Want to sell on Amazon?
You can become an FBM seller and fulfill orders yourself. Alternatively, you can go the FBA way and have Amazon fulfill the order on your behalf.
Amazon has a growing landscape of over 2 million strong sellers. When you go the FBM route, you can be part of that community.
But what is FBM actually? How does it work? How does FBM fare compared to other delivery options (FBA)?
In this detailed post, you will try to find answers to all these and many other FBM related questions.
What is FBM?
FBM stands for Fulfillment by Merchant . As the term implies, this business model is about sellers fulfilling their orders through the Amazon marketplace. In other words, sellers pick, store, pack, and ship products to buyers themselves. The FBM method has proven to be a better business prospect for some Amazon sellers. These sellers boost their profit margins by saving money that would otherwise be spent using Amazon's fulfillment mechanism.
When to choose Amazon FBM?
FBA is undoubtedly more popular with sellers because of its multiple advantages over FBM. Still, FBM is an integral part of the Amazon economy, and thousands of sellers take this route. So, they must have some valid reasons for doing so.
Here, we'll list all the reasons why it makes more sense to choose FBM.
Low Sales : If you don't sell more than 40 units per month, you may find FBM more convenient.
Have a large storage space : If you have enough free space, you can consider and adopt the FBM way. This space can serve as your true fulfillment center.
Logistics capabilities : If you already have a warehouse and shipping network and ship packages to different destinations, you may find FBM to be a more logical choice.
Large and heavy products : When you're dealing with large and heavy items, it's better to fulfill orders yourself than to fulfill them on Amazon.
Prerequisites for launching Amazon FBM
Before discussing how Merchant Model is fulfilled, it is necessary to understand its prerequisites. Here, we'll take a quick look at what you need to do before finalizing your choice between FBA and FBM.
Choose a market
First, you need to select the Amazon marketplace you want to operate. Amazon has 19 global marketplaces spanning six continents. You can select single or multiple marketplaces (based on your location, budget and products). For example, if you are located in India, you may find it easy to start your journey with the Amazon India marketplace.
For those living in the EU region, the same goes for Amazon Germany, France, Italy and the Netherlands. For international sellers, the US is considered the most profitable Amazon marketplace due to its size. The ease of doing business also makes it easy for international sellers to start their journey from the US rather than any other Amazon marketplace.
Choose a business model
The Amazon marketplace is not a one-dimensional commercial space that offers a single way to sell. Instead, the e-commerce giant lets sellers choose from four basic business models.
Private label is the most popular business model on Amazon. Private label sellers manufacture or source white label products and sell them under their own brands. Then there's the wholesale model, which involves buying branded products in bulk and listing them at a profit on Amazon. It is the second most popular business model on Amazon.
Amazon also offers low investment options through its arbitrage and dropshipping business models. With Amazon Arbitrage, you can generate a revenue stream by buying retail items at a discount and resell at a profit (maintaining a profit). In dropshipping, you market and list products on Amazon for third-party brands. The brands then perform order fulfillment themselves.
Choose a seller plan
Amazon mainly offers sellers two selling plans: Personal and Professional. The cost of the Personal plan is based on a per-sale model, which is $0.99 per sale. On the other hand, the Professional plan has a flat-rate subscription, which is $39.99 per month. The Professional Selling Plan is better for any seller who is serious about making Amazon a revenue channel.
Create a seller account
Once you've selected your marketplace, business model, and seller program, create your seller account on Amazon. With a valid credit card, tax ID, and bank account, you can easily create an Amazon seller account as an individual or business entity.
List your products
Finally, you must list the products you want to sell through Amazon. When listing a product, you need to fill in its attributes such as price, condition, and size. This is when you must also choose a fulfillment method. For example, if you choose FBM, select " I will ship this item myself ."
How does Amazon FBM work?
When you choose to be fulfilled by a merchant when listing a product, you will take a different trajectory than an FBA seller.
At first, the backend of FBM looks simple. You put product listings on Amazon, customers place orders, Amazon notifies you, and finally, you fulfill those orders. However, a lot happens during these seemingly simple phases.
Here, we'll break down and discuss all the FBM details that pave the way for a successful sales journey.
Set up a storage/fulfillment center
Adequate inventory is the lifeblood of any product-based business operation. FBM sellers are no exception. Conventional wisdom says that whether you are an FBA or an FBM, you must have three months of inventory.
