In previous years, sellers flocked to Fulfillment by Amazon (FBA) as an accessible means to build a brand and sell products on the Amazon marketplace. In 2024, however, more sellers are opting for FBM (Fulfillment by Merchant) as the better choice to fulfill orders and meet customer expectations.
Fulfillment by Merchant (FBM) is a fulfillment method that offers Amazon sellers better control over inventory and shipping. Here, we explore the reasons to choose Amazon FBM (Fulfillment by Merchant), the benefits of choosing FBM and some of the challenges to consider. If you’re a seller seeking more control and flexibility in your operations, FBM could be right for you.
What are the disadvantages of FBA?
Let’s review some of Amazon FBA’s disadvantages to understand why Fulfillment by Merchant (FBM) may be the better option for your business.
- Rising costs: It’s no secret that Amazon continues to raise its Fulfilled By Amazon (FBA) fees year after year. Amazon recently announced its fee schedule for 2024, sending sellers into a tizzy over rising costs and frustration with storage and fulfillment. FBA sellers’ decreasing control over margins and fulfillment makes FBM look like a superior alternative, considering fees alone.
- Limited inventory control: FBA requires sellers to send inventory to Amazon’s fulfillment centers, which ultimately means reduced stock control. Inventory management challenges arise when products become out of stock, leading to missed sales, damaged brand reputation and poor margins.
- Challenges with customer service: Winning customers’ hearts isn’t so straightforward when choosing the FBA fulfillment option. With FBA, there are fewer means for direct communication with customers, and the FBA reimbursement service return policy is limited. Often, Amazon inadvertently deems products as “unsellable” or places unsellable inventory back into available status. Navigating returns and keeping customers happy with FBA can be challenging, especially given that Amazon determines your inventory’s conditions.
- Amazon FBA strict policy adherence: FBA sellers must abide by Amazon’s policies and procedures for fulfillment, which constantly change. The lack of control over Amazon FBA policy poses various challenges for sellers. While FBA offers a low bar to entry, convenience, and a fast track to scalability, sellers must carefully weigh the pros and cons before diving in. Sometimes, the cons of FBA outweigh the pros, prompting sellers to try FBM. With a streamlined process, FBM is a reliable option to meet and exceed your fulfillment needs.
What is Amazon Fulfillment by Merchant (FBM)?
Amazon FBM empowers sellers to tailor their fulfillment process to suit their needs, offering a more hands-on and personalized approach to fulfilling and delivering customer orders.
With FBM, sellers store products in their own facilities, or they can employ third-party logistics providers to manage their inventory and fulfillment needs. Amazon FBM is growing more appealing due to its flexibility in fulfillment strategies. Sellers can save on storage fees and fulfillment costs traditionally associated with Amazon FBA.
Why merchant fulfill an item on Amazon instead of FBA?
Let’s review why you should consider Amazon FBM over FBA.
Reason #1 Ditch long-term storage fees
Long-term storage in Amazon FBA warehouses is costly. FBM enables you to avoid long-term storage fees by managing your inventory and fulfillment process. You won’t need to rely on Amazon to maintain inventory levels.
Reason #2 Greater control over returns
Amazon Fulfillment by Merchant (FBM) allows you to manage your return processes, providing more control and flexibility. This is a primary advantage if you offer specific return policies or employ a personalized customer service approach. With FBM, you can communicate with your customers while tailoring return solutions to meet their needs.
Reason #3 Control over demand and fulfillment
Every year, Amazon faces capacity issues, resulting in the loss of coveted Prime badges and delayed fulfillment times. Sellers can also experience delayed shipment receipt when demand is at an all-time high, like during the Christmas rush or certain seasons. With Amazon FBM, you control your shipment process and replenishment, avoiding Amazon’s capacity issues and allowing you more control over operations and customer satisfaction.
