What is Amazon FBM?
Amazon FBM stands for “Fulfillment by Merchant.” It’s a method where sellers list their products on Amazon’s platform but handle the storing, packing, and shipping of those products themselves, rather than utilizing Amazon’s fulfillment services (Fulfillment by Amazon – FBA).
How does Amazon FBM work?
Here’s a closer look at how each step of selling with Amazon FBM typically works:
- Listing Products on Amazon: Sellers create listings for their products on the Amazon platform. They set prices, upload product images, write descriptions, and manage inventory levels.
- Handling Inventory: Sellers are responsible for storing their inventory. They can either manage their own warehouses or use third-party logistics providers (3PL) to store their products.
- Receiving Orders: When a customer places an order on Amazon for a product sold by an FBM seller, the seller receives a notification through Amazon Seller Central.
- Order Processing: Sellers pack the products themselves or instruct their 3PL to do so. They also create shipping labels and prepare the package for shipment.
- Shipping and Delivery: The seller or the 3PL arranges for the shipment to the customer’s address using the chosen shipping method. The seller manages the shipping process and ensures timely delivery.
- Customer Service: Amazon FBM sellers handle customer inquiries, returns, and any issues related to the order directly. This includes providing tracking information, handling refunds or replacements, and addressing customer concerns.
In short, FBM allows sellers to maintain control over their inventory and fulfillment processes but also requires active involvement in handling logistics, customer service, and the overall end-to-end order fulfillment experience.
Amazon also refers to FBM as MFN – the Merchant Fulfilled Network.
Amazon FBM pros and cons
Using FBM presents different benefits and challenges to those experienced by Amazon FBA sellers. Let’s start with the pros:
Amazon FBM pros
- Control over Operations: FBM gives sellers greater control over their inventory, packaging, and shipping processes. They can maintain their own standards for quality control and packaging.
- Lower Fees: FBM typically incurs lower fees compared to Amazon’s Fulfillment by Amazon (FBA) service. Sellers can potentially save on fulfillment and storage fees.
- Customization and Branding: Sellers have the freedom to include personalized branding, inserts, or marketing materials in their packages, helping with brand recognition and customer loyalty.
- Flexibility in Inventory Management: Sellers can manage their inventory independently, making it easier to handle unique or one-of-a-kind items that might not fit well with Amazon’s FBA system.
- Direct Customer Interaction: With FBM, sellers directly handle customer inquiries, allowing for a more personalized customer service experience. This direct interaction can help build stronger customer relationships.
- Better Control of Returns: Sellers can manage returns according to their own policies, potentially reducing return shipping costs and restocking fees compared to Amazon’s FBA return processes.
- No Long-Term Storage Fees: Sellers using FBM don’t face Amazon’s long-term storage fees, which can be advantageous for products with slower turnover rates.
These advantages give sellers more autonomy and control over their operations, allowing for tailored customer experiences and potentially lower costs compared to using Amazon’s fulfillment services.
Amazon FBM cons
Here are some potential drawbacks of using Amazon FBM:
- Time-Consuming Fulfillment: FBM requires sellers to handle packing, shipping, and customer service, which can be time-consuming, especially as sales volume increases. This can limit scalability.
- Shipping and Logistics Challenges: Sellers are responsible for shipping, which can lead to complexities in managing shipping costs, logistics, and ensuring timely deliveries, particularly during peak periods.
- Limited Prime and Buy Box Eligibility: Products fulfilled through FBM might not be eligible for Amazon Prime or the Buy Box, impacting visibility and potential sales, as many customers prefer Prime-eligible products.
- Potential Trust Issues: Some customers prefer FBA due to the reliability and trust associated with Amazon handling shipments. FBM might face trust challenges from customers unfamiliar with the seller’s fulfillment processes.
- Higher Customer Expectations: Customers accustomed to Amazon’s fast and reliable shipping may have higher expectations for delivery times, potentially leading to dissatisfaction if orders take longer to arrive.
- Storage and Inventory Management: Sellers using FBM need to manage their own inventory and storage space, which can be costly and challenging to optimize, especially for large or rapidly changing inventory.
- Customer Service Demands: Handling customer inquiries, returns, and issues directly can be demanding. It requires time and resources to ensure prompt and satisfactory resolutions for customers.
- Limited Scalability: Scaling an FBM operation might require significant investments in infrastructure, logistics, and customer service as sales volume increases, potentially limiting growth potential.
These challenges highlight the trade-offs involved in managing the fulfillment process in-house.
To manage it successfully you need to focus on effective logistics, good customer service, and a robust operational setup.
