FBA vs FBM: Which Saves More Money?

Understanding the true costs of fulfillment can help you make informed decisions about how to manage your e-commerce business. Whether you choose Fulfilled by Amazon (FBA) or Fulfilled by Merchant (FBM), each has its own cost implications that can affect your bottom line.

Cost Breakdown: Standard Size Item

When considering the costs associated with standard-sized items, FBA and FBM offer different advantages. Let's break down these costs to see which might be more beneficial for your business.

With FBA, you're looking at a storage cost of $0.87 per cubic foot each month. This cost is for storing your inventory in Amazon's warehouses, which might be a small price to pay for the convenience and exposure that comes with FBA. The pick and pack fee is $3.22 per unit, which includes the cost of Amazon handling and preparing your order for shipment. Shipping to the buyer is included in this fee, which can be a significant saving, especially for businesses that ship large volumes.

On the other hand, with FBM, you incur no storage costs if you use your own space, making it an attractive option for businesses with available warehouse space. The labor cost for picking and packing is approximately $0.50 per unit, which is considerably lower than FBA. However, shipping costs range from $4.50 to $8.00 per unit, depending on the carrier and destination. Prep and labeling are also cheaper at $0.10 per unit. In total, FBM costs can range from $5.10 to $8.60 per unit, which can be higher than FBA unless you find ways to reduce shipping expenses.

When FBM Wins

FBM can be more cost-effective under certain conditions:

• Large or Heavy Items: FBA fees increase with the size and weight of products. If you sell bulky or heavy items, FBM may save you money as you avoid the additional weight-based fees that FBA imposes.
• High Order Volume: If you ship more than 50 orders daily, FBM allows you to leverage economies of scale. With efficient logistics processes, you can reduce costs per unit shipped.
• Low Turnover Products: For items that don't move quickly, FBA storage fees can add up. Keeping these products in your own warehouse means you avoid these ongoing costs.
• Efficient Processes: If you've streamlined your operations and have efficient packing and shipping systems in place, FBM can be more profitable.

FBM Shipping Savings with Atoship

Shipping costs can be a significant part of FBM. Fortunately, platforms like Atoship can offer substantial savings on shipping rates. Here's how Atoship compares to Amazon Buy Shipping:

• For a 1 lb package, Atoship offers a rate of $4.10 compared to Amazon's $5.80, saving you 29%.
• A 2 lb package costs $5.30 with Atoship, while Amazon charges $7.50, again saving 29%.
• At 5 lbs, Atoship's rate is $9.00 versus Amazon's $12.80, yielding a 30% savings.
• For heavier packages, like 10 lbs, Atoship charges $12.90 compared to $18.50 with Amazon, saving you 30%.

These savings can add up quickly, especially for businesses with high shipping volumes.

Break-Even Analysis

Determining whether FBA or FBM is right for your business depends on your monthly order volume:

• Under 100 Orders: FBA is generally more economical due to its all-inclusive shipping and handling fees.
• 100-500 Orders: The best option depends on your specific products. Consider factors like size, weight, and turnover.
• 500+ Orders: FBM, especially with negotiated shipping discounts, often emerges as the more cost-effective choice.

FBM Best Practices

To maximize the benefits of FBM, consider the following best practices:

Use Commercial Plus Rates: Take advantage of discounted shipping rates available for businesses. This can significantly reduce your shipping costs.

Batch Print Labels Daily: Streamlining your labeling process by batch printing can save time and reduce errors.

Negotiate with Carriers for Volume Discounts: If you ship large volumes, talk to carriers about volume discounts. This can lead to substantial savings.

Optimize Packaging to Reduce DIM Weight: Use the smallest possible packaging to reduce dimensional weight charges. This helps lower shipping costs.

By carefully considering these factors and leveraging platforms like Atoship for shipping savings, you can make a more informed decision about whether FBA or FBM is the best choice for your business.