In the last couple of years, you can say there has been an Amazon boom. The online retailer— which accounts for 45% of the U.S. e-commerce market— is home to over 6 million sellers according to Marketplace Pulse. This number is only growing, with nearly 2,000 new sellers joining each day. Despite the massive amount of competition, selling on Amazon is still a great source of income for those who have the resources and time to navigate the market.
Most sellers on Amazon use FBA to sell their products, and you might even be one of them. However, there is an alternative method that many overlook. That method is called Amazon FBM, and it may be better for your business. In this article, we teach you everything you need to know about selling and how to do FBM on Amazon.
What is Amazon FBM?
Amazon FBM stands for Fulfilled By Merchant and is sometimes referred to as Amazon MFN (Merchant Fulfilled Network). Amazon FBM is where sellers choose to ship their products to buyers themselves. This often involves sellers storing their own stock, packing and shipping Amazon FBM orders, and dealing with all customer service inquiries and returns. Essentially, Amazon is just your listing venue, and everything else is done by you.
What’s the Difference between Amazon FBM and Amazon FBA?
The only difference between the two is how the order is fulfilled. Amazon FBM is fulfilled by the seller while Amazon FBA is fulfilled by Amazon. When sellers utilize Amazon FBA, they are able to send their inventory to an Amazon warehouse and have their orders shipped out from there by Amazon’s shipping services.
You know the big blue Amazon trucks you see often driving around your neighborhood? Yeah, those.
Amazon FBM sellers, on the other hand, handle their own inventory storage and order fulfillment. They are also in charge of customer service and returns.
Both Amazon FBM and Amazon FBA and their own advantages and disadvantages. It is really up to the seller to choose which fulfillment services best suit their needs.
Pros of Fulfillment By Merchant (Amazon FBM)
Despite having to do all the work, selling with Amazon FBM comes with an array of advantages. We detail some for you down below:
1. Fewer Fees
A major benefit of Amazon Fulfillment by merchant is having to pay fewer fees. While using FBA can take away many of the tedious tasks of selling on Amazon, the charges are pricey and quickly add up. The FBA costs include monthly storage, order fulfillment, handling fees, and more. Depending on your business, you can also see other costs, such as high volume listing charges.
Down below we breakdown Amazon FBM fees so you know exactly what you are getting into:
- Monthly Subscription Fee – Pro plan $39.99 per month / Individual Selling Plan no fees
- Per Item Selling Fee – Pro Plan no fee / Individual Selling Plan $0.99 for each product sold
- Referral fee – a percentage of the total sales price— usually 15%— but it differs based on the categories. It goes as low as 6% but as high as 45%
While you will still have to pay the monthly subscription and referral fees when using it, but that is a lot less than shipping with FBA.
2. Greater profit margins
Because of the fewer fees, sellers on Amazon often see wider profit margins per item than those using FBA. However, this is not a given, so make sure you calculate your other costs correctly and negotiate the best prices for stock and shipping. You can easily do this validate potential profitable products using ZonBase’s Amazon Sales Estimator.
3. Full control over the business
Fulfilling all your orders yourself gives you complete control over your business and products at all times. When you are involved in the entire selling process, it becomes easier to track your inventory and the progress of each order, leading to fewer mishaps as long as you are on top of everything. Also, you will be able to quickly increase your stock when needed, making it easier to expand your business.
4. Avoid FBA Strict Regulations
While using FBA would make it easier on you as a seller, you would have to follow its strict policies and requirements. There are rules concerning many aspects of the business, such as product titles, barcodes, and shipping labels. With this, however, you get to bypass all those standards and just focus on item quality and shipment.
5. Less unexpected expenses
FBA sellers can be affected by increased costs due to Amazon policies or long-term storage charges. Luckily, FBM users do not have to deal with those hassles and instead just have to focus on their own stock, storage, and shipping.
6. Able to build your independent brand
When you’re selling using Fulfillment by merchant, you will have to provide customer service rather than relying on Amazon to do so. While this may sound like more work for you to do, it actually is beneficial in creating your own brand. By talking to customers, you better understand what they want and what you should improve on as a seller.
Cons of Fulfillment By Merchant
While there are many advantages to using FBM, there are also drawbacks that make using FBA the more appealing option for some.
Managing your business is already tedious by itself, but dealing with shipping is another monster. When using Amazon FBM, you will have to dedicate many hours a week to picking and packing your orders and just overall be super hands-on in the process.
2. Shipping may cost more
While you are definitely saving on your storage fees compared to Amazon FBA, your shipping costs could vary depending on the weight of your items and carrier. You can try to negotiate a good deal; however, sometimes, it may be unavoidable.