As a private label or wholesale FBM seller, you must have your own dedicated storage space for your inventory. You will use this space to receive, store, package and send your products. Therefore, it is important to build this storage center/fulfillment center while taking care of the warehousing base.
You must predefine protocols for other elements of shipping, packaging, and inventory management . Classifying all of this information beforehand will simplify your internal fulfillment process.
Set up inventory
Once you have a place to store and package your products , you can start the supply chain of your Amazon FBM business. Basically, this means delivering the product to a storage center or picking it yourself from the manufacturer/distributor. Then, organize the inventory in the warehouse in a way that items can be easily sourced once the relevant order is received.
When a customer successfully places an order, you need to start processing it. Once notified of your order, source items from your inventory and start packing for delivery. From boxes to bubble wrap, plastic bags to tape, your FBM operation requires a lot of packaging material.
Some products will be packaged and shipped in boxes. Then, some of them will be packed in plastic bags. Also, you may need air fillers and bubble wrap as well as fragile items. Additionally, you may need to crate some heavy items for safe shipping and shipping handling.
If you want your product to remain intact during shipping, follow Amazon's packaging compliance for its FBA operations.
Configure Seller Central for FBM
You can modify several settings and features on Seller Central to make merchant fulfillment easier. For example, creating customized shipping templates is one of the keys to simplifying FBM operations. You can use shipping templates to predefine and customize shipping details (rates, destinations, handling times, etc.) for different SKUs.
For example, if you only offer one-day shipping for a specific item, you can handle it by making a specific shipping template and linking it to the relevant SKU. Likewise, shipping templates allow you to set shipping prices based on weight and price ranges.
Follow the steps below to create a shipping template on your Seller Central account.
Click Shipping Settings in the Settings drop-down menu in the upper right corner of the Seller Central home page .
Click the Create New Shipping Template button.
Start selecting the required shipping details for that specific template.
This is what the shipping template looks like after it is created.
Once a shipping template is ready, you can assign it to a specific SKU from the Manage Inventory page .
Note : Amazon recommends that FBM sellers keep free shipping. Free shipping can help sellers win featured deals that boost their sales.
In addition to creating shipping templates, you should also set up order processing capabilities in Seller Central . By setting a specific processing capacity, you can determine the maximum number of orders that can be processed in a day. When this limit is reached, subsequent orders automatically increase their processing time by one day. Therefore, setting up your order processing capacity will ensure that you can navigate a period of order surges smoothly.
Click the General Shipping Settings tab on the Shipping Settings page.
Scroll down to the Processing Time section and click the Edit button.
Enter the maximum number of orders you can ship per day and click the Save button.
Ship orders to consumers
This is one of the last and most critical stages of FBM. Here, you need to pay attention to one necessary Amazon FBM shipping requirement, which is maintaining a 95% and above Valid Tracking Rate (VTR). VTR essentially measures the percentage of FBM packages that have a valid tracking number. Going below this VTR percentage may prevent you from performing merchant-fulfilled actions.
You can ensure a good VTR by choosing an Amazon integrated carrier. These operators are part of Amazon's VTR network and provide the platform with real-time tracking status. For example, these are integrated carriers for US domestic shipping.
United States Postal Service
Asendia FedEx Freight
Watkins & Shepard United States
If you're not sure how to handle the shipping portion of FBM, you can use Amazon Buy Shipping Services . This service allows you to purchase shipping labels, process and confirm orders, and track shipments. Names like FedEx, Ontrac, UPS, USPS, DHL Express International, and China Post are part of FBM's seller services.
Using Amazon-assessed and approved shipping services will help you keep your VTR, negative feedback, and return claims low.
Manage returns and take care of customer service
FBM sellers also have to take good care of customer service themselves. Allowing buyers to ask pre-purchase questions, manage returns, process A-to-Z warranty claims, and respond to customer messages in a timely manner are some of the basic pointers to FBM-related customer service.
Also, managing returns in FBM is slightly different than in FBA. For example, you must provide customers with prepaid return labels for most items. You then have the option to request a prepaid return label exemption for certain SKUs.
What is the cost of running an FBM operation?
We can break down the cost of FBM operations in various parts. First, the cost of goods (the products you will sell) will be the main expense of your FBM business. After that, running your own storage/fulfillment center will also incur costs. You will also need a budget for purchasing packaging items.
