Introduction

Fulfillment is one of the most important—and overlooked—factors in Amazon success. Choosing between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) impacts costs, customer experience, and scalability. Some sellers thrive with one model, while others maximize growth by combining both.

This guide explains the essential functions and strategies every seller needs to know to succeed with FBA, FBM, or a hybrid approach.

Core Differences Between FBA and FBM

FBA (Fulfillment by Amazon):

  • Amazon handles storage, shipping, customer service, and returns.
  • Products gain Prime eligibility.
  • Higher fees, but faster logistics and customer trust.

FBM (Fulfillment by Merchant):

  • Seller handles storage, packing, and shipping directly.
  • Lower fees but more operational responsibility.
  • Useful for oversized, slow-moving, or margin-sensitive products.

Essential Functions Sellers Must Master

  1. Inventory Management
    • FBA requires balancing IPI scores, aged inventory, and storage fees.
    • FBM demands accurate forecasting and in-house or 3PL logistics.
  2. Shipping & Logistics
    • FBA: Amazon manages Prime-level speed.
    • FBM: Sellers must negotiate carrier rates and maintain fast delivery.
  3. Returns & Customer Service
    • FBA: Amazon handles returns automatically.
    • FBM: Sellers need systems for returns processing and customer communication.
  4. Fee Structures
    • FBA: Higher fulfillment and storage fees, but improved sales velocity.
    • FBM: Lower fees, but more responsibility and fewer Prime benefits.

When to Use FBA vs. FBM

  • FBA is best for:
    • High-demand, fast-moving products.
    • Smaller items where Prime eligibility boosts conversions.
    • Sellers seeking hands-off logistics.
  • FBM is best for:
    • Oversized or heavy products with high FBA fees.
    • Products with low margins where shipping can be optimized.
    • Brands with strong in-house fulfillment capabilities.

Hybrid Strategies

Many sellers succeed by combining both models:

  • Test launches with FBM to validate demand before sending inventory to FBA.
  • Split SKUs between FBA and FBM to reduce stockout risk.
  • Seasonal strategies where FBA handles Q4 peaks and FBM absorbs overflow.

Cost & Profitability Tactics

  • Run FBA fee simulations for each product to compare margins.
  • Use FBM for bulky or slow-moving products to reduce long-term storage fees.
  • Monitor TACoS and contribution margin to tie ad performance into fulfillment decisions.
  • Avoid overstocking FBA—aged inventory surcharges crush margins.

Case Study Example

A furniture brand struggled with FBA fees on oversized products. By switching to FBM for bulky SKUs while keeping smaller accessories in FBA:

  • FBA sales remained strong thanks to Prime eligibility.
  • FBM products avoided oversized storage penalties.
  • Contribution margin improved by 22% overall.

Common Seller Mistakes

  • Relying only on FBA and absorbing high storage penalties.
  • Underestimating the customer service demands of FBM.
  • Ignoring hybrid strategies that could balance costs.
  • Treating fulfillment as a back-office function instead of a growth driver.

Conclusion

FBA and FBM are not “either/or”—they’re tools. The most successful sellers know when to leverage each, and how to coordinate both for maximum growth and profitability.

The bottom line: mastering fulfillment is mastering your Amazon business.

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