Reason #4 FBA inventory restrictions
Choosing to sell via Amazon FBA means dealing with inevitable inventory restrictions, most notably expiration dates on FBA products. “At the time of check-in at Amazon fulfillment center, all products must have a remaining shelf life that allows sufficient time for the product to be consumed in full, plus an additional 90 days.” (Amazon Seller Central/Expiration Dates on FBA Products) Leveraging FBM means liberating you from inventory constraints. You’ll be able to ensure a steady supply during peak times, preventing stockouts.
Reason #5 Flexible carrier choices
Opting for Amazon FBM means choosing your preferred shipping carriers and not relying on Amazon for delivery. By selecting from various providers, you can tailor your delivery needs, ultimately increasing sales and order fulfillment. You’ll be far less likely to experience delays at critical times, like during the surge of Q4, when you can maintain control over carrier selection.
Reason #6 Customized branding and packaging
Merchant Fulfillment allows you to craft and maintain a unique customer experience through branding and packaging. With FBA, products are packaged in Amazon-branded boxes. With Merchant Fulfilled, you can customize your packaging to help build authority and trust with your customers. Opting for FBM allows you to consider eco-friendly options, which some customers specifically seek.
Reason #7 Amazon FBA stock outs
Occasionally, sellers choose to sell products to Amazon, but products may not be checked into fulfillment centers on time. In this case, FBA sellers can flip fulfillment to FBM, allowing them to fulfill orders when they would otherwise be out of stock. This approach is practical throughout the year, especially during Q4, when there are frequent fluctuations in Amazon’s stock levels for various items.
How to merchant fulfill on Amazon
Let’s review the step-by-step approach to selling products via Amazon FBM.
Step 1 Select your approach and consider costs: Whether wholesale selling, online arbitrage, retail arbitrage, or private label, you must choose an approach that aligns with your goals. Costs will vary. You’ll pay fees per item sold, monthly subscription, and referral fees. Evaluate your numbers before listing products via fulfillment by merchant. Try Amazon’s Fee Calculator. Consider shipping costs, referral fees, and product costs to determine if FBM is right for you.
Step 2 Conduct product research: Thoroughly research and identify the best products for a healthy profit margin. Some large or oversized products may be unrealistic with Fulfillment by Merchant (FBM), as the shipping costs may eat away at your bottom line.
Step 3 Create an Amazon Seller Central Account: Like with FBA, you’ll require an Amazon Seller Central account. A professional account is $39.99/per month. To open an account, you’ll need your business name, address, email address, phone number, contact information, credit card and tax ID. You’ll select ‘I will Ship This Item Myself’ when you list your product(s) in Amazon Seller Central.
Step 4 Craft unique product listings: Amazon product listings are your digital storefront displaying your products to a ready-to-buy market. Craft listings that unfold your brand story, offering your most prominent product features and benefits clearly and concisely. Leverage Amazon SEO best practices to boost visibility and gain top rankings. Even with Fulfillment by Merchant (FBM), product listings are vital to your success.
Step 5 Configure your FBM account: Customize your Fulfillment by Merchant (FBM) account settings by integrating technology with Amazon to help facilitate automatic order delivery and furnish customer details.
Step 6 Decide your warehouse and fulfillment facilities: Decide how you want to store and fulfill orders with FBM. You can self-manage this process or hire a third-party logistics provider to help meet your needs. The more robust inventory and fulfillment process you can maintain, the better sales volume and positive customer experience you’ll achieve.
Step 7 Create shipping templates: Leverage shipping templates in Amazon Seller Central via the Manage Inventory menu and Shipping Settings. Create multiple templates to help streamline your operations. Select your default order handling capacity and time settings to help mitigate sales surges. Avoid choosing only default templates, as these templates may not entirely suit the needs of your operations.
Step 8 Consider bulk shipping: If you have several orders pending fulfillment with Fulfillment by Merchant (FBM), you can choose bulk shipping to fulfill multiple orders simultaneously. Go to Manage FBA Shipments, select the Upload Shipping Plan File, then click “Prepare Your Create Shipping Plan File,” and click “Download Template.”
