As an Amazon seller, choosing between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM) can significantly influence your bottom line. Both Amazon FBA vs FBM fees come with distinct structures, making it critical to evaluate which option aligns best with your business goals.

As of 2024, changes in Amazon’s fee structure – particularly the increase in FBA fees – have made it even more important to carefully evaluate which model, Amazon FBA vs FBM fees,  is best for your business.

What Are Amazon FBA Fees?

Amazon FBA allows sellers to outsource storage, packaging, and shipping to Amazon. 

Amazon FBA fees are charged per unit sold and vary based on the item’s size and weight. These fees cover the costs of picking, packing, and shipping products. 

Storage fees are typically higher during peak seasons, such as Q4, reflecting increased demand for warehouse space. Storage fees are monthly fees based on the volume of inventory stored in Amazon’s fulfillment centers. 

These may include removal fees for unsold inventory, long-term storage fees for items that remain in warehouses for extended periods, and unplanned service fees for non-compliant inventory. 

How to Calculate Amazon FBA Fees

Amazon provides an Amazon FBA vs FBM Calculator to help sellers predict fees and profitability, and by inputting product details, including size, weight, and price, sellers can estimate costs and compare the difference between FBA and FBM fees. 

To estimate Amazon FBA fees, sellers need to consider multiple factors: 

• The product’s dimensions and weight: Heavier or oversized items lead to higher fulfillment costs. 
• Storage duration and volume: Longer storage periods and higher volumes lead to increased fees. Costs for labeling, repackaging, or removal of inventory must also be factored in.

Pros and Cons of Amazon FBA Fees

Amazon FBA offers several key advantages: 

FBA products are automatically eligible for Amazon Prime, which can significantly boost sales, as Prime members often prioritize Prime-eligible products. 

Amazon’s efficient fulfillment and shipping processes lead to faster delivery times and improved customer satisfaction, which can positively impact your seller rating and customer reviews. 

By outsourcing fulfillment to Amazon, you can focus on other aspects of your business, such as product sourcing, marketing, and customer service. 

FBA uses Amazon’s extensive logistics network, including fulfillment centers and shipping carriers, to streamline the fulfillment process. 

FBA products are eligible for Buy Box eligibility, which can significantly increase your product’s visibility in search results and drive more sales. 

However, FBA also comes with potential drawbacks:

FBA fees can be significant, especially for larger or heavier products, where these fees include fulfillment fees, storage fees, and additional fees for special handling or disposal of unsold inventory. 

When you use FBA, you let go of control over the packaging, shipping, and customer service aspects of your orders, where sometimes it can lead to issues with packaging quality or customer support that may impact your brand reputation. 

During peak seasons, Amazon’s fulfillment centers can become congested, leading to higher storage fees for your inventory. If your inventory remains in Amazon’s fulfillment centers for an extended period, Amazon may charge long-term storage fees or even dispose of the inventory without your consent.

What Are Amazon FBM Fees?

FBM vs FBA requires sellers to manage all aspects of fulfillment independently. Sellers bear the cost of shipping orders to customers, which varies based on carrier, speed, and destination. 

Warehouse and storage fees include costs associated with maintaining and operating a storage facility, such as rent, utilities, labor, and insurance. 

Additionally, sellers pay a percentage of each sale to Amazon as a referral fee, based on product category and price. FBM sellers also need to invest in packaging materials, such as boxes, bubble wrap, and tape, to make sure their products are safely shipped to customers. 

How to Calculate FBM Fees

Shipping costs vary significantly between carriers. Costs increase with faster shipping speeds (e.g., overnight vs. standard). Building strong relationships with carriers and negotiating volume discounts can significantly reduce shipping expenses. 

Shipping costs are often calculated based on dimensional weight, which considers the package’s dimensions in addition to its actual weight. Efficiently packing products to minimize space and weight can reduce shipping costs. 

Warehouse costs include the cost of renting or leasing warehouse space, which differs based on location and size. Costs for uses such as electricity, gas, and water need to be factored in. Labor costs for warehouse staff, including salaries, benefits, and training, can be a significant expense. 

Costs for equipment such as forklifts, pallet jacks, and conveyor belts might be necessary. Costs for inventory management software to track inventory, manage orders, and generate shipping labels are also essential. 

Packaging material costs include the cost of boxes in various sizes and types. Costs for fillers such as bubble wrap, packing peanuts, and other materials to protect products during shipping are also included. Costs for shipping labels, tape, and other necessary packaging materials need to be considered.

Returns Processing Costs include labor, shipping, and restocking fees. 

Pros and Cons of Amazon FBM Fees

By avoiding FBA fees like fulfillment fees, storage fees, and long-term storage fees, sellers can often achieve higher profit margins on their products. 

FBM provides sellers with complete control over their inventory, allowing for better inventory management, reduced waste, and the ability to quickly adjust to changing market demands. 

FBM allows sellers to customize their packaging, include branded inserts, and provide personalized customer service, enhancing the overall customer experience. 

While Amazon FBA vs FBM sellers have a slight advantage in Buy Box eligibility, FBM sellers can still compete effectively by offering competitive pricing, fast shipping options, and excellent customer service. 

FBM offers greater flexibility and scalability as sellers can easily adjust their fulfillment operations to meet changing demands and scale their business accordingly. 

Yet, there are drawbacks: 

FBM requires sellers to handle all aspects of fulfillment, including order processing, picking, packing, shipping, and customer service, which can be time-consuming and resource-intensive. 

FBA sellers often have an advantage in terms of shipping speed and customer satisfaction due to Amazon’s efficient fulfillment network. If not managed effectively, shipping costs can significantly impact profitability. 

FBM sellers are responsible for all aspects of fulfillment, which increases their risk of errors, delays, and customer dissatisfaction. 

Which is More Cost Effective, Amazon FBA or FBM Fees?

The cost-effectiveness of FBA vs FBM depends on several factors, including business model, product type, and sales volume. 

1. Low-Margin Products: FBM is often more cost-effective for low-margin items, as it avoids the high fulfillment fees associated with FBA. Sellers can better manage costs by optimizing their logistics. 
2. High-Demand Products: FBA is advantageous for fast-selling products that benefit from Prime eligibility, which boats visibility and sales. Amazon’s logistical efficiency can also reduce delivery times, enhancing customer satisfaction. 
3. Heavy or Oversized Items: FBM can be more cost-effective for bulky or heavy products, as sellers can negotiate lower shipping rates directly with carriers. Avoiding FBA’s oversized item fees can significantly improve profitability. 

For sellers with diverse inventory, a hybrid approach, using both FBA vs FBM Amazon, may offer the best balance of cost and convenience. This strategy allows sellers to use FBA’s benefits for high-demand products while minimizing costs for slow-moving or niche items through FBM. 

To learn about all the updates on Amazon FBA fees in 2024, make sure to get our 2024 Fees Guide!