What FBA and FBM Prep Actually Means for Your Amazon Business

Learn what FBA and FBM really mean for your Amazon business, how each affects costs, time, and growth, and when it’s time to outsource prep and fulfillment.

If you’ve been selling on Amazon for a while and handling everything yourself, you already know the drill. Orders come in, you pack them up, print labels, run to the post office or wait for pickups. It works until it doesn’t. Maybe you’re spending entire weekends just getting orders out. Or you missed Amazon’s prep requirements on a shipment and got hit with fees or warnings. Or your storage space is bursting and you’re not sure how much longer you can keep doing this from your garage or spare bedroom.

The terms FBA and FBM get thrown around constantly in Amazon seller circles, but understanding what they actually mean for your day-to-day operations matters more than most sellers realize. The choice between them affects your costs, your time, your inventory management, and whether Amazon might suspend your account for prep violations you didn’t even know existed.

What FBA Actually Involves

Fulfillment by Amazon sounds simple in theory. You send your inventory to Amazon’s warehouses, they store it, pick it when someone orders, pack it, ship it, and handle customer service. You get Prime eligibility and Amazon handles the logistics. That’s the pitch.

The reality is more complicated. Amazon has extremely specific requirements for how products need to arrive at their fulfillment centers. Every item needs proper labeling with Amazon’s FNSKU barcode. Certain products need poly bagging. Some items require bubble wrap. Others need suffocation warning labels. Books need special prep. Anything with a battery has additional requirements. Fragile items need extra protection that meets Amazon’s standards, not just your idea of what’s protective enough.

Get these wrong and Amazon either refuses the shipment, charges you prep fees to fix it themselves, or accepts it but flags your account with compliance issues. I know a seller who sent in 500 units of a new product without proper poly bagging. Amazon charged them $1.50 per unit to bag them. That’s $750 in unexpected fees for something that would have cost maybe $50 to do correctly before shipping.

Storage fees are another consideration most sellers underestimate at first. Amazon charges monthly storage fees based on cubic footage. These fees jump significantly during Q4. If your products don’t sell as fast as you projected, those storage costs eat into your margins every single month. Long-term storage fees kick in after a year, and they’re high enough to wipe out profit on slow-moving inventory.

Then there’s the inventory management aspect. Amazon limits how much inventory you can send in based on your IPI (Inventory Performance Index) score. Sell well and keep your score high, you get more storage space. Let inventory sit too long or stock out frequently, your limits get tightened. This creates situations where you physically can’t send in more inventory even when you need to restock.

The FBA fee structure itself keeps changing too. Between fulfillment fees, storage fees, removal fees, return processing fees, and various other charges Amazon adds periodically, calculating your actual profit per unit requires staying on top of current fee schedules. What was profitable last quarter might not be anymore after a fee increase.

The FBM Alternative

Fulfillment by Merchant means you handle everything yourself or work with a third party. When orders come in, you’re responsible for getting them packed and shipped within Amazon’s required timeframes. You lose automatic Prime eligibility, though you can qualify for Seller Fulfilled Prime if you meet Amazon’s strict performance requirements.

FBM gives you more control and you decide how to pack items. You’re not paying Amazon storage fees. You can sell inventory through other channels simultaneously without dealing with Amazon’s multi-channel fulfillment fees. For products with low margins or slow turnover, FBM often makes more financial sense than paying ongoing FBA storage costs.

The tradeoff is time and infrastructure. Someone needs to be available to process orders every day. You need shipping supplies, label printers, and space to store inventory and pack orders. Your shipping costs might be higher than Amazon’s negotiated rates unless you’re doing serious volume. Customer service becomes your responsibility, including handling returns and refunds according to Amazon’s policies.

Performance metrics matter just as much with FBM as FBA. Amazon tracks your late shipment rate, cancellation rate, and valid tracking rate. Fall below their thresholds and you risk losing selling privileges. During peak seasons when carrier delays happen, you’re the one who gets dinged for late deliveries even when it’s not really your fault.