Step 9 Customer service: You’ll have more control over the customer experience with Fulfillment by Merchant (FBM), but with that comes more responsibility. Ensure you follow best practices and are up-to-date on Amazon’s return policies. Leverage the return process dashboard to keep on top of returns and reply to customers within the 24-hour required period. A positive customer experience is essential in any fulfillment model.
As you achieve customer service excellence, Amazon will reward you with various support options, including Premium Shipping access. Meeting delivery speed and accuracy benchmarks opens avenues to perks such as free expedited shipping, which your customers will love, continuing the cycle of a positive customer experience.
What are Fulfillment by Merchant (FBM) best practices?
While retaining control over inventory, storage, picking, packing, and shipping, your integration with Amazon ensures a streamlined order fulfillment and customer communication process. Here are some FBM best practices to keep in mind:
- Prioritize fast delivery
- Adjust shipping settings and holiday settings to better self-manage
- Meet standard shipping requirements and adhere to service-level agreements (SLAs).
- Learn about Premium shipping so you can offer one and two-day shipping
- Choose free shipping to help increase your chances of winning the Featured Offer.
- Consider a 3PL to meet your storage and fulfillment needs
- Leverage the Default Handling and Order Handling Capacity options to safeguard against surges.
What are some of the challenges with Fulfillment by Merchant (FBM)?
While FBM offers more control and flexibility, it has a few challenges. Here are a few of the common challenges to consider.
Challenge #1 Order fulfillment
One of the most notable challenges of Fulfillment by Merchant (FBM) is the responsibility for fulfillment and shipping resting on your shoulders. You must be well organized to meet the demand and keep customers returning.
Challenge #2 Shipping rates & delivery times
Getting the best rates may take some work. Failure to secure the best rates can mean high operational costs and poor margins. Meeting customer expectations with prompt delivery is also crucial. You must find a way to balance costs and on-time order fulfillment.
Challenge #3 Inventory management
Effective inventory management is no small feat. To avoid stockouts, you’ll need to consider software and tools that can come with hefty price tags. Failure to leverage optimal inventory management can mean lost inventory, poor brand reputation, and a loss of sales.
Challenge #4 Customer service expectations
Responding to customer inquiries within the 24-hour timeline can be challenging, especially as your sales increase and your business expands. Be prepared to navigate customer inquiries and returns or risk lowered customer satisfaction and ratings.
Challenge #5 Winning the Buy Box
Win the buy box on Amazon can feel impossible, especially with Fulfillment by Merchant (FBM). You must monitor the success of winning the buy box at every turn. Pricing is one of many factors to consider, but shipping and seller metrics also play a vital role in buy box results.
Challenge #6 Sales surges
Like FBA, FBM sellers must contend with seasonal fluctuations and peak periods, especially during Q4. As your sales surge during these times, you must easily navigate the boost in traffic and orders efficiently. You’ll require a comprehensive strategy to keep up with sales surges, especially during peak times and significant holiday events.
Challenge #7 Learning process
Flipping to FBM can be daunting when you factor in the significance of storage and fulfillment to your bottom line. Learn as much as possible about Fulfillment by Merchant (FBM), talk to other sellers using FBM regularly, and lean on experts versed in both fulfillment options for sound advice.
Fulfillment by Amazon affords you flexibility
While Fulfillment by Amazon remains a convenient option for many sellers, Fulfillment by Merchant is becoming the preferred method. Sellers seeking reprieve from rising Amazon FBA fees also seek ways to exercise greater operational control. Fulfilled by Merchant can offer flexibility and control– two things many sellers notice are missing with FBA.
Navigating the intricacies of order fulfillment can be challenging. Managing shipping plans, maintaining optimal stock levels, providing excellent customer service, and continuously competing for the Buy Box are hurdles to be expected with FBM. Don’t let these hurdles scare you away.
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