What are the essential things you need to know about Amazon FBM, given the massive changes this 2020? Find out more in this comprehensive article.
More and more are using the Amazon FBA because of a lot of advantages that come with it. But here is the thing. It’s not a one-size-fits-all solution. It always depends on your given resource and situation. While the FBA may work for others, the Amazon Fulfillment by Merchant (FBM) may be the better option for you.
Now, what exactly is the Amazon FBM, and how is it different or advantageous as a strategy? Keep on reading to discover why.
What is Amazon FBM?
Amazon FBM entails merchants to upload their products on Amazon, pack and ship orders, store your items, and handle all customer inquiries by themselves or via another third party. So Amazon is primarily your venue for listing while you would have to manage the rest of the tasks.
If you’re familiar with creating a regular Amazon product listing, then you should know that it’s the same process when creating your FBM listing. When you get across the Fulfillment Channel Section, choose the “I will ship the item myself” button. FBM is otherwise known as Amazon Merchant Fulfilled Network (MFN).
When Should You Use Amazon FBM?
Operating an Amazon store will never be a one size fits all scenario though anyone can decide to execute the Amazon FBM. Again, FBM may not work for all sellers.
Consider selling via the Amazon FBM if you market:
- Low-profit items
- Exclusive items with low sales frequency
- Hard to ship items, including fragile and oversized listings
- Small volume products
Also, choose Amazon FBM if you have:
- A third-party cheaper than Amazon FBA that is already integrated into your Amazon store
- Handmade items among your listings. Typical handmade merchants prefer to use FBM to ensure that the orders arrive as expected.
Advantages of Using Amazon FBM
Even though you will have to handle most of the work, various benefits come with using the Amazon FBM. These benefits mainly apply when you have a minimal inventory or new to selling on Amazon.
- Understand how your Amazon business works.
Instead of delegating everything in the hands of a third party, it’s sometimes a good idea to control your business yourself. That holds particularly true if you’re a start-up because it allows you to learn and understand the business’s fundamentals. In that way, you can develