When to Use FBA and When Not To

Deciding When Amazon’s Fulfillment Is Worth It—and When It’s a Profit Killer

Fulfillment by Amazon (FBA) is one of the most powerful tools available to e-commerce sellers. It offers fast shipping, Prime badge visibility, and hands-off logistics. But despite its benefits, FBA is not always the best choice—especially when profit margins, product type, or inventory strategy aren’t aligned with Amazon’s model.

The key to success isn’t just “using FBA”—it’s knowing when to use it and when not to.

What is FBA?

Fulfillment by Amazon (FBA) means you send your inventory to Amazon’s warehouses, and they handle:

• Storage

• Picking and packing

• Shipping to the customer

• Customer service and returns

• Prime eligibility

You pay FBA fees, which include:

• Fulfillment (per unit)

• Storage (monthly, plus long-term)

• Optional: labeling, removals, prep services

When to Use FBA

• You Want Prime Eligibility & Faster Sales
  Products enrolled in FBA qualify for Amazon Prime, which increases visibility and trust with buyers. Studies show Prime products convert 2–3x higher than non-Prime equivalents.

• You Have Lightweight, Small, Fast-Moving Items
  FBA fees are more favorable for smaller, lighter items (under 18″ and <1 lb), especially if you ship high volume.

• You Struggle With Fulfillment Logistics
  If you lack warehouse space, staffing, or shipping infrastructure, FBA can eliminate complexity.

• You Want Hands-Off Returns
  FBA handles customer service and returns—good for reducing support tickets and response time.

When NOT to Use FBA

• Your Margins Are Already Tight
  FBA can eat into already-thin margins. Between storage, fulfillment, and return handling, fees add up quickly.

• Your Product Is Oversized or Heavy
  Large items incur dimensional weight charges, long-term storage risks, and costly return fees.

• You Sell Bundles or Custom Kits
  FBA isn’t ideal for frequently changing SKUs, personalized kits, or bundles that require assembly.

• You Have Slow-Moving Inventory
  If a SKU doesn’t sell quickly, Amazon charges long-term storage fees (LTSF) after 180+ days.

• You Sell Across Multiple Channels
  FBA is Amazon-first. While you can use Multi-Channel Fulfillment (MCF), it’s expensive and restrictive.

The Smartest Sellers Use a Hybrid Model

Most experienced brands don’t ask “FBA or not?”—they ask “Which SKUs belong in FBA?”

Smart FBA Strategy:

• FBA: High-velocity, small/light, profitable products

• FBM (Fulfilled by Merchant): Oversized, lower-margin, or specialty items

• 3PL: Everything else, with flexibility across Shopify, DTC, Walmart, etc.

💡 Rule of Thumb: Use FBA to scale what’s already working, not to test what you’re unsure about.

Cost Example: FBA vs. FBM

Here’s a quick comparison of the per-unit costs:

→ If your product sells for $15, FBA leaves you ~$3.75, while FBM leaves ~$6.50.

⚠️ These numbers vary by product weight, size, and category—always use Amazon’s FBA calculator before sending inventory.

Calculating Your Break-Even Units in FBA

Because Amazon issues refunds quickly and often without resistance, even after customer use, you’ll need to factor in a buffer for returns in your break-even calculations.

Let’s say your product costs $6, and total FBA fees are $5 (storage + fulfillment + return fees).
If your return rate is 10%, and your selling price is $15:

• Each sale nets ~$4 profit after all fees.

• For every 10 units sold, 1 is returned—cutting your net profit by ~$5.

To break even in that scenario, you’d need to sell roughly 4–5 units just to cover the impact of one refunded return.

💡 Bottom line: Always calculate returns into your break-even analysis, especially in FBA, where return rates and customer-first refund policies can quietly erode profit.

Final Takeaway

FBA is powerful—but not perfect. It can scale your logistics, boost conversion rates, and improve customer satisfaction. But used incorrectly, it can erode your profit and trap your inventory.

👉 Use FBA strategically—not emotionally.

Need Help Deciding What to Send to FBA?

At Modonix, we help brands:

• Analyze product-level profitability

• Build hybrid fulfillment plans

• Forecast FBA fees vs. margin

• Identify SKUs for MCF, 3PL, or FBM

📬 Book a fulfillment strategy call: https://modonix.com/contactt-us