Selling on Amazon is one of the best ways to earn passively. The marketplace currently provides a steady source of income to over two million sellers and recorded 2,975 new sign-ups daily in 2021. It is evident that the competition on Amazon is tough. Yet, the platform has remained a top choice for aspiring entrepreneurs. This may be as a result of the behemoth’s vast customer base, however, its fulfillment options are also a major reason why most sellers choose to sell on the platform.
Amazon offers two fulfillment options; Fulfillment by Amazon (Amazon FBA) and Fulfillment by Merchant (Amazon FBM). Through FBA, Amazon manages complex business processes like storage, customer service, and order fulfillment on behalf of sellers. In contrast, sellers who opt for Amazon FBM will have to manage these processes themselves. So, Amazon provides its sellers with the option of outsourcing through FBA or total control through Amazon FBM.
The Fulfillment by Amazon option used to be the go-to for most sellers because of its Prime badge, easy shipping, and other perks. However, the company’s approach to order fulfillment during the pandemic has left some sellers with no trust in the system. And this has led to an increased interest in the Fulfilled by Merchant option. Still, some sellers would rather use the FBA option since it allows them to outsource the major aspects of their business to Amazon. But if you’re reading this, then you’re probably considering switching from Amazon FBA to Amazon FBM. In this post, we’ll discuss everything you should know about Amazon FBM. Let’s get right into it.
What is Fulfillment by Merchant (Amazon FBM)?
Fulfillment by Merchant or Amazon FBM is Amazon’s fulfillment option for third-party sellers who want to manage their fulfillment processes themselves. With FBA, Amazon stores, packs, and ships orders on behalf of sellers. They even provide 24/7 customer service and manage returns too, leaving FBA sellers with more time to execute other tasks.
In contrast, FBM sellers will have to store, pack, and ship orders themselves. They’ll also have to provide customer service and manage returns and refunds. Managing these processes can be complex and time-consuming and this explains why the majority of sellers often overlook the Fulfillment by Merchant service. But that does not imply that using FBM is a bad idea.
So, if you’re considering switching from Amazon FBA to Amazon FBM, it is imperative for you to understand how the service works. You must also consider the cost as well as the benefits and drawbacks of using the service. We’ll talk about the pros and cons soon, but first, how does Amazon FBM work?
How Does Amazon FBM Work?
If you decide to sell on Amazon through FBM, you will be solely responsible for all your business tasks. So, you will have to store your products, then package and ship orders promptly. In addition to this, you will need to provide customer service and integrate your business with Amazon to ensure that your customers can access order information on their accounts.
Here are a few steps to help you set up your FBM account and run your business seamlessly:
- First, create an Amazon Seller Central account to list your products.
- Next, create your product listings and come up with a strategy for visibility.
- Provide your account information and verify shipping and handling times. You’ll also have to provide contact details for returns.
- Ensure you ship orders promptly. If you don’t, customers may file claims and your account health will be at risk.
How to List Products on Amazon FBM
After creating your seller account, you will have to create product listings. There are two ways to do this; Sell on an existing listing or create a new listing.
Sell on an Existing Listing
This option is best if you intend to sell products that already exist in Amazon’s catalog. You only need to go to your existing listing and choose the ‘Sell on Amazon’ option.
Next, provide all the required information:
- Condition of your products (Brand new or Used)
- Quantity in stock
- Preferred Fulfillment channel (FBA or FBM)
Create a New Listing
If you intend to sell private label products, chances are that your products have not been listed on Amazon. In this case, you’ll have to create new product listings.
- Log in to your Seller Central account
- Next, Click ‘Inventory’ and select ‘add a product’
- Click ‘I’m adding a product not sold on Amazon’
- Provide the product information
After completing these steps, you will have to wait for some time for your listings to reflect in Amazon’s catalog. Once you have created your product listings, the next step is to choose a fulfillment channel.
- After completing the above steps, you will be redirected to a page that reads ‘ Fulfillment channel’. Select ‘Merchant fulfillment’.
- Once your listings appear in Amazon’s catalog, you can find your products under the ‘Manage inventory’ tab.
When Should You Use Amazon FBM?
Managing an Amazon business does not follow a one-size-fits-all approach and it’s up to you to decide which fulfillment option is best for you. However, if you want to maximize sales, you should weigh your options before settling for a fulfillment option. Amazon FBM is best suited for your business if:
- You sell products that do not sell out quickly
- Have limited inventory or stock or sell products with low-profit margins
- Your products are mostly oversized or fragile
- You sell handmade items and want to ensure they are delivered in good condition
- You have a fulfillment service that is more affordable than FBA.
If your products or business fall into any aforementioned categories, then FBM is great for you. But when it comes to business, no system is 100% perfect so you should still weigh the pros and cons of the Fulfillment by Merchant service.
Statistics show that 33% of FBM sellers earn over $25,000 per month and only 26% of FBA sellers earn this amount monthly. This is because FBM sellers, especially those who sell small, lightweight products are more likely to maximize their profit margins. FBA sellers often have to deal with planned and unexpected FBA fees that may eat into their profits sometimes.
