. Many sellers test both methods with different products to determine what works best for their business. Keep in mind that switching frequently can be costly and operationally complex, so it's best to make strategic, well-planned transitions rather than constant changes.
The cost difference varies significantly based on your product characteristics. For a small, lightweight item (under 1 lb), FBA might cost $3-4 per unit in fulfillment fees plus storage, while FBM might cost $2-3 in shipping if you have negotiated rates. However, for a 20-pound item, FBA could cost $10-15+ per unit, while you might ship it yourself for $8-10. You must also factor in the value of your time—if FBM requires 5 hours weekly of your time worth $50/hour, that's $1,000 monthly in opportunity cost. Use Amazon's FBA calculator tool to compare actual costs for your specific products, and remember to include all costs like storage, shipping supplies, and labor when making your comparison.
Yes, multiple studies and seller reports indicate that FBA typically increases sales, often by 30-50% or more. The primary drivers are Prime eligibility (which makes your products visible to Prime members who filter for Prime-only items) and increased Buy Box percentage. Amazon's algorithm strongly favors FBA sellers for the Buy Box, which drives the majority of sales. Additionally, Prime's free two-day shipping increases conversion rates since customers are more likely to purchase when shipping is fast and free. However, the sales increase must be weighed against higher fees—a 40% sales increase doesn't help if FBA fees eliminate your profit margins. The sales lift is most pronounced in competitive categories where Prime eligibility is expected by customers.
FBA's main disadvantages include higher costs (fulfillment fees, storage fees, and long-term storage fees), less control over inventory and packaging, strict preparation requirements, potential for inventory loss or damage, and dependency on Amazon's systems and policies. You can't easily access inventory for quality checks, photography, or bundling. Amazon may lose or damage items, and while they typically reimburse you, the process can be time-consuming. Storage fees can accumulate quickly for slow-moving inventory, and Amazon's policies can change with little notice, affecting your costs and operations. You also lose the opportunity to build direct customer relationships since Amazon handles all fulfillment communications. For brand-building sellers, the inability to customize packaging and include branded inserts is a significant limitation.
Yes, but it requires strategic advantages. FBM sellers can compete by offering lower prices (since they avoid FBA fees), focusing on products where FBA isn't cost-effective (oversized or heavy items), providing exceptional customer service, or qualifying for Seller Fulfilled Prime. Some FBM sellers succeed by targeting customers who specifically filter out Prime items to find better deals. You can also compete in niches with less FBA saturation or where product knowledge and customer service matter more than fast shipping. However, in highly competitive categories dominated by FBA sellers, competing as FBM is challenging. Your best strategy is often to identify products or niches where FBM's advantages (lower costs, greater control, custom packaging) outweigh FBA's benefits (Prime badge, Buy Box preference).
Seller Fulfilled Prime (SFP) is a program that allows FBM sellers to offer Prime shipping while fulfilling orders themselves. It provides the Prime badge and its benefits without using FBA. However, SFP has strict requirements: you must maintain a 99% on-time delivery rate, offer one-day or two-day delivery to all contiguous U.S. states, provide free standard shipping, and meet Amazon's other performance metrics consistently. You'll need sophisticated fulfillment infrastructure, likely including a 3PL partner, to meet these requirements. SFP works well for sellers with existing robust fulfillment operations who want Prime eligibility without FBA fees, but it's not recommended for small sellers or those just starting out. The program requirements are demanding, and failure to meet them results in removal from the program.
Start by using Amazon's FBA Revenue Calculator, which compares estimated fees and profits for FBA versus FBM. Input your product's dimensions, weight, and selling price to see detailed fee breakdowns. For FBM, calculate your actual costs including shipping (get quotes from carriers), packaging materials, labor time (value your time at a realistic hourly rate), storage costs, and any 3PL fees if applicable. Don't forget to factor in less obvious costs like the value of Prime eligibility—estimate how much more you might sell with FBA and whether that increased volume justifies the higher fees. Create a spreadsheet comparing both methods across multiple scenarios (different sales volumes, seasonal variations, etc.). Many sellers find that FBA is more profitable for some products while FBM works better for others, leading them to adopt a hybrid approach.
If you decide to stop using FBA, you have several options for your inventory. You can create a removal order to have Amazon return the inventory to you, though you'll pay removal fees (currently around $0.50-$0.60 per unit for standard-size items). Alternatively, you can have Amazon dispose of the inventory, which costs less but means you lose the products entirely. You can also let inventory sell through naturally without sending more shipments, though you'll continue paying storage fees until items sell. Plan your FBA exit carefully—removal fees can add up quickly if you have substantial inventory. Some sellers time their exits to coincide with low inventory levels to minimize removal costs. Remember that you'll also need to have a fulfillment plan in place (FBM setup or alternative sales channels) before removing inventory from Amazon's warehouses.
The amazon fba vs fbm comparison ultimately comes down to your specific business situation, products, and goals. FBA offers unmatched convenience, scalability, and access to Prime members, making it ideal for sellers who want to focus on product sourcing and marketing rather than logistics. The Prime badge and increased Buy Box chances can significantly boost sales, often justifying the higher fees. However, FBA isn't universally superior—it can erode profit margins on low-cost or oversized items, and it sacrifices control over packaging, inventory, and customer relationships.
FBM provides greater control, potentially lower costs, and flexibility in how you run your operations. It's particularly advantageous for large items, low-margin products, custom orders, or sellers with existing fulfillment infrastructure. However, it requires more hands-on management and typically results in lower visibility among Prime members and reduced Buy Box percentage. The operational demands of FBM can also limit your ability to scale quickly.
Many successful Amazon sellers don't view this as an either-or decision. They strategically use both methods, optimizing each product's fulfillment approach based on its specific characteristics. This hybrid strategy provides the best of both worlds but requires more sophisticated inventory management and operational complexity.
Your decision should be based on careful analysis of your product dimensions and weight, profit margins, operational capacity, growth goals, and competitive landscape. Use Amazon's FBA calculator to run actual numbers for your products, factor in all costs including opportunity costs, and don't forget to consider the strategic value of Prime eligibility in your specific category. Remember that your choice isn't permanent—you can test both methods, gather data, and adjust your strategy as your business evolves.
Ready to optimize your Amazon fulfillment strategy? Start by calculating your actual costs for both FBA and FBM using your specific product data. Whether you choose FBA, FBM, or a hybrid approach, the key is making an informed decision based on your unique business needs rather than following what everyone else is doing. Your fulfillment method is a crucial component of your overall ecommerce strategy—choose wisely, and you'll set your Amazon business up for sustainable, profitable growth.
Raúl Galera is the Growth Lead at ReferralCandy, where they’ve helped 30,000+ eCommerce brands drive sales through referrals and word-of-mouth marketing. Over the past 8+ years, Raúl has worked hands-on with DTC merchants of all sizes (from scrappy Shopify startups to household names) helping them turn happy customers into revenue-driving advocates. Raúl’s been featured on dozens of top eCommerce podcasts, contributed to leading industry publications, and regularly speaks about customer acquisition, retention, and brand growth at industry events.
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