When DIY Prep Stops Making Sense

Most sellers start out doing all their own prep work. You’re sitting at your kitchen table with a label printer, poly bags, bubble wrap, and boxes of inventory. It’s tedious but it saves money when volume is low. At some point, usually sooner than sellers expect, this stops being a good use of time.

Do the math on what your time is actually worth. If you’re spending 20 hours a week on prep and packing, that’s 80 hours a month. Even at a modest hourly value, you’re looking at significant opportunity cost. Those hours could go toward sourcing better products, optimizing listings, expanding to new marketplaces, or literally anything else that grows your business instead of keeping you stuck in operational tasks.

Storage space becomes an issue too. As your business grows, you need somewhere to keep inventory before it goes to Amazon or ships to customers. Spare bedrooms fill up fast. Garages get cramped. At some point you’re either renting commercial space or limiting your inventory levels based on physical storage constraints rather than actual business needs.

Seasonal spikes make the DIY approach particularly painful. Q4 hits and suddenly your normal volume triples. You can barely keep up with prep and shipping. You’re working seven days a week and still falling behind. Peak season should be when you make the most money, but instead you’re drowning in logistics.

Quality control suffers when you’re rushing to get everything done yourself. Mistakes happen. Wrong labels get applied. Items don’t get prepped correctly. These mistakes cost money in Amazon fees, customer complaints, or account warnings. Professional prep services have systems and checks to catch errors before they become expensive problems.

How FBM Services Actually Work

Third-party FBM services handle the fulfillment side of your business so you don’t have to. You send inventory to their warehouse. When orders come in from Amazon (or other sales channels), they pick, pack, and ship items using your seller account credentials. From Amazon’s perspective, you’re still the merchant of record fulfilling orders yourself.

Good FBM services do more than just ship boxes though, they handle all the prep requirements Amazon demands. They apply FNSKU labels correctly. They poly bag items that need it. They add suffocation warnings, bubble wrap fragile products, and follow Amazon’s packaging guidelines so your shipments don’t get rejected or hit with fees.

These services typically integrate directly with Amazon through APIs. Orders flow automatically from your seller account to their warehouse management system. When someone buys your product, the prep center gets the order details, picks the item, packs it according to requirements, prints the shipping label, and sends tracking information back to Amazon. You’re not manually forwarding orders or managing shipping details.

The cost structure usually involves receiving fees when inventory arrives, storage fees (typically cheaper than Amazon’s), pick and pack fees per order, and the actual shipping costs. Some services charge extra for special prep requirements. The total cost per order is often comparable to FBA fees once you factor in all of Amazon’s charges, but you maintain more control and flexibility.

For sellers using both FBA and FBM, these services become particularly valuable. They can prep inventory going to Amazon’s warehouses and also fulfill your FBM orders from the same inventory pool. This eliminates the complexity of managing inventory in multiple locations while still letting you optimize which fulfillment method to use for different products.

Making the Switch

Moving from handling everything yourself to using FBA, FBM services, or both doesn’t have to be an all-or-nothing decision. Start with a portion of your catalog. Pick products where the pain points are worst or where the economics clearly favor outsourcing.

Test a prep service with a limited number of SKUs first. See how their processes work, whether they catch issues proactively, how they communicate, and whether orders actually ship on time according to Amazon’s requirements. This trial period protects you from committing your entire inventory to a service that doesn’t perform well.

Watch your metrics closely during any transition. Amazon doesn’t care why your performance drops. Whether you’re switching fulfillment methods, changing prep services, or scaling up quickly, your late shipment rate and other metrics need to stay in good standing. Plan transitions during slower periods if possible, not right before Q4 when you can’t afford problems.

The goal isn’t to eliminate all work on your end. It’s to eliminate work that doesn’t directly grow your business. Spending Saturday afternoon labeling products doesn’t increase sales. Spending that time finding better sourcing deals, improving listings, or launching new products does. Your fulfillment method should free you to focus on activities that actually move your business forward, not keep you stuck in operational tasks that scale poorly as you grow.