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Amazon FBA vs FBM: Ultimate 2023 Guide (What’s Best For You + 6 Major Considerations)

January 23, 2023

With Amazon FBA vs FBM, the best fulfillment option for you will depend on the product you’re selling, the size of your business, your budget, and capacity. Amazon FBA helps manage customer service, shipping, handling, and storage, but is more expensive than FBM. FBM will help you save on Amazon fees, but you’ll miss out on Amazon Prime perks like winning the Buy Box.

We'll break down dozens of comparisons between FBA and FBM, and 6 MAJOR factors you need to take into consideration that could ultimately sustain your Amazon business far longer (if you make the right call.)

Not all online business models are so dependent on a product’s fulfillment method. For instance, local lead generation has no physical product. Instead, you create a digital billboard in the form of a website, and organically rank it to the top of Google. Once there, the site requires very little maintenance. Ultimately, you maintain full control, which is something neither Amazon FBA or Amazon FBM can promise.

What Factors to Consider in Choosing Between Amazon FBA vs. FBM?

FBA:

  • Can only store as much as Amazon allows you to in a warehouse, fees rise for more space.
  • More fees- on top of 15% referral fee, you’ll pay for storage, shipping, handling, etc.
  • Fee increase in Q4, usually triple other times of the year. Whatever you’re selling at that time needs to move quickly.
  • Very difficult to visit your products in an Amazon warehouse- Amazon distributes your products nationwide (you have no control over where) if they lose your products, you are out of luck.
  • Amazon automatically sends when a customer orders, keeps sit metrics healthier.
  • Automatic Prime badge and benefits, like 2 day Prime shipping
  • Amazon handles customer service and returns (but almost always side with Amazon shoppers over sellers. If this happens, you won’t be reimbursed and the FBA product will be marked “unsellable”.)
  • Less control over packaging.
  • Begin selling in 2-3 weeks at the earliest (waiting for inventory to ship, vetting suppliers/products).
  • Just being in the FBA  program is an Amazon SEO ranking factor.
  • FBA prep: all items must be properly prepared to enter the Amazon warehouse.
  • Able to spend more time scaling into the future.
  • Pay for shipping to Amazon and then to customer.
  • Slower cash flow.
  • Saves a ton of time, especially once you scale 
  • More sales, higher fees.
  • Can use multi-channel fulfillment, but this is even more expensive

FBM:

  • No inventory limits (have as much inventory on hand as you want, never run out).
  • Less fees- Amazon takes a 15% referral fee.
  • Can choose a 3rd party warehouse, which can be cheaper for large items and may allow you to tour the facility.
  • Must send products within 24 hours to keep healthy store metrics. 3-5 days at the very latest, which will affect your chances at winning the buy box.
  • No prime access- seller fulfilled Prime (Amazon SFP) is currently closed.
  • More work with customer support and returns.
  • More control over what your packaging looks like, though you’ll still have to follow Amazon’s rules.
  • For some products, if Amazon doesn’t prioritize you, FBM can keep you afloat without interruption (think private label here).
  • Begin selling on day 1.
  • No ranking factor algorithm boost.
  • Only need to worry about how product arrives to the customer.
  • Spend most of your time in the present, handling complaints.
  • Pay for shipping to customer.
  • Faster cash flow.
  • Impossible to continue when you scale.
  • Probably less sales, but lower fees.

Amazon FBA vs FBM: What’s Best for You?

FBA will work best for you if:

Your products move quickly.

You don’t want to fulfill, pack, and ship items.

You don’t already have logistics covered already.

You’re selling small, lightweight products.

You don’t want to store your own products.

Can handle/understand the fees.

You want Prime benefits.

You need warehouse space.

FBM will work best for you if:

You're selling slow moving products.

You can handle fulfilling orders/returns.

You don’t want inventory limits.

You have storage space.

You're selling large, heavy products.

You want more control over packaging.

Want better profit margins.

Are ok with handling customer service and product returns (more control).

Have no buy box competitors (check Keepa).

About one third of Amazon sellers use both Amazon FBA and Amazon FBM, and only 9% use only FBM. A great way to diversify is to use Amazon FBA, but use FBM for other merchants like Walmart, eBay, or Shopify. This way, you will have backup in case your Amazon account is suspended and your product is tied up in inventory.

But, diversifying to other platforms comes with its own set of difficulties (inventory maintenance and customer service alone will be far more complicated). If you're strapped for resources and time, sticking to a single fulfillment process will be easier. 

Before choosing FBA or FBM, consider how bad the fee increases will be in 2022, if FBA or FBM is more profitable, and these other major factors. Your product might not even be right for the fulfillment method you choose- certain product specs (like weight) can affect if Amazon FBA or FBM is right for you.

6 MAJOR Considerations when Choosing Amazon FBA vs FBM

1. How Bad Will 2023 Amazon Fee Increases Be?

2023 Amazon fee increases should be significant. After all, increases have continued to occur for the last few years. For example, Amazon added a 5% fuel and inflation surcharge in April 2022. Most recently, Amazon announced they will charge $0.35/item ordered between October 15, 2022 and January 14, 2023. 

Amazon fulfillment fees have increased 30% since 2020, so prepare yourself for further increases as we go into 2023.

Amazon FBA Fees

2. How Do You Ship Products Prime with Amazon FBA vs FBM?

When using Amazon FBA, your products will automatically be Prime eligible. With FBM, you will need to use the Seller Fulfilled Prime (Amazon SFP) option, which is currently not available. 

There are over 200 MILLION users that are more likely to buy Prime products over non-Prime products, so this is something you must consider before making your final decision.

3. Top Product Categories for Amazon FBA and FBM?

According to JungleScout, the most popular FBM products are cell phones and cell phone accessories, computers, apps and games, CDs and Vinyl, and Handmade items. This differs from the data they collected in late 2020, when Home and Kitchen, Health, Household, and Baby Care, and Toys and Games topped the list. 

In 2020, the top categories for FBA were Home and Kitchen, Toys and Games, and Sports and Outdoors. Today, FBA is popular in almost every category.

4. Is FBM More Profitable than FBA?

No, FBM is not more profitable than FBA typically, but it can be. This is because products get more traffic when they have the Prime badge, and Amazon shoppers purchase Prime products more than non-prime products.. But, if you have that unique product, you won’t have to fight anyone for the buy box.

For instance, if you find a third party warehouse that charges fewer fees than Amazon, you may avoid the ever-rising Amazon FBA fees. But you’ll need a unique (even patented) product that no one else can copy. You’ll need this because you won’t win the buy box unless you use FBA.

5. Can You Switch from FBA to FBM?

Yes, you can switch from FBA to FBM. To convert, just order your next load of FBA inventory to a new warehouse or your home, wait for your FBA to sell out to avoid fees, and then fulfil on your own. This is the cheapest way to transition, as Amazon will charge you fees for pulling inventory out of their warehouses.

6. Prime Books: FBA vs. FBM?

FBM might be best for selling books on Amazon Prime, simply due to issues like these:

prime books

However, this means that you will have to warehouse books in your own home. For this reason, we suggest Amazon KDP for book sales, if you are selling books you own the rights to.

What is Amazon Fulfillment by Merchant?

Amazon Fulfillment by Merchant, or Amazon FBM, means that the merchant (in this case, you, the third party seller) packages and ships their own product. An FBM seller keeps their entire inventory in their home, running massive shipments of products to the post office each day.

What Percent Does Amazon FBM Take?

Amazon FBM takes 15%. But, according to the product category, it might take anywhere between 6% and 45%. You’ll also have to pay $39.99/month for your Amazon Seller Central Account, and you’ll cover the shipping costs to your customers.

Does Amazon Pay Sales Tax for FBM Sellers?

No, sales tax is not paid by Amazon for FBM sellers (only FBA). Sales tax is your responsibility and requires you to record all sales tax collected. This is extremely complicated, as there are 11,000 tax jurisdictions.

sales tax

With FBM, Do I Pay Any Fees Before I Sell, Or Only When Customers Start Making Orders?

Yes, you will need to pay your $39.99 account fee each month if you are listing 40+ products. If you’re listing less, you’ll pay $0.99/listing.

Is Amazon FBM Free?

Yes, Amazon can be free (except for that $0.99/listing fee), but only if you are selling items that you already own directly from your house with materials you already own. Some sellers use this as a form of retail arbitrage for a few extra dollars here and there. 

Any further capacity than this and you will need to buy product to sell, packing materials, and postage at the very least. From there, you can consider adding the expense of a virtual assistant to help you with customer service and returns or a third party warehouse to handle your product.

What is Fulfillment by Amazon?

Fulfillment by Amazon, or Amazon FBA, involves shipping products directly from the manufacturer or supplier to an Amazon warehouse. Amazon dictates where this inventory goes. From there, Amazon handles everything- from packaging, shipping, handling returns, and customer complaints.

How Much Are Amazon FBA Fees?

Amazon FBA fees include a 6%-15% referral fee, $39.99/month or $0.99/listing/month, a 5% fuel and inflation surcharge, and fulfillment fees that range from $2.35-$138.11/product. And now, there is a $0.35/item through Q4 2022.

Does Amazon Pay Sales Tax for FBA Sellers?

Yes, Amazon covers sales tax for FBA sellers. And, as of 1/1/2023, they will do this for third party sellers in Missouri, too- right now they do not.

Who Pays for Shipping Amazon FBA?

The Amazon FBA seller pays for shipping while using Amazon FBA services. All FBA products are automatically Amazon Prime products, so while “Free 2-day shipping” is great for the buyer, it is not so great for the seller. (Although, the free shipping perk may inspire more Amazon sales overall).

Do Amazon FBA Fees Include Shipping?

Yes- the shipping cost is included in the Amazon fees that you will pay as the FBA seller.

How Do You Send Products to Amazon FBA?

To send products to Amazon FBA:

  • Go to your Amazon Seller Central Account.
  • Select “Inventory”, then “Manage Inventory”.
  • Choose “Edit”, then “Send/Replenish Inventory”
  • Enter your “ship from” address, which is either a home or business.
  • Follow the prompts/ questions about your inventory, and click “Continue”
  • Indicate if your products need to be prepped before leaving for an Amazon warehouse, and how the products are labeled
  • Amazon determines where your inventory will go based on product demand. If you don’t want to split your inventory, choose this opinion under shipment settings.

  • Follow the prompts to find out shipping charges, calculated by Amazon.

  • Choose a ship date

  • Print your labels

  • Package your inventory and send to Amazon.

With FBA, Do I Pay Any Fees Before I Sell, Or Only When Customers Start Making Orders?

With Amazon FBA, you will pay fees before you sell anything. These fees include the Amazon Seller Central account fees, fees for shipping to the Amazon warehouse, and storage fees.

What Can Be Sold on Amazon FBA?

You can sell almost anything on Amazon FBA, but some products are restricted or completely prohibited. Some are prohibited entirely from being Prime eligible, which means they cannot be Amazon FBA. For instance, you cannot sell water walking balls, lock picking sets, key marketing sets, original lawn darts, strike-anywhere matches, and more.

How Many Amazon Sellers Use FBA?

1,780,000 Amazon sellers use FBA, according to JungleScout. There are about 2 million third party sellers on Amazon, and 89% of sellers use Amazon FBA.

Can You Start Amazon FBA With No Money?

No, you can’t start Amazon FBA with no money, because even if you sell products you already own, you must pay something to ship the products to the Amazon warehouse.

How Do You Convert to FBA?

To convert from FBM to FBA, simply follow the same steps you would follow to ship your inventory to an Amazon warehouse. Amazon will do the rest and calculate your costs.

How are FBA Fees Calculated?

FBA fees are calculated by your product’s category, size, and weight. This typically amounts to 15% of the price of the item, with an additional $3. But, Amazon’s fees are always changing, so make sure you follow the entire process within your Amazon Seller Central Account to see the exact amount that Amazon calculates for you.

How Much are FBA Storage Fees?

FBA storage fees are $0.83/cubic foot for most items, but during Q4, the FBA fee triples to $2.40/cubic foot. 

You’ll also pay storage fee penalties for inventory that doesn’t move quickly enough. This fulfillment fee is $1.50/ cubic foot for items in an Amazon fulfillment center for 271 to 365 days. After 1 year, this Amazon FBA fee skyrockets to $6.90/cubic foot.

How Can You Lower Your FBA Fees?

You can lower your FBA fees by minimizing your product’s dimensional weight, if it makes sense to make the product smaller. Dimensional weight is determined by length x width x height divided by 139 and rounded UP, no matter what the decimal is. 

So, if your item is 6 x 3 x 10 / 139 and rounded up, your item’s dimensional weight is 2. Really, the figure comes out to 1.3, but you must round up to the nearest whole number.

But, if you can adjust the item's dimensions somehow, perhaps make it 5 x 3 x 9, its dimensional weight becomes 1. 

However, Amazon calculates fees depending on whichever metric is HIGHER- the weight, or the dimensional weight. So, if you adjust your product’s dimensional weight too much, you may end up paying a higher price for its weight.

Can an Increased Price Compete with FBA to Offset Additional Fees?

Increasing your price can offset additional Amazon FBA fees, but increasing your price can quickly lead to losing the buy box. Without the buy box, you will get very few sales- if you get any at all. Read our full guide on how to win the Amazon buy box consistently.

Can You Use FBA as an Individual Seller?

Yes, you can use FBA as an individual seller. It works exactly the same as when an organization or larger company uses FBA, but it may be a bit more difficult without using some automation software or an Amazon automation company to help delegate tasks.

Does It Matter that FBA Restricts Customer Interaction?

Yes, it matters that FBA restricts customer interactions. Some sellers really like this feature because virtually all customer service is handled by Amazon. However, other sellers don’t like this because Amazon almost always sides with the customer rather than the seller. This can result in unsellable returned products you’ll have to sell on another platform, like eBay.

Is FBA Profitable in 2023?

Yes, Amazon FBA is still profitable in 2022. But, you’ll have to spend a lot on Amazon PPC to compete in the extremely saturated market. Even if you have a completely unique product, you will need to push traffic to it, and hijackers are always watching the most profitable items hoping to create knock-offs for their own stores.

Is Amazon FBA Still Worth Starting in 2022?

Amazon FBA might be worth starting in 2023, especially if you already have a successful online store and you’re adding Amazon FBA as another source of income. However, it will be extremely difficult in 2023 to start a profitable FBA store from scratch, because of the level of competition you’ll face (Amazon itself!), increasing seller fees, and complicated shipping costs/times.

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

The Amazon fulfillment method right for your business might be FBM or FBA, depending on the size and weight of your product, your capacity, the size of your operations, your Amazon business goals and your personal preferences. In the end, no matter which order fulfillment method you choose, Amazon is in charge and has the final say.

With other business models, like local lead generation, you are in full control of every part of your business. You don’t work off of a platform, so you make the rules. And, there's no complicated inventory to manage, or tricky and changing fees to keep track of. You simply rank a website organically and provide leads to small businesses- in a far less saturated market.

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