Amazon FBM costs
Before deciding whether to use FBM, there are several cost categories that you need to consider:
- Amazon Referral Fees: Amazon charges various fees for selling on its platform, including referral fees (percentage of each sale) and, depending on the subscription plan, a monthly subscription fee. This is true for both FBM and FBA sellers.
- Shipping Costs: Sellers bear the costs of shipping products to customers. This includes postage, packaging materials, and any additional expenses related to shipping.
- Storage and Warehousing: Sellers using FBM need to manage their own inventory storage, whether it’s in their own facilities or through third-party storage providers. Costs here include rent, utilities, insurance, and possibly additional services.
- Packaging Materials: Sellers need to purchase packaging materials such as boxes, bubble wrap, tape, labels, etc., which can add up depending on the volume of sales.
- Returns and Refunds: Handling returns and refunds may include shipping costs for returned items, restocking fees, and potential loss of revenue if the product can’t be resold at full price. However, given Amazon’s generous return policies, you could also save money in this area with FBM.
- Fulfillment and Labor Costs: If you hire employees or use fulfillment services, you’ll incur labor costs associated with picking, packing, and shipping orders.
Often the costs of using FBM will end up being similar to using Amazon FBA and add more complexity.
This means the decision of whether to use FBA or FBM really depends on the product you’re selling.
When is the best time to use Amazon FBM?
Choosing to use Amazon FBM is often situational and depends on various factors.
Here are scenarios where FBM might be the best choice:
- Unique or Handcrafted Items: FBM is suitable for sellers offering unique, customized, or handcrafted products that may not fit well within Amazon’s standardized fulfillment process.
- Control Over Branding and Packaging: If maintaining control over branding, packaging, and customer experience is crucial, FBM allows more flexibility for sellers to customize these aspects.
- Lower Sales Volume: For sellers with lower sales volume or a limited number of SKUs, managing fulfillment in-house or through a third-party provider might be more cost-effective than utilizing FBA.
- Specific Storage Requirements: Products that require special storage conditions or are oversized might be better managed in-house or through a specialized third-party logistics provider.
- Higher Profit Margins: If the profit margins on products are already high enough to accommodate the costs associated with fulfillment, using FBM could be a viable option.
- Seller’s Expertise in Logistics: Sellers with expertise or access to efficient and cost-effective logistics and shipping solutions may find FBM more beneficial in terms of cost and control.
- Testing New Products or Markets: FBM can be useful for testing new products or entering new markets without committing to the potentially higher costs associated with FBA.
FBM suits situations where sellers prioritize control over their fulfillment process, have specialized or unique products, or where the shipping cost and logistics of FBA might not align with their business model or current stage of operations.
Assessing factors like product uniqueness, sales volume, cost considerations, and branding control can help determine if FBM is the best fit for your fulfillment strategy.
How to create an Amazon FBM listing
Create an FBM listing follows the same process as creating an FBA listing on Amazon.
You will need to head to Seller Central and navigate to the Catalog > Add A Product menu.
Then, enter the UPC of the product, or choose to sell a product not being sold on Amazon.
Fill out all of the details for your listing, then, when presented with the choice of having Amazon fulfill your orders or fulfilling them yourself, choose the latter.
You will then need to set how many units you have in stock before the listing will become active.
Using Seller Fulfilled Prime with Amazon FBM
To qualify for Seller Fulfilled Prime (SFP) while using Amazon FBM, you need to meet certain criteria and follow specific steps:
- Performance Metrics: Maintain a high level of performance metrics, including order defect rate, on-time delivery, and use of tracked shipping methods to meet Amazon’s SFP standards.
- Eligibility Check: Check your eligibility for SFP in your Amazon seller account. Amazon has specific eligibility requirements related to shipping time, cancellation rates, and order volume.
- Trial Period or Approval: You might need to go through a trial period where Amazon evaluates your ability to meet Prime delivery standards. Once approved, you’ll be granted the Seller Fulfilled Prime badge.
- Compliance with Amazon Policies: Ensure compliance with Amazon’s policies regarding packaging, customer service, returns, and order cancellations to maintain SFP status.
- Use Amazon’s Carrier Partners: Utilize Amazon’s approved carrier partners and shipping methods to fulfill orders and ensure tracking information is uploaded promptly.
- Regular Monitoring and Compliance: Continuously monitor your metrics and performance to ensure you’re meeting Amazon’s SFP standards. Failure to maintain these standards could result in losing the SFP badge.
Remember: Achieving and maintaining Seller Fulfilled Prime status requires consistent adherence to Amazon’s stringent requirements for shipping speed, reliability, and customer service.
It can provide significant advantages in terms of winning the trust of Prime customers, but it also demands a commitment to meeting and exceeding Amazon’s expectations for order fulfillment.