Amazon FBA vs FBM: Setting Up Your Amazon Logistics Strategy

Every decision you make as a business owner shapes your growth and success. You’re tasked with identifying your brand's needs and finding the best solutions — and experts — to help you unlock its full potential. This is especially pertinent when you operate on Amazon, which commands an impressive 37.6% of the ecommerce market.

Sellers’ main logistics options on the platform are Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Your choice between FBA or FBM (or both) can significantly impact your efficiency, costs, and customer satisfaction. Each has unique strengths, so the right choice for you will depend on your goals and resources.

Have you ever asked yourself, what is FBA or FBM? What are the pros and cons of FBA and FBM? Which is better, FBA vs FBM? In this post, we'll explain the key differences between the two and help you decide which strategy best suits your business needs.

What is Amazon FBA?

Amazon’s logistics service, Fulfillment by Amazon (FBA), allows sellers to leverage the marketplace’s vast fulfillment network. Through the program, Amazon handles the entire fulfillment process, from storing and packing to shipping, customer service, and even reverse logistics. This streamlined solution helps manage orders conveniently and efficiently, which is why 82% of sellers on the platform use it for their businesses.

FBA advantages

• Vast customer base: Reach millions of potential buyers and enhance your brand visibility within Amazon’s trusted marketplace.
• Simplified logistics and fulfillment: Have Amazon take care of storage, shipping, and returns, ensuring timely delivery while you focus on growing your business.
• Seamless multi-channel selling: FBA’s Multi-Channel Fulfillment (MCF) service supports platforms like Shopify and WooCommerce, streamlining order fulfillment across all your sales channels.
• Prime access: Tap into the over 200 million Amazon Prime members with fast, free shipping and the enhanced visibility of the Prime badge.‍
• Streamlined operations: By outsourcing inventory management and order fulfillment to Amazon, you’re able to focus more on business growth.

FBA downsides 

• Reduced control: Relying on Amazon for inventory management and customer service means sacrificing control. This may be challenging for brands with specific packaging needs or personalized customer service goals.
• Dependency on Amazon: When you operate within Amazon’s ecosystem, you have to adapt to their policies and fees, which can change frequently and potentially affect your business model.
• Packaging limitations: FBA uses generic packaging, so it’s difficult to showcase your brand identity. While you can incorporate custom inserts or packaging to maintain branding, they must abide by the program’s guidelines.‍
• Program fees and costs: FBA charges fees for storage, fulfillment, and referral, so you’ll need to conduct a careful cost analysis to ensure profitability through the program. Additionally, overstocking or a slow-moving inventory can result in higher storage fees, so you need to forecast as accurately as possible. Look into tools like SoStocked that can help you to take back control of your inventory to prevent stockouts and costly storage fees.

What is Amazon FBM?

As the name suggests, sellers take full responsibility for their fulfillment in Fulfilled by Merchant. That means storing, packing, and shipping products, as well as managing customer complaints and inquiries directly (unlike FBA, where Amazon takes on these tasks). 

FBM is an excellent option for businesses with the resources, infrastructure, or additional support to independently manage their fulfillment process.

FBM advantages

• Complete business control: You manage inventory, shipping, and branding, which offers flexibility and customized packaging options.
• Higher profit potential: Optimize earnings with strategic inventory placement and competitive shipping rates.
• Avoid Amazon-related issues: Amazon’s policy changes don’t affect your business in FBM, reducing the risk of listing removals and extra paperwork.
• Stronger customer relationships: Personalize consumer interactions and build loyalty by controlling the entire experience.
• Full operational awareness: Monitor inventory, sales, and trends directly to make informed business decisions.
• Flexibility to partner with 3PLs: Collaborate with third-party logistics providers to streamline your fulfillment strategy.

FBM downsides

• Greater operational workload: Logistics, warehousing, and customer service are entirely your responsibility unless you work with a logistics partner.
• Difficulties handling high-order volumes: Managing large orders can become overwhelming and require dedicated resources or outsourcing.
• Risk of rising costs: Warehousing, staffing, and shipping costs can escalate and potentially outweigh FBA’s pricing.
• Lower Featured Offer eligibility: FBM sellers are less likely to win Amazon’s Featured Offer than FBA listings because the marketplace favors the latter program.
• Infrastructure investment required: You have to invest in your infrastructure to store, pack, and ship products efficiently, which can be a hurdle for smaller businesses.‍
• No access to Prime benefits: FBM products are barred from the Prime badge, making them less appealing to customers who value fast and free shipping.