3. Customer Service is your responsibility
With FBA, you have the advantage of using Amazon’s trained customer service department, and they will be able to handle any inquiries, returns, and refunds on your behalf. Fulfillment by merchant does not offer this kind of assistance, so it will be all up to you.
4. No Amazon Prime
By far, the biggest con of Amazon FBM is the missing business from Amazon Prime members. When buyers have a Prime account, the 2-day shipping criteria is a vital factor in a purchase to them. And, with 1 in 3 Americans having an Amazon Prime subscription, that is a lot of business loss. While you can apply for the alternative Seller Fulfilled Prime program, it is challenging to be eligible for it.
It requires nearly perfect selling ratings and other criteria, listed down below:
- Have a timely shipment rate of 99%
- Have a valid tracking rate of 99%
- Offer Premium Shipping to customers
- Have a proper collection rate of 0.5% or less
- Use Amazon’s Buy Shipping for 98.5% of the orders minimum
- Abide by Amazon’s return policies
- Use of Amazon-approved carrier for delivering orders
- Let Amazon handle all the customer inquiries
When Should You Use Fulfillment By Merchant?
Still confused on whether Amazon Fulfillment by merchant is the better choice for you?
Here are a few situations where it would be best to fulfill your own orders:
- You are a new seller – Amazon FBM is great for beginners
- Your items are unique to your store – this builds the credibility of your product and online shop
- Your products are difficult to ship – when items require special handling, it would be better to ship them yourself instead of Amazon to avoid mishandling or breakage
- You have a small scale business – when you don’t have as many items, storage is easier and cheaper
- Your items make a small margin – you wouldn’t want to lose any more of the profit due to FBA fees
- You make handmade products – this ensures your items are delivered to the buyer the way you want
- Your products are exclusive – they have a lower frequency of sales
- You already have a third-party fulfillment service – then you definitely don’t need Amazon FBA
How does Amazon FBM work?
Decided you wanted to do FBM on Amazon? Well, we will tell you how to start Amazon FBM here. First you have to set up an Amazon seller account. In order to do this, you will need a variety of information, including your business name, address, contact information, as well as your credit card and Tax ID number.
After Amazon approves you for selling on its platform, you can start to create listings for your items. Make sure these listings are search-focused in order to best promote your products. If you need help with your listings, Zonbase is a software tool that can make sure your products reach the most eyes. With Zonbase’s Listify tool, you can find and include the most important keywords to start optimizing your product listing. These keywords are crucial in making sure your listings rank highly in search engines.
After, you have to integrate your Fulfillment and order management tools with Amazon to handle orders and deliver customer details. Once you update your account information to verify shipping and handling times, you are done and can get selling with Amazon FBM!
Tips for Selling with Amazon Fulfillment by merchant
Ship out orders on time
Once you receive an order, you should ensure you ship the item based on the delivery date estimated by Amazon. If you are late, your customers may get angry and leave your business bad reviews.
If you aren’t exactly sure how to ship your product, the first step is to choose a carrier. In the United States, you have multiple options, such as UPS, FedEx, USPS, and DHL. You can compare the shipping rates using websites such as Online Shipping Calculator and Ship Gooder.
Always provide tracking numbers
Amazon requires all orders to have a tracking number, so make sure you don’t forget! If you purchase shipping through Amazon, the tracking number will automatically be sent to the customer. Otherwise, you will have to let them know yourself.
Have a good return policy
According to Amazon’s policy, you must accept all returns. So, you should have clear return instructions included in your packaging as well as your item listing. Ensure you have a valid return address that your returns can be sent to.
Choose where to store your inventory
When choosing storage or warehouse location, you should try to strategically have it in a place where you can avoid redundant shipping costs. You can rent a room or even use your house for smaller businesses.
What Do We Think?
Despite the number of benefits selling on Fulfillment by merchant has, we at ZonBase still believe Amazon FBA is the way to go.
Even though the fees from Amazon eat into your profits, Amazon FBA’s efficient, hands-off shipping saves sellers a lot of time they could be spending on improving other aspects of their business. Whether it’s marketing their business, researching their competitors, or even adding more products to their catalog, it feels like a waste using multiple hours a week packing your products when Amazon could just do it for you.
Along with that, Amazon FBA makes selling on Amazon much easier and more feasible for beginners looking to increase their income. For those who are experienced, the entire selling process could even be autotomized, making it a great, passive income opportunity that those using it can’t even dream of.
However, like we said before, there are many specific scenarios where Amazon FBM may work better for your products. However, for most Amazon sellers who wish to scale their business and maximize their profits, they would need a lot of inventory space and time which makes Amazon FBA the better option for them.
Want to learn more about Amazon FBA? Read all about it here.
Selling on Amazon is a lucrative and flexible source of income. Whether you choose to do it as a side hustle or full-time job, check out ZonBase to make your Amazon business a piece of cake.