An important part of e-commerce these days is shipping and delivery services. Choosing the best method to sell on Amazon and deliver to customers is very important for sellers; because how and when to get the products purchased is effective for customer satisfaction. A well-organized and well-organized process can increase your profits. Using customer fulfillment (FBM) is beneficial for small businesses. This simple guide will explain how Fulfillment by Merchant (FBM) works.
What is Amazon FBM?
The short form for Merchant Fulfillment on Amazon is Amazon FBM. In this fulfillment process, sellers list their products and decide to manage their business activities. They do everything from storage and shipping to customer service. Along with the FBA system, about 43% of Amazon sellers use the FBM business model. However, 9% of Amazon sellers only use FBM. Usually, newbies use this method more than established sellers because the initial setup is easy.
How does Amazon FBM work?
Obviously, in the Amazon FBM business model, when a product is sold on Amazon, the customer fulfills the order.
Here are some steps to do Amazon FBM:
1) First, you need your business information as below to create an account in Amazon Seller Central.
- Company information (your company name, address and contact details)
- Email address
- Credit card
- Phone number
- Tax Identification Number (Federal and State)
- e-commerce return address
2) From the information above, register with Amazon and choose one of the Amazon plans: Professional Seller or Individual.
3) The next step will be the product list. You need to list the products you want to sell. To improve your conversion chances, you can use the right images, videos, text, etc.
4) Now, it’s time to choose between two complete models: FBA or FBM. When going for FBM, you need to look for cost-effective and reliable shipping/delivery partners. Fees should be lower than FBA, which doesn’t affect your margin.
5) Now it’s time to ship your products to your warehouse or distribution center. Your home is the best option as a short-term solution if you are a small business owner. Large companies may require multiple distribution centers. Depending on the number of distribution points at your disposal, the distribution of products to important points will be easy. Also, you can reduce your average shipping area and save on shipping costs.
6) Delivery of orders received on time is another important factor. Amazon determines the estimated delivery time for customers on the checkout page, which shows the order and delivery time. It is possible to change the shipping and processing times to better meet customer expectations. You need to follow the e-commerce rules for the customer by purchasing the shipping label through Amazon or yourself. Amazon sends a return label with your background information.
When should you use Amazon FBM?
Obviously, not all marketers can be successful using only one method for their business. So, running an Amazon business won’t be the same thing. If you are a seller who sells unique products in a short period of time, FBM is the best choice for you.
Consider that you can use both FBA and FBM, which doubles your exposure and sales opportunities, but new sellers with limited inventory often opt for the FBM business model.
Here we outline the best conditions for FBM:
- Small stock
- Low quality products
- Special products have low market prices
- Handcraft your merchandise
- It is difficult to ship the product (oversized, weak or heavy)
- Have good storage or small supplies
- Having a third-party fulfillment service is cheaper than Amazon FBA
Advantages and disadvantages of FBM
Assuming you decide to do all the work by choosing the FBM execution method. But, it is important to know the pros and cons of using this method.
- A small document to work with when working directly with a buyer
- Have control over all aspects of the business
- There is no need to pay any more on Amazon; therefore, you have a lot of freedom to do the business as you want
- A better understanding of the inventory in the product: what is sold and the changes that may be necessary for success
- There is no need to worry about the inevitable losses due to changes in policy on Amazon
- No unexpected fees; the trader is well aware of all the costs of each order
- Building a brand is easy to achieve
- FBM sellers can continue to sell even during emergencies, such as the Covid-19 pandemic when Amazon stops shipping some products.
- Amazon Prime is not allowed
- Need more money for shopping
- You need more time to manage your business
- Delivery fees can be high
- In-house (if manual) storage and fulfillment costs are high
- Customer service is your responsibility
Amazon FBM vs FBA
Of course, comparing Fulfillment by Amazon (FBA) to Fulfillment by Merchant (FBM) is tricky. In FBA, sellers ship their products directly to Amazon’s warehouse, while FBM stores the products in the seller’s warehouse.
Also, with FBA, picking, packing, shipping, and customer service are part of Amazon’s operations. Additionally, your customers can use Amazon Prime service for free for two days with qualifying orders.
But, in the FBM system, apart from product listing, shipping management, customer support, and all aspects of order fulfillment are the responsibility of sellers.
Amazon FBM fee
Sellers face certain costs when they decide to use customer fulfillment on Amazon. Depending on their shipping/delivery options, these fees may vary from seller to seller. The commissions received by all sellers are broken down below:
- Monthly Subscription Fee: The Individual plan is free, but resellers will pay $39.99 per month for the Professional plan.
- Earnings per sale: Seller – $0.99 per sale of each product and no fees for professional plans.
- Shipping Costs: For every sale, you must pay shipping costs.
- Referral Commission: For every product sold, Amazon takes a referral commission. It is 15% of the retail price on most types of products. But, it is between 6% and 45%. Here’s a table of referral fees (included in one minute unless otherwise noted):
Is Amazon FBM worth it?
Increasing your profit margin is the main benefit of using FBM. When you sell large or heavy products, there is no doubt that the FBM system is the best choice. Also, when you run out of FBA products, FBM is a good backup strategy. FBM can be a profitable venture as a side business if you have access to free space.
How much money do Amazon FBM sellers earn?
There is no limit to your winnings amount. It depends on many factors, especially the time and effort you put into your business. In general, FBM sellers start their business on Amazon faster than FBA sellers. About 33% of FBM sellers can earn $25,000 per month in revenue. In this article, you will find more information about Amazon FBA Business.
Although Amazon FBM may seem like a difficult task, it has many advantages. The FBM system gives you better control over your business. Also, it is known as a good backup for Amazon FBA. In this article, you can read the pros and cons of Amazon FBM.