Start your Amazon FBM business with zero selling experience and make money!
11% of sellers in 2022 exclusively used Amazon FBM to sell their products. Don’t miss out on this opportunity – follow our step-by-step guide to get started today.
Amazon dominates the US retail e-commerce industry with a staggering 37.8% market share as of June 2022, leaving behind major players like Walmart, Apple, eBay, and Target. With 9.7 million sellers worldwide, Amazon is a complex and competitive marketplace.
Sellers can fulfill orders through two methods, Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). This article provides an overview of Amazon FBM.
What is Amazon FBM?
Amazon Fulfillment by Merchant, commonly known as FBM is a fulfillment method in which the seller is responsible for packing and shipping orders to customers themselves after getting sales on Amazon.
How does Amazon FBM work?
Sellers who opt for Amazon FBM to run their business are responsible for storing the inventory in their warehouse or partnering with a third-party logistics service provider such as Buzz Byte.
Fulfilled by Merchant Amazon sellers must keep the shipping costs in mind. They need to find reliable and cost-effective shipping partners like Buzz Byte’s warehousing and logistics service.
If the FBM shipping costs are high, the business might suffer loss instead of profit.
Requirements for Amazon FBM
Selling via FBM on Amazon requires meeting certain requirements as a seller, including:
- Stock Management: FBM sellers must ensure they have enough inventory to avoid stock-outs and missed sales.
- Inventory Control: Sellers are required to accurately set the quantity of a product available on Amazon to avoid overselling.
- Shipping Carrier Selection: FBM sellers are responsible for shipping orders, so they must choose a reliable and cost-effective carrier to keep shipping costs low.
- Packing: FBM sellers must pack orders firmly to prevent damage during transit, which could result in customer complaints and returns.
- Shipping on time: FBM sellers must meet Amazon’s handling times to avoid negative impacts on their performance metrics.
- Returns and refunds: FBM sellers must handle all product returns and provide resolutions within 30 days. Failure to do so could lead to negative feedback and A-Z guarantee claims.
- Customer service: FBM sellers must respond to all customer inquiries within 24 hours to keep customers satisfied and avoid negative feedback.
- Adherence to Amazon’s policies: FBM sellers must adhere to Amazon’s policies and meet certain performance metrics to avoid account deactivation or restrictions.
Amazon FBM: Advantages and Disadvantages
Amazon FBM (Fulfillment by Merchant) is a fulfillment method for Amazon sellers that offers both advantages and disadvantages. Here’s a brief overview:
· Advantages:
- Control: FBM sellers have more control over their business, including stock levels and packaging.
- Scalability: FBM sellers have the freedom to scale their business as they like, without any storage limitations.
- Better Profit Margins: FBM sellers do not have to pay FBA fees or storage costs, resulting in potentially better profit margins.
- No Storage Fees: FBM sellers don’t pay any fulfillment or storage fees, unlike FBA sellers.
- Freedom: FBM sellers can use their own labeled packaging and aren’t bound by strict labeling and shipping criteria.
- No Strict Rules: FBM sellers don’t need to follow any strict rules enforced by Amazon regarding inventory.
· Disadvantages:
- No Amazon Prime Badge: FBM sellers lose the Prime badge, which can impact sales since many customers look for the Prime badge.
- Increased Responsibility: FBM sellers have to manage stock levels, packing, and shipping orders themselves, which can be time-consuming and overwhelming.
- Time-Consuming: Fulfilling orders can take many hours daily.
- Outsourcing Costs: FBM sellers may need to work with a 3PL service provider for inventory storage and order fulfillment, which can result in outsourcing costs.
- Customer Service: FBM sellers are required to provide top-notch customer service and handle all customer inquiries themselves.
- Manage Returns: FBM sellers must handle all customer returns themselves, which is time-consuming and can impact profits.
FBM vs FBA vs SFP
- FBM: Fulfilled by Merchant (FBM) means the seller fulfills orders on their own or through a third-party logistics (3PL) service. The seller is responsible for customer support and handling returns.
- FBA: Fulfilled by Amazon (FBA) means the seller transfers storage, picking, packing, and shipping operations to Amazon and pays a fee. Amazon handles customer support and returns.
- SFP: SFP is a variation of FBM that allows sellers to get the Prime badge without using FBA. Sellers must meet high-performance standards, including shipping over 99% of orders on time, maintaining an order cancellation rate below 0.5%, and using Amazon Buy Shipping for over 99% of orders.
To choose between these methods, it’s helpful to use the FBA calculator to estimate profits for a specific product.
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Alternatives To FBM
· Dropshipping:
In dropshipping, the seller does not keep inventory. When a customer places an order, the seller forwards the order details to a dropship supplier who then picks, packs, and ships the order directly to the customer.
The seller earns by keeping the profit from the price difference. Dropshipping has lower upfront, storage, and packaging costs. However, the quality of products being sent to customers is not under the seller’s control, and Amazon’s Drop Shipping Policy must be followed.
A recommended Dropship supplier in the US is DailyDealsCo. DailyDealsCo offers a vast variety of products to drop-ship according to Amazon’s policies at reasonable prices.
· 3PL Service Center:
A third-party logistics service provider offers storage and order fulfillment at a cost per unit, making it a good alternative to Amazon’s fulfillment services. 3PL companies have more storage space and resources to ship orders faster.
Using a reliable 3PL company allows the seller to focus on other aspects of the business. The cost of 3PL services must be factored into the product price for a profitable business.
This can also be done via 2-step Online Arbitrage.
By understanding these alternatives to FBM, sellers can choose the best fulfillment method suitable for their business.
Amazon FBM Fees:
Selling on Amazon through FBM incurs three types of fees: Subscription, Referral, and Shipping fees.
- Subscription Fee:
There are two types of seller accounts on Amazon – Individual and Professional. The Individual account has no monthly subscription fee but charges $0.99 for every unit sold. The Professional account charges a monthly subscription fee of $39.99 but doesn’t charge any additional fee per unit sold. - Referral Fee:
Amazon charges a commission, on every sale made by the seller known as the Referral fee. The fee is usually 15% of the sale price in most categories but might be 8% in some categories for sales below a certain value. - Shipping Fee:
FBM sellers are responsible for paying the shipping fee, whether they use a carrier or Amazon’s Buy Shipping This fee should be factored into the sale price to ensure profitability.
Tips For Amazon FBM:
- Provide a Valid Return Address: Specify a valid return address to accept returns smoothly. Amazon sends return labels to customers based on the provided address.
- Utilize Buy Shipping: Opt for Amazon’s Buy Shipping feature to ensure timely and trackable deliveries. It provides discounted shipping labels and helps maintain account health.
- Monitor Account Health: Regularly check your seller account’s health through the performance tab. Pay attention to metrics such as Order Defect Rate, Late Shipment Rate, Pre-fulfillment Cancel Rate, and Valid Tracking Rate.
- Request Seller Feedback: Proactively ask customers for seller feedback to increase positive reviews. Automate this process with paid tools to enhance sales and reputation.
- Follow Drop Shipping Policy: If using drop shipping or a third-party logistics company, comply with Amazon’s Drop Shipping Policy. Be the seller of record, clearly identify yourself, and handle all customer returns. You can use DailyDealsCo or other dropship suppliers for this.
By implementing these tips, you can optimize your Amazon FBM business and ensure a seamless selling experience for both you and your customers.
Conclusion:
Amazon FBM offers a lucrative opportunity for sellers with an oversized or slow-moving inventory. For FBM sellers who need help with warehousing, Buzz Byte’s warehousing service can be a great solution. With Buzz Byte, FBM sellers can easily store their products and fulfill orders using the 2-step FBM process on Amazon, streamlining their operations and improving customer satisfaction.
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