FBM = Fulfilled by Merchant (shipped by you) FBA = Fulfilled by Amazon

You may have been doing research on whether FBA or FBM is the best model to fulfill your Amazon orders, unfortunately there is no easy answer. FBA is the most prevalent method for most Amazon sellers since it eliminates the need for you to fulfill items yourself, Amazon handles customer service, shipping is often cheaper (more on that later), and most importantly it gives you access to Amazon’s 2 day prime shipping (which often will increase sales up to 50% over the same listing with FBM fulfillment).

However, it does have some downsides. First, you have to pay freight to ship the item to an FBA warehouse. While that can be relatively inexpensive for something the size of a deck of playing cards, it can be a considerable cost for something say the size of a bass guitar. You also have to manage your IPI (Inventory Performance Index) to maximize the amount of items that Amazon will allow you to store in their FBA centers. IPI has a lot of factors but the main ones are Inventory Age, sell-through, and number of units in stock. However Amazon will also use historical data of your product’s sales (if it has historical data) to calculate if you are “overstocked” on an item. Another downside is Amazon also will charge storage fees on your products for FBA. While their storage fees in general are very reasonable compared to say a 3rd party 3PL, Amazon will continually increase storage rates for products that have not sold through in a timely manner and are deemed “Excess Inventory.” This will often mean you either need to clearance the product out at a bargain price, remove the inventory to your warehouse (at your cost generally, although Amazon does occasionally offer “free” removals pre Q4 to get more space for the holidays), or else dispose of inventory (also at your cost). While managing inventory can be relatively simple for items that sell at a more or less even rate throughout the year, it can be very difficult to manage for seasonal items. Another potential downside of FBA is the cost of FBA fulfillment and storage. While Amazon FBA fees are often far more affordable than comparable UPS or Fedex rates for small, standard, or “small oversize” items, they quickly grow in price the larger the item is. So it is more economical to say ship an item the size of a baseball using FBA fulfilment than using Fedex or UPS, but it is much more expensive to ship an item the size of a dresser drawer through FBA fulfillment than it is to ship Fedex or UPS. If you have access to the Amazon Vendor program, large items are generally best handled through Vendor. FBA generally is also not able to handle items that have multiple components that make up a single finished product, such as a single piece of furniture like a desk that ships in 4 separate component boxes. Amazon also simply does not allow certain types of items to be sold FBA, such as aerosol cans, and requires them to be sold through FBM.

So now that we’ve talked about FBA lets discuss FBM. One of the main advantages is you set your own inventory, and the only real limitation is how many orders your warehouse can fulfill within the 2 day standard processing time Amazon gives you (although you can set extra processing days in your FBM listing if need be). Another advantage is heavy items often are much more economical to ship through FBM using Fedex or UPS than FBA fulfillment. On top of that there are no FBA storage fees (other than your own warehouse costs of course) or IPI metrics like FBA has. One strategy I’ve used in the past with new items is to test them out FBM to see if there is any sales volume before shipping them in FBA so you don’t end up having excess units you’re going to have to remove eventually. Another advantage of FBM is that it is possible to sell items to have multiple components, such as my earlier example of a desk that ships in 4 separate boxes to make a complete product. However, Amazon does only let you upload one tracking number per shipped product so I would highly recommend putting “product ships in multiple boxes” somewhere in the listing. One other major advantage of FBM is its low cost, in order to list FBM products there is virtually no cost to you (aside from the $40 monthly fee to Amazon for a pro seller account). So if you want to test the waters on Amazon without a big investment (aside from time setting up the listings) it can be a good way to try it out as a selling platform.

Now for the disadvantages of FBM. FBM has metrics that you need to stick too just as with FBA, however unlike the IPI metrics for FBA if you don’t meet Amazon’s FBM metrics they will shut down your FBM account for an indeterminate amount of time (your FBA account will still be allowed to be active however). I had this happen once at the business I was working at when the warehouse manager had to take extended time off for personal medical reasons beyond his control. The other warehouse workers had only been there a couple of months and didn’t know where product was located, couldn’t work the shipping properly, and generally didn’t know how to function without the manager’s guidance (through no fault of their own). So we had a lot of late shipments, a lot of canceled orders, and more than a few mis-shipped orders where customers received the wrong product. After a couple weeks of being beyond Amazon’s metrics allowances for these shipments our FBM account was shut down. This was not a fun situation since FBM probably accounted for about 60-70% of our sales at the time. Amazon did reinstate our FBM account in around 3 months from memory, but it was not a fun experience to say the least. Ever since I have been a stickler for maintaining the metrics, although we have had circumstances where I’ve worked where the metrics exceeded the allowable limits I have not had an FBM account shut down on me since then. Being in good communication with your warehouse is one of the most important ways to mitigate getting your FBM shut off. If you exceed the metrics for FBM you will see a very concerning message on your Amazon account saying that “You are in danger of cancellation.” While this is alarming, usually in my experience if you are not way over the target percentage and show Amazon that you are being more on top of orders and improving the percentages then they won’t cancel you (this is my personal experience and not a guarantee). The most important metrics to keep track of are your Late Shipment Metrics and your Order Cancelation metrics, those are the two that will get your account shut down the quickest. Another is A2Z claims, A2Z generally happen when a product doesn’t show up at the customers address. A2Z is the most serious claim a customer can make and even having the customer make an A2Z claim will negatively affect your metrics. This can often times be beyond your control, although rare, Fedex and UPS can lose packages or they can arrived damaged to the point the product is unusable. The best way to avoid this is to try to work with your warehouse to ensure that products are packaged in the best way possible to be secure and robust enough to withstand any potential “abuse” that carriers may put it through. In all my years of shipping thousands upon thousands of FBM orders I’ve really only had a handful of A2Z cases relative to what has been shipped, if your warehouse is following proper procedures this should be a rare occurrence. Stolen packages from the customers porch can also be the cause of an A2Z case, unfortunately there’s not much you can do about this since UPS and Fedex drivers don’t take pictures of the confirmed delivery like Amazon Fulfillment drivers do. While you can implement a signature on delivery requirement, I wouldn’t recommend this since you will generally get more angry customers out of it than you will save on stolen packages. However, the exception may be if you are shipping some rather expensive product then it may be worth it to use signature on delivery.

So my shorthand guide would be as far as the best fulfillment method for a product:

Small Products: FBA

“Standard” size products: FBA

Large and/or heavy products: FBM (or Vendor)

Products that have multiple component pieces: FBM (or Vendor)

Products that have to ship LTL: Vendor