Key takeaways
- Count every cost, including labor and space.
- Use real shipment and fee data.
- Model by product, not by account.
- Revisit assumptions twice a year.
List every cost for both models
For FBA, include fulfillment fees, storage, inbound shipping and prep, returns handling and any removal costs. For FBM, include packaging, pick and pack labor, shipping, warehouse space, returns handling, customer service and any 3PL charges. Leaving out labor and space makes FBM look cheaper than it is.
Use real shipping data
Average shipping cost varies by weight, size and destination. Use your own recent shipment data and carrier invoices rather than quotes for a typical parcel. For FBA, use the fee preview for your product and current schedule.
Include storage and inventory carrying
FBA storage charges and the cost of capital tied up in inventory at Amazon belong in the model. For FBM, the equivalent is warehouse cost and carrying cost. Slow-moving products can be costly in either model.
Account for returns and service
FBA handles much customer service for orders and processes returns in its network, which saves time but may incur fees. FBM requires your own service capacity and return logistics. Quantify both.
- Return rate and handling cost
- Customer service time
- Damage and loss
- Refunds and replacements
Consider the effect on sales
FBA can improve delivery speed and may help conversion in some situations, while FBM may offer flexibility and control. Measure real differences where you can, but avoid assuming effects you have not observed.
Compare by product
Calculate margin per unit for each product under each model. Many catalogs have a clear split, for example small, fast-moving items on FBA and bulky or slow-moving items on FBM.
Revisit regularly
Costs and fees change, so refresh the model at least twice a year or when you see a change in performance.
A worked example
A seller models a bulky, low-velocity product on both models. Storage and fulfillment fees on FBA are high, but shipping from their own warehouse is moderate and customer service volume is low. FBM yields the better margin for that product, while small items remain on FBA.
Common mistakes
Typical mistakes include using headline fees only, ignoring labor and space and treating the decision as permanent. Document assumptions and update them.
Questions to ask before moving a product
Before changing a product's fulfillment model, check how inventory and listings will transition, whether any promotions or advertising will be affected, what staff or systems are needed and how you will measure the result. Plan a review date and a way back if the change does not work.
Moving a few products first is wiser than switching a whole catalog based on one spreadsheet.
Your next three steps
Compare the two models properly for one product.
- List all FBA and FBM costs, including labor and storage space.
- Use real shipping invoices rather than quotes.
- Pilot the better option on a small share of volume before switching.
Key terms
A few terms used above, in plain language.
- Fulfillment fee: Amazon's charge to pick, pack and ship an FBA unit.
- Carrying cost: the cost of holding inventory.
- Landed cost: the full cost to deliver a unit.
Frequently asked questions
Which model gives better conversion?
It depends on the product and market. Measure rather than assume.
Can I use both for the same product?
Sometimes. Understand listing and inventory rules before doing so.
This guide is general information. Amazon's fees, policies and program rules change and vary by marketplace, so confirm current details in Seller Central and, for tax or legal questions, with a qualified adviser.