Less start-up capital
Since FBM sellers store and ship products themselves, they can save money on FBA storage and shipping fees. New sellers who sell relatively small or lightweight items need only a little storage space, they also pay lesser shipping fees.
FBA requirements are constantly changing, sometimes, without notice. These requirements are strict and FBA sellers who do not comply run a risk of delayed deliveries and additional expenses In contrast, with FBM, there are fewer restrictions and penalties.
More control of your business
If you want to build a brand on Amazon, then FBA is not the best option for you. This is because orders shipped via FBA carry AMZ’s branding. FBM on the other hand allows you to ship products using your brand name and logo.
More time and effort to scale your business
This is the most obvious con of this fulfillment option and if you’re a busy seller, this is your cue to take the easy way out – FBA. Fulfillment processes are complex and time-consuming and if use FBM, then you’ll have to dedicate a considerable amount of time to scale your business.
No Amazon Prime badge
Products sold under FBM are not prime-eligible. Using Amazon FBA allows you to sell to Amazon Prime subscribers and this can be a major income boost. However, it requires you to provide free same-day or two-day shipping which is largely impossible if you manage order fulfillment yourself.
How Do You Know When You Make a Sale?
FBA sellers do not need to track orders because Amazon manages orders and ships them promptly. However, as an FBM seller, you will have to track orders and deliver them promptly. To ensure seamless delivery, you can manage orders through the seller central order widget or seller mobile app. Using the seller mobile app is easy. After installing the app, you will receive notifications when you make a sale. In contrast, with the seller central order widget, you’ll have to keep tabs on your seller central account. Here’s how it works
How to Track Orders Using the Amazon Seller Central Order Widget
First, locate the order widget on your seller central account.
As soon as a new order is placed, you will receive a “Pending” notification. Once the order is confirmed by Amazon and the sale is completed, the pending order will move to ‘Unshipped’, ‘Premium Unshipped’, or ‘Prime Unshipped.’
- If you offer shoppers fast delivery options such as overnight or express shipping, you are providing premium shipping.
- Seller Fulfilled Prime orders are eligible for Prime shipping.
- All other shipping methods are classified as ‘Unshipped’.
How to Ship Products on Amazon FBM
As soon as Amazon notifies you that an order is ready to ship, you have 24 hours to confirm that the order has been shipped.
The next step is to choose a seller shipping method or carrier. A shipping carrier is a logistic company that picks up merchandise from sellers and delivers it to buyers. To ensure smooth and timely delivery of your products, you may also need to work with more than one shipping carrier. There are several shipping methods available. Here are a few shipping carriers to choose from:
UPS is the most popular shipping service used by Amazon sellers. With over 200 aircraft and a large fleet of trucks, the company can deliver your orders swiftly and safely on either land or by air. Since larger products such as furniture or mattresses may need to be shipped by truck, you may consider using UPS. However, if you cannot afford to use this carrier, here are a few things to look out for when choosing another shipping carrier.
- Fast shipping service
- Available service options
- Customer ratings and reviews
- Order fulfillment capacity
- Excellent customer service
- Affordable shipping rates
What shipping supplies do FBM sellers need?
After choosing a shipping carrier, you will have to package your products according to the carrier’s requirements. To do this, you will need shipping supplies, and the shipping carrier you use determines the shipping supplies you will need to ship your goods.
UPS Flat Rate, for instance, uses special boxes that you can obtain from your nearest post office for free. With other carriers, you will have to purchase your own shipping supplies. We recommend:
- Boxes, envelopes. etc.
- Packing material (airbags, brown paper, etc.)
- Peel & stick mailing labels
- Packing tape and Scotch tape
Amazon FBM Fees
Selling through Amazon FBM may be a cost-effective option, still, there are some important costs involved.
First, you will have to pay selling plan fees. Amazon offers two selling plans; Individual and professional selling plans. The individual plan costs $0.99 per sale and is best for sellers who do not intend to sell more than 40 units a month. The professional plan costs $39.99 monthly and is best for sellers who want to sell more than 40 units per month.
Amazon also charges a referral fee and this applies to both FBA and FBM sellers. The referral fee varies by product category and is typically a percentage of your sales price. The referral fee for most categories is 15%, but this fee can be anywhere from 8% to 45%.
Since you will not be using Amazon FBA, you won’t be charged inventory storage and fulfillment fees and this is a great way to reduce costs. However, ensure you factor in shipping fees when fixing product prices else your profit margin will take a hit for it. To be on the safe side, check out Amazon’s seller fees before fixing your product prices.
Conclusion: Should I switch from FBA to Amazon FBM?
The decision to switch from FBA to FBM is up to you. If you’re on a budget or want more control of your business, you can consider using Amazon FBM. Moreover, some sellers use FBA and FBM simultaneously.
On the whole, you should weigh your options and choose what’s best for your business. Also, invest in Amazon software to automate your product research, keyword research, and listing optimization processes. Automating your back-end processes is a great way to free up time for other processes like order fulfillment and customer service.
ZonBase is the best AMZ software for business automation. The software provides you with a complete set of seller tools for product research, keyword research, and listing optimization. In addition to this, it also offers a sales estimator, photo enhancer, and profits tool.