You're running a thriving retail store, managing your warehouse, and personally handling every shipment to your customers. Now, picture that same operation scaled to the vast online marketplace of Amazon, where you maintain control over your inventory and fulfillment processes. This is the essence of Amazon Fulfillment by Merchant (FBM), a system that allows you to directly manage your business while leveraging the reach of the world's largest e-commerce platform.
With 1.9 million active sellers on Amazon Marketplace in 2023 alone, the growth potential is undeniable. However, the key is choosing the right fulfillment method that aligns with your business goals. In this guide, we'll break down the fundamentals of FBM, compare it with Fulfillment by Amazon (FBA), and guide you through the decision-making process to determine if FBM is the best path for your business in 2024.
What is Amazon Fulfillment by Merchant (FBM)?
Amazon Fulfillment by Merchant (FBM) is a fulfillment model that puts you, the seller, in the driver's seat. This means you’re responsible for warehousing your products, packaging them, and shipping them directly to your customers. FBM gives you complete control over your inventory and shipping processes, allowing for more personalized customer service and potential cost savings.
Approximately 30% of Amazon Marketplace sellers use FBM, finding it particularly advantageous for products with lower sales velocity or those that are oversized. FBM avoids the hefty storage fees associated with FBA. Plus, FBM lets you choose your shipping methods, offering flexibility that can lead to faster delivery times and improved customer satisfaction.
Differences Between Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM)
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When deciding between Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM), it's essential to understand how each model impacts your business operations. FBA offers the convenience of Amazon's logistics network, while FBM gives you full control over your inventory and customer service.
The table below provides a side-by-side comparison of these two fulfillment options, helping you determine which approach aligns best with your business goals.
Feature | Fulfilled by Amazon (FBA) | Fulfilled by Merchant (FBM) |
Storage | Amazon stores your products in their warehouses. | You manage your storage, either in-house or through third-party logistics. |
Shipping | Amazon handles all packing and shipping, including Prime delivery. | You are responsible for packing and shipping orders directly to customers. |
Customer Service | Amazon manages customer service, including returns and refunds. | You handle all customer service inquiries and returns. |
Cost | Higher fees due to Amazon’s storage and fulfillment costs. | Lower fees, but you bear the cost of storage and shipping. |
Control | Limited control over inventory and shipping methods. | Full control over inventory management and shipping processes. |
Prime Eligibility | Products are eligible for Amazon Prime, increasing visibility and sales potential. | Products are not automatically Prime-eligible unless you meet certain criteria for Seller Fulfilled Prime (SFP). |
Scalability | Easier to scale with Amazon’s logistics infrastructure. | Scalability depends on your own logistics capabilities. |
Pro Tip: Choose FBA if you prioritize convenience and Prime eligibility, but opt for FBM if you want more control and lower costs, especially for unique or low-turnover items.
Unlike FBA’s integrated logistics, SellerMate can elevate your FBM strategy by boosting the performance of your Amazon ads and driving more traffic and sales to your listings.
How to Get Started with Amazon FBM
Starting with Amazon Fulfillment by Merchant (FBM) involves several key steps that enable you to take full control of your inventory, shipping, and customer service. Here's a breakdown of how you can seamlessly set up your FBM operations:
Step 1: Sign Up for a Selling Account
Begin by signing up for a selling account. You have two options:
Individual Selling Plan: This requires no subscription fees.
Professional Selling Plan: This costs $39.99 per month plus selling fees.
If you already have an account, simply log in to Seller Central. A Professional account gives you access to a full range of tools and services that streamline your FBM operations.
Step 2: List Your Products
Once your account is set up, list your products by matching them to existing listings or creating new product detail pages. If you own a brand, consider enrolling it with Amazon to unlock additional selling tools and protection benefits.
Step 3: Configure Shipping and Return Settings
Customize your shipping settings to align with your business operations. This includes setting up handling times, transit times, and capacity limits. You can also use Shipping Settings Automation to optimize delivery dates. To enhance customer satisfaction, remember to configure your return settings to match or exceed Amazon’s policy.
Step 4: Manage Inventory and Fulfill Orders
Use Amazon’s Manage Inventory tool to keep track of your stock and update product information. When an order is placed, confirm shipping, provide tracking details, and ensure the shipment is completed within your stated handling time. For ease of operations, consider using Amazon Buy Shipping, Veeqo (Amazon Shipping API), or other multi-channel integrators.
Step 5: Handle Cancellations, Returns, Refunds, and Customer Service
Stay on top of cancellations, returns, refunds, and customer inquiries using Amazon’s tools. The Manage Orders and Manage Returns tools allow you to process cancellations and returns efficiently. Additionally, engage with customers via Buyer-Seller Messaging to provide a personalized post-order experience.
Step 6: Monitor Your Shipping Performance
Regularly check your performance using Amazon’s Fulfillment Insights and Account Health Dashboards. These tools help you track order defects, late shipments, and other key metrics. Meeting performance requirements opens doors to advanced options like Premium Shipping and Seller Fulfilled Prime, enhancing your service offerings.
Following these steps will help you to effectively manage your Amazon FBM business, ensuring timely deliveries, optimized inventory management, and superior customer service.
FBM Fees and Costs
Understanding the associated fees and costs is crucial for managing your profitability when selling through Amazon's Fulfilled by Merchant (FBM) program. Here's a breakdown of the key expenses you'll encounter:
1. Monthly Subscription Fees
If you're an FBM seller with a Professional account, you'll pay a monthly subscription fee of $39.99. This fee gives you access to Amazon's full range of selling tools and services. However, if you opt for the Individual plan, there’s no monthly fee; instead, you’ll pay a per-item fee for each sale made. The Individual plan might be more suitable if you're selling fewer than 40 items per month.
2. Per-Item Selling Fees
Every sale you make through FBM incurs a per-item fee. For Professional account holders, this fee is lower than what you'd pay under Fulfilled by Amazon (FBA). This fee is automatically deducted from your earnings and varies based on the product category and selling plan you’ve chosen.
3. Referral Fees and Shipping Costs
Amazon charges a referral fee on each sale, which is a percentage of the total sale price, including item cost and shipping charges. This percentage varies depending on the product category but typically ranges from 8% to 15%.
Additionally, as an FBM seller, you're responsible for your shipping costs. You can either absorb these costs or pass them on to the customer. Using Amazon’s Buy Shipping tool can help reduce shipping expenses, as it offers discounted rates from major carriers like UPS, FedEx, and USPS.
Understanding and managing these fees can help you better control your costs and maximize your profits while using Amazon's FBM program.
Advantages and Disadvantages of FBM
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When deciding between Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM), it's crucial to understand the unique benefits and drawbacks of each model. FBM allows you to take charge of your entire fulfillment process, offering a different set of advantages compared to FBA's streamlined approach.
To make the best choice for your business, consider the following pros and cons of FBM, which highlight how it can impact your operational control, costs, and overall customer experience.
Advantages of Fulfilled by Merchant (FBM):
Enhanced Seller Control: FBM provides you with full control over your inventory, shipping processes, and customer interactions. This means you can customize your fulfillment strategy and make decisions that best suit your business needs, including setting your own shipping rates and handling times.
No Additional Fees: Unlike Fulfilled by Amazon (FBA), FBM doesn’t involve Amazon’s storage or handling fees. This can translate into lower operational costs, allowing you to manage expenses more effectively and retain a larger portion of your sales revenue.
Potentially Better Margins: Handling shipping and fulfillment yourself will allow you to negotiate better shipping rates or pass on lower costs to customers. This can result in improved profit margins compared to the fees associated with FBA.
Disadvantages of Fulfilled by Merchant (FBM):
No Amazon Prime Badge: FBM listings do not automatically qualify for the Amazon Prime badge, which can reduce your visibility and appeal to Prime members who prefer faster shipping options. However, you can apply for Seller Fulfilled Prime to access this benefit if you meet the program’s requirements.
Increased Fulfillment Responsibility: As an FBM seller, you are responsible for managing all aspects of fulfillment, including inventory management, packing, and shipping. This can be time-consuming and resource-intensive, requiring efficient systems and processes to handle orders effectively.
You should properly weigh these advantages and disadvantages to make an informed decision about whether FBM aligns with your business goals and operational capabilities.
Conclusion
Selecting the right fulfillment strategy is crucial for achieving success on Amazon. Fulfilled by Merchant (FBM) offers significant advantages, such as increased control over inventory, lower fees, and potentially better profit margins. However, it also comes with challenges, including the lack of Amazon Prime eligibility and the increased responsibility of handling your fulfillment. Balancing these factors against your business needs will help you make an informed choice that aligns with your goals.
Ultimately, the best fulfillment strategy depends on your specific circumstances and priorities. If you're seeking greater autonomy and cost savings, FBM might be the way to go. On the other hand, if you value convenience and Amazon’s logistics network, FBA could be more suitable.
Ready to elevate your Amazon business? Discover how SellerMate.AI can optimize your Amazon ads and streamline your fulfillment processes with our cutting-edge AI tools. Book a demo today to see how our solutions can drive growth and efficiency in 2024!
Don’t miss out on the opportunity to transform your Amazon operations and achieve your business goals.
FAQs
Q. What is Fulfillment by Merchant (FBM)?
A. FBM is an Amazon fulfillment model where sellers handle their warehousing, packing, and shipping of products directly to customers. Unlike Fulfillment by Amazon (FBA), where Amazon manages these aspects, FBM gives sellers complete control over their fulfillment process.
Q. How does FBM differ from FBA?
A. The primary difference between FBM and FBA is who manages the fulfillment process. FBA involves Amazon handling storage, packing, and shipping and often provides Prime eligibility. FBM requires sellers to manage these aspects themselves but avoids FBA’s associated fees and gives them greater control over inventory and shipping.
Q. What are the costs associated with FBM?
A. FBM costs include a monthly subscription fee for Professional accounts ($39.99 per month) or a per-item fee for Individual accounts. Sellers are also responsible for referral fees (a percentage of the total sale price) and shipping costs, which can be managed through Amazon’s Buy Shipping tool for discounted rates.
Q. Can FBM products be eligible for Amazon Prime?
A. FBM products are not automatically eligible for Amazon Prime. However, you can apply for Seller Fulfilled Prime (SFP) if you meet certain requirements, which allows you to offer Prime benefits on your FBM listings.
Q. What are the advantages of using FBM?
A. FBM offers several advantages, including enhanced control over inventory and shipping processes, no additional Amazon storage or handling fees, and potentially better profit margins through self-managed shipping and fulfillment.
Q. What are the disadvantages of using FBM?
A. Disadvantages of FBM include the lack of an Amazon Prime badge for your products (unless you qualify for Seller Fulfilled Prime) and the increased responsibility for handling all aspects of fulfillment, which can be time-consuming and resource-intensive.
Q. How can I get started with FBM?
A. To get started with FBM, sign up for a selling account on Amazon, list your products, configure your shipping and return settings, manage inventory, handle orders, and monitor your shipping performance using Amazon's tools. For detailed steps, refer to the guide provided in the blog.
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