Fulfilled by Amazon (FBA) vs. Fulfilled by Merchant (FBM): A Look at How Both Options Work and Compare

For brands, an incredible amount of opportunity exists on Amazon. In 2021, Amazon accounted for 41% of the U.S. ecommerce market, making it the world’s leading online retailer.

There are many ways brands can tap into that opportunity, and one of the factors brands need to weigh is fulfillment. Brands can choose from several different ecommerce fulfillment methods when selling on Amazon, two of which are Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM). Both options come with advantages and disadvantages, and brands do not need to feel tied to one service.

In this article, we'll specifically dissect the pros, cons, fee structures and more of FBA and FBM.

What is Fulfilled by Amazon (FBA)?

Fulfilled by Amazon (FBA) is a fulfillment option where Amazon handles every step of an ecommerce transaction. To begin, a brand sends its inventory to Amazon, where it is stored in one of the thousands of U.S. warehouses. Amazon takes care of packing, shipping, customer service and returns. The entire FBA process can be managed by the brand itself, a third-party logistics (3PL) service or an ecommerce partner. 

For a long time, brands and sellers relied on FBA as an inject-it-and-forget-it type of 3PL strategy. Companies would send their products to Amazon and let the ecommerce giant handle the rest. Those days are over. Fee raises and inventory limits have made it more difficult to cost-effectively and strategically use FBA.

What is Fulfilled by Merchant (FBM)?

With FBM, a brand or its 3PL takes full responsibility for warehousing and inventory fulfillment. FBM comes with one condition: listings aren’t Prime-eligible, meaning FBM listings don’t come with a Prime Badge. Amazon gives preference to Prime-eligible listings and sellers, and most Amazon buyers prefer Prime advantages. For the brands that want Prime and control over fulfillment, there is another option through Seller-Fulfilled Prime (SFP), which you can learn more about in our guide to SFP.

FBA vs. FBM

While both FBA and FBM are Amazon-based services, the two options have a few notable differences. First, FBA gives complete logistical control to Amazon. From packing to shipping, Amazon fulfills every order using its own infrastructure. Through FBM, the brand must handle all aspects of inventory management and fulfillment. 

Products fulfilled through FBA are Prime-eligible, while FBM products are not. Not having Prime benefits could cause a brand to lose sales, as there are an estimated 200 million Prime members in the U.S. On the flipside, FBA comes with more fees than FBM. For example, each brand must pay a per-unit charge from purchases made through the Amazon store. Although there aren’t substantial FBM fees, the service may pose a challenge for brands without robust in-house capabilities. In addition to managing other business operations, brands using FBM must allocate limited time and resources to inventory fulfillment. 

Finally, unlike FBM, FBA imposes frequently changing brand requirements. Limits such as product and inventory restrictions could create significant headaches for brands, especially during high-demand periods like Black Friday and Prime Day.

Using a combination of FBA & FBM

Despite the differences between FBA and FBM, the services do not have to be mutually exclusive. Many brands choose to combine them to enjoy the benefits of both options. For brands with a variety of inventory types and sizes, it may make sense to inject some products into FBA and fulfill others via FBM. If the products are oversized and heavy, then FBM may be a brand’s best bet. Smaller and lightweight items are ideal for FBA. Brands can determine the best fulfillment option for each product category by using Amazon’s FBA revenue calculator. 

Turnover rates can also be an important fulfillment factor. The turnover rate, or speed in which an order is sold and restocked, varies among products. Amazon charges long term-storage fees for keeping products in its warehouses for 365 days or longer. Depending on turnover rates, some brands may want to split their inventory between Amazon’s warehouses and their own centers.

Regardless, brands should have FBM as a backup to FBA. During the initial COVID-19 outbreak, the steep rise in demand bottlenecked Amazon’s supply chain. As a result, Amazon was forced to deprioritize products deemed unessential. Brands that pivoted to alternate fulfillment methods, such as FBM or SFP, survived the restriction. And brands that didn’t switch lost sales.

HOW TO GET the best of all fulfillment methods

Although Amazon offers a variety of fulfillment options—each with its pros and cons—it is not the only entity that supplies logistics. Qualified 3PLs, such as Netrush, also provide fulfillment methods for FBA, FBM, SFP and MCF.

Choosing to outsource operations to Netrush offers a host of advantages for brands. One advantage is savings. Because of our streamlined operations, we save most brands 15%-20% on average. Our two-day nationwide shipments have a 99% accuracy rate and a 0% defect rate.

Another advantage to using Netrush is gaining access to advanced fulfillment centers. Our automated warehouses flex with marketplace demands and current events, ensuring continued access to your consumers. These warehouses are also run by a seasoned team of professionals with experience in supply chains and transportation. 

Through our services, customers receive an optimal fulfillment experience. Learn more about our 3PL solution.  

Summary and takeaways

• Fulfilled by Amazon (FBA) is a logistics service that handles every fulfillment detail for a brand. Conversely, Fulfillment by Merchant (FBM) requires Amazon sellers to manage all fulfillment operations themselves.

• As opposed to FBM, FBA has extra fees, inventory restrictions and Prime eligibility. But brands using FBM will need in-house capabilities. 

• Brands can combine FBM and FBA to categorize the storage of products based on size and turnover rate. However, brands should plan to use FBM as a backup during marketplace crises. 

• Using Netrush’s 3PL gives brands the benefits of Amazon fulfillment—at a reduced price. Our cutting-edge warehouses and knowledgeable staff also provide brands a competitive fulfillment experience.