The better alternative: FBA and FBM hybrid approach

Luckily, you don’t have to stick to only one strategy; with a hybrid approach, you can combine Amazon FBA and FBM to suit your current needs. In fact, 22% of Amazon sellers use both, which allows them to leverage Amazon’s fulfillment network while maintaining control over certain operations. You simply split your inventory according to the method that works best for each product. 

You can utilize FBA to take advantage of Prime’s speedy fulfillment and broader customer reach for fast-moving items. At the same time, FBM is a cost-effective choice for slower-moving products, helping you save on storage fees while retaining direct control. When comparing Amazon FBA vs FBM, a hybrid strategy is an excellent backup during unexpected disruptions or peak seasons, as it ensures seamless operations and continued customer satisfaction despite these fluctuations.

The pros of a hybrid approach

• Personalized customer experiences: FBA guarantees fast fulfillment for popular products, while FBM allows personalization like custom packaging to enhance buyer satisfaction and loyalty.
• Expanded market reach: FBA supports international shipping, while FBM offers control over regional preferences and special handling, thus helping you grow globally without sacrificing service.
• Resilient fulfillment strategy: Combining FBA and FBM safeguards you from disruptions by keeping products available even when inventory runs low in one program.‍
• Optimized inventory management: Using FBA for high-demand items and FBM for lower-volume products reduces storage fees and cuts inventory costs.

How to set up your logistics on Amazon

Establishing a hybrid fulfillment strategy might seem overwhelming, but it’s much more manageable when you break it down into simple steps. Whether you're a new seller or looking to fine-tune your existing logistical operations, we’ll walk you through how to implement a combined approach on Amazon.

Step 1: Register as an Amazon seller

Before you can sell anything on Amazon, you need to create a seller account. You have the option of an Individual or Professional account, and which one you choose depends on your volume and business needs. 

An Individual account:

• Is designed for small-scale or new sellers
• Has no monthly fee but charges $0.99 per item sold
• Is limited to 40 items per month
• Offers basic features with limited access to advanced tools

A Professional account:

• Is for serious sellers or businesses looking to grow
• Charges $39.99 a month but has no per-item fee
• Allows you to sell an unlimited number of items each month
• Provides full access to advanced features like bulk listings, advertising, and detailed business reports

Once you’re in, you’ll have access to Seller Central, Amazon’s dashboard, where you can manage everything from product listings to orders.

Step 2: Evaluate your products and fulfillment needs

When deciding which fulfillment model to adopt, compare their unique characteristics. Some items are a better fit for FBA, while others ― especially those that don’t sell as quickly — are more suited to FBM. 

Here are some factors to consider as you make your decision:

• Product size and weight
• Sales demand and speed
• Storage costs
• Shipping speed

Step 3: Set up your fulfillment processes

Since you’re combining both fulfillment models, you’ll need to take certain steps to create robust Amazon logistics. 

First, set up your FBA procedure. This will help you take care of the hands-off aspect of the process right from the start. To enroll in FBA, simply log in to Seller Central, navigate to the FBA section, and sign up. Once you're in, Amazon will fulfill your FBA items.

Next, build your storage and packing process for your FBM fulfillment. You have two options here: manage everything in-house or partner with a 3PL. Before deciding, set up your listings for FBM (you can convert them from FBA if desired). This step is crucial to ensure everything is aligned and will run smoothly.

Step 4: Create FBM listings

Crafting FBM listings is pretty straightforward, with a few ways to do so:

• Convert FBA listings to FBM: Head to Seller Central, select the FBA listings you want to switch, change them to FBM, then adjust your shipping and stock settings to match your new fulfillment method.
• Duplicate FBA listings for FBM: If you want to run both Amazon FBA and FBM, simply copy the ASIN of your FBA product, create a new FBM listing with a modified SKU, and set your stock and shipping details.
• Create a new FBM listing: If you want to start fresh, delete your old listing, add the new product details, and insert the unique SKU and correct information to verify it's ready for FBM.

Remember to update your shipping settings and double-check your listings to ensure accuracy. As your business grows, it’s a good idea to evaluate your fulfillment process regularly to keep everything running smoothly.