Amazon AWD vs. FBA: Which is Better for Your Business?

As an Amazon private label seller, one of the biggest challenges you face is managing your logistics efficiently and cost-effectively. Amazon is offering two key options—Amazon Warehousing and Distribution (AWD) and Fulfillment by Amazon (FBA)—but which one is the better fit for your business?

In this post, we’ll dive deep into the pros and cons of AWD and FBA, providing you with insights to make an informed decision. Our goal is to help you streamline your logistics, reduce costs, and focus more on growing your business.

What is FBA (Fulfillment by Amazon)?

FBA has been a staple of Amazon’s fulfillment services for years. With FBA, you send your inventory to Amazon’s fulfillment centers, and Amazon handles everything from storage to packing and shipping your products directly to customers. It’s a popular choice because of its convenience and access to Prime customers.

Key Benefits of FBA:

Prime Eligibility: FBA products are eligible for Amazon Prime, giving your customers access to fast, free shipping. This increases your chances of winning the Buy Box and boosts sales.
Outsourced Logistics: With FBA, you don’t have to worry about packing, shipping, or customer service. Amazon does it all for you, allowing you to focus on other areas of your business.
Multi-Channel Fulfillment: You can use FBA to fulfill orders not just on Amazon, but on other sales channels as well, giving you flexibility.

The Drawbacks of FBA:

High Storage Fees: One of the main pain points of FBA is its high long-term storage fees. If your products sit in Amazon’s warehouse for too long, those fees can pile up quickly.
Inbound Placement Fees: A newer challenge is the inbound placement fee, which is charged for Amazon’s inventory placement service. This can add unexpected costs to your shipments, especially if your inventory is spread across multiple warehouses.
Low Inventory Fee: Amazon recently introduced a low inventory fee, which penalizes sellers for not maintaining sufficient inventory levels, particularly for slow-moving products.
Limited Control: Amazon’s strict rules on packaging and shipping can be frustrating, and you may feel limited in how you manage your inventory. Amazon routinely adjusts its policies, sometimes with little notice.

What is AWD (Amazon Warehousing and Distribution)?

Amazon’s AWD program was introduced as a cost-effective complement to FBA, particularly for long-term bulk storage. AWD allows sellers to store their inventory in Amazon warehouses until it’s time to ship to FBA or other distribution channels. Unlike FBA, AWD focuses on the storage and distribution side of things.

Key Benefits of Amazon AWD:

Low-Cost Bulk Storage: At just $0.36 per cubic foot, AWD offers significantly lower storage fees compared to FBA. This is especially beneficial for sellers with large inventories.
Auto-Replenishment (Optional): AWD’s optional auto-replenishment feature ensures your FBA stock is never out of stock. It automatically ships your products to fulfillment centers based on demand.
Multi-Channel Distribution: AWD isn’t limited to Amazon. You can also distribute to other channels like Walmart Fulfillment Services, wholesalers, or even retail stores. AWD does provide labeling for shipments to third-party channels, such as Walmart box labels.

The Drawbacks of Amazon AWD:

Case Pack Shipments Only: Unlike FBA, which handles both individual and bulk shipments, AWD only accepts case pack shipments, which might not suit every seller’s needs.
Lead Times for FBA Stock: Once inventory is in AWD, the lead time to move products to FBA is like shipping directly to FBA. However, if you need stock replenished urgently, you’ll want to ship directly to FBA from your manufacturer to make it available for sale faster.

AWD vs. FBA: Which is Right for You?

Choosing between AWD and FBA largely depends on the nature of your business and your inventory management needs. Here’s a breakdown:

Choose FBA If you:

Need faster fulfillment and want to take advantage of Prime eligibility.
Don’t want to handle any logistics and prefer a hands-off approach to inventory management.
Are selling fast-moving products and don’t expect long-term storage to be an issue.
Do not have long lead times for manufacturing products, meaning you can replenish stock quickly and frequently.

Choose AWD If you:

Have large inventories and want to avoid high long-term storage fees associated with FBA.
Need to distribute products to multiple sales channels, not just Amazon.
Prefer more control over your stock, particularly with optional auto-replenishment. You can choose when and how to move inventory from AWD to FBA based on demand, giving you flexibility without overstocking FBA. This flexibility allows for protection from overstocking or understocking on less predictable product lines or those with seasonal demand (eg. holiday gifts, seasonal clothing).

How to Combine Amazon AWD and FBA for Maximum Efficiency

For many sellers, the best solution is likely a combination of both AWD and FBA. Here’s how you can leverage both services:

Store Bulk Inventory in AWD: Use AWD to store your bulk inventory at a lower cost. This allows you to avoid the steep storage fees associated holding backup stock at FBA, especially during Q4 and greatly reduces the chance of getting hit with long term storage fees.
Auto-Replenish with AWD (Optional): Take advantage of AWD’s optional auto-replenishment feature to ensure your FBA stock never runs out. This keeps your Prime-eligible products available for sale without the risk of overstocking FBA.
Distribute to Other Channels: If you sell on multiple platforms, AWD can handle distribution to channels outside of Amazon, giving you flexibility and reducing the need for multiple storage facilities.

Optimizing Costs with AWD and AGL

In addition to using AWD, consider leveraging Amazon Global Logistics (AGL) for international shipping. By shipping your products directly from manufacturers to AWD, you can save on both storage and transportation costs. AGL simplifies the customs process and offers competitive shipping rates while feeding your products directly into Amazon’s warehousing network, reducing your overall logistics expenses.

Key Takeaways:

FBA is great for fast-moving, high-demand products and offers the benefit of Prime eligibility.
AWD is perfect for sellers who need low-cost bulk storage and multi-channel distribution.
By combining Amazon AWD and FBA, you can minimize costs while maximizing efficiency, especially during peak seasons.

How Amazon Storage Pros Can Help

Managing Amazon’s logistics and warehousing fees can feel overwhelming, but that’s where we come in. At Amazon Storage Pros, we specialize in simplifying and optimizing your entire supply chain to reduce costs and boost efficiency. Here’s how we can help:

Tailored Logistics Solutions: We create custom strategies to meet your specific business needs, whether it’s refining your warehousing, streamlining shipping, or improving inventory management. Our experts focus on uncovering the most effective ways to lower fees and maximize operational efficiency.
AWD Expertise: As specialists in Amazon Warehousing and Distribution (AWD), we help you fully leverage AWD’s benefits, from eliminating inbound placement fees to automating your restocking process. With our guidance, your inventory will always be strategically placed, saving you time and unnecessary costs.
Detailed Cost Analysis: We take a deep dive into your logistics expenses, offering actionable insights and reports on where you can save. Whether it’s through smarter packaging, more efficient shipping routes, or optimizing how you manage inventory, we’ll find ways to cut costs and improve your bottom line.
Ongoing Management & Support: Logistics isn’t a one-time task—it requires constant optimization. Our team provides continuous support to keep your logistics running smoothly, making sure your operations evolve as your business grows and market conditions shift.
Proven Amazon Expertise: With extensive experience working with Amazon sellers, we know how to navigate the intricacies of Amazon’s systems. Whether you’re just starting or looking to scale, we’ll guide you through the challenges and help you succeed in a competitive marketplace.

At Amazon Storage Pros, our mission is to help you minimize logistics costs, improve efficiency, and allow you to focus on growing your business. Reach out to us today to discover how we can streamline your logistics and warehousing strategy.