Then you need to deal with some Amazon fees. Finally, you also have to pay for shipping because you fulfill the order yourself.
The commodity costs and expenses of operating a warehouse depend on the size, scale and product mix of the business. Therefore, they may vary from seller to seller.
However, Amazon fees, packaging costs, and shipping are the same for everyone. Let's discuss them in more detail.
Amazon FBM Fees
If you choose the Professional Selling plan, you must pay a flat monthly fee of $39.99 no matter how many sales you make. Then, you have to pay the referral fee that is charged each time you make a sale. It's essentially a commission that Amazon takes for giving you a platform to sell on. Referral fees vary by product category , ranging from 6% to 45%. For most product categories, it's still 15%.
Amazon FBM Shipping
Generally speaking, shipping fees for FBM sellers are determined by these factors.
Shipping Destination (Carriers typically divide the U.S. into eight shipping zones and set different shipping rates for these zones)
Package insurance (if it's an expensive item)
Shipping costs also depend on the carrier you choose. For example, USPS users will definitely pay different fees than sellers using FedEx.
This is the USPS cost calculator for estimating your FBM shipping costs . FedEx also provides a calculator to estimate shipping costs up front. You can also find similar cost calculators for other Amazon integrated carriers. Use these calculators to make a cost comparison of services from different carriers.
We calculated the USPS and FedEx 2-day delivery costs for a 1-pound box package from Los Angeles to New York. USPS rates are much lower than FedEx's rates.
If you process a large number of products through FBM operations, please contact the relevant carrier's customer support. You may get discounted quotes for bulk orders.
Amazon FBM Packaging Cost
FBM sellers must also consider packaging costs. All the envelopes, corrugated boxes, bubble wrap and plastic bags used to wrap the order will also cost a lot. Depending on your packaging, packaging costs can range from as little as a few cents to as high as $10 per item.
Amazon can be your one-stop shop for all your packaging and shipping supplies. From mail to corrugated boxes, from bubble wrap to sealing tape, you can find everything you need for FBM packaging at affordable prices on Amazon from multiple suppliers.
How to Succeed with Amazon FBM
Due to the difficult task of order fulfillment, many sellers do not take the FBM approach. However, FBM sellers must work the same way as any other self-fulfilling e-commerce seller. Likewise, an FBM business can achieve all the success that any self-sufficient e-commerce business can achieve.
Here are some tips to help Amazon sellers get the most out of FBM.
Be at the top of your inventory management game
Having sufficient inventory is a prerequisite for FBM operations. You can't wait for a customer to place an order to source inventory. Always keep stock that can handle an 8-12 week sales forecast. Make the most of your FBM storage and fill it with products that are in demand.
Inventory management tools can also come in handy if you're dealing with high sales and multiple product portfolios. Syncing inventory management software with your Seller Central account will ensure you're never late for your next shipment.
Minimize processing time
Amazon calculates shipping time by adding processing and shipping durations. While your carrier will make sure you get the shipping time you need, you will be solely responsible for processing times. If you want to maintain a fast shipping turnaround, try to maintain same-day processing times. This means you should be able to pack and have your order ready for the carrier the same day you receive it.
Make a good shipping deal
A good shipping agreement with the carrier is critical to the success of an FBM operation. A good shipping deal is one where you can get the delivery time you want at a reasonable price. In other words, a good shipping deal can increase customer satisfaction and increase profit per sale.
Therefore, please do your due diligence before choosing your FBM operator. Always compare prices between carriers on all aspects of delivery. For example, compare 1-day and 2-day delivery rates for envelope and boxed shipments. Also, see if the carrier offers better rates for bulk orders.
Become part of Seller Fulfilled Prime
Being a part of Seller-Fulfilled Prime is an amazing feat for any FBM seller. This program allows you to fulfill Amazon Prime orders from your own warehouse, given that you maintain a 2-day delivery time. Catering to Prime members can help you increase your sales significantly. To be part of Seller Fulfilled Prime, you need to meet these requirements .
meet customer expectations
The ever-evolving e-commerce environment has made customers expect more from online sellers. They want cheaper shipping, fast delivery and real-time tracking of their orders. As an FBM seller, you are solely responsible for all of these things. You can keep shipping costs low by adding some shipping to your product price. For real-time tracking and fast delivery, always work with any reliable Amazon integration carrier.
FBM vs. FBA battle
When discussing FBM, it is almost impossible not to discuss FBA and compare the two business models. The best way to compare FBM and FBA is to list the pros and cons of both.
Advantages and disadvantages of FBM
FBM has its strengths and weaknesses. Let's take a quick look at them.
Potential for better profits : By choosing an FBM with your own logistics infrastructure, you can avoid many FBA-related costs (fulfillment fees, storage fees, etc.). Not having these recurring costs may improve your chances of making a higher profit on each sale.
Greater control over inventory and packaging : You, as an FBM seller, are in charge of your inventory. Therefore, there is less chance of misplacement and lost items. Again, you don't have to argue back and forth with anyone about size and weight. Plus, you have full control over how you want your order to be packaged and shipped. Here, you can even get ahead of FBA services.
No Peak Season Holdups : As an FBM seller, you won't experience delays and higher fees, which are normal for FBA sellers during peak seasons like Thanksgiving and Christmas holidays.
Lots of handling and oversight : You have to handle all fulfillment requirements yourself, from inventory management to packaging and shipping to customer service. This extensive handling and oversight makes FBM almost a full-time job.
Fierce FBA Competition : Whether it's Buy Box or Prime eligibility, Amazon favors sellers who use its fulfillment services. As a result, FBM sellers have to put in extra effort to compete in this unfair playing field.
Multiple non-Amazon fees : As an FBM seller, you can avoid all FBA-related fees. Still, you can't avoid the recurring costs of running your own fulfillment facility (warehouse rent and utilities, employee salaries, purchasing packaging materials, etc.).
Advantages and disadvantages of FBA
FBA is more popular than FBM because of its many benefits. However, the model still has some shortcomings. Here, we'll look at both sides of the FBA coin.
Buy Box and Prime Edge : FBA sellers have an absolute advantage in winning the Buy Box. Again, they are automatically considered for Amazon Prime without going through trial periods and waiting lists.
Ease of Handling : FBA sales are easier to handle. All you need to do is send your inventory to an Amazon fulfillment center. From then on, Amazon manages everything. This simple FBA administration is one of the reasons why many people take it as a part-time job.
Favored by Amazon SEO : Amazon does not officially claim that it supports FBA sellers on search results pages. However, it is widely believed that the Amazon search algorithm is biased towards FBA listings. Therefore, if you operate as an FBA seller, you have a good chance of getting better exposure and higher sales.
High Costs : From short- and long-term storage fees to sudden increases in fulfillment fees due to Amazon's assessed weight and dimensions, the cost of doing FBA can vary and add up to a huge amount of money.
Inventory and packaging issues : Amazon fulfillment centers handle large volumes of products from thousands of sellers. This high-volume processing increases the chances of poor inventory management, especially if your product batches are not properly labeled. Likewise, you must ship products to fulfillment centers in accordance with Amazon's strict packaging details for FBA sellers . If you don't do this, your inventory may be stuck in the FBA center.
Before ending this article, let's answer some frequently asked questions about FBM operation.
Can I do FBA and FBM at the same time?
Yes, you can do both FBA and FBM from the same seller account. Many Amazon sellers use both fulfillment routes to their advantage. Some sellers often use FBM as their fallback option in case the unforeseen happens which prevents them from continuing their FBA operations.
Is FBM better than FBA?
There is no clear answer to this question. Which Amazon business model is better depends on several terms and conditions. If you already have the resources to store, pack and ship, or if you want to sell heavy and oversized items, then FBM is a better fit for you. However, in general, FBA is a better option than FBM for most sellers.
Does Amazon pay sales tax for FBM sellers?
No, Amazon does not collect and pay sales tax for FBM sellers. As an FBM seller, you must keep records of the taxes you collect and pay them yourself.
What percentage of Amazon's FBM orders are accepted?
Amazon charges the same commission on FBM orders as FBA orders, the referral fee.
We hope the above discussion has helped you learn more about the FBM business model. FBM is a suitable selling option for those who have a strong logistics infrastructure or who do not wish to maintain higher sales velocity and monthly sales.
However, this may not be the best option for sellers entering the e-commerce market who have no experience and cannot handle it entirely on their own. For such entrants, FBA is certainly a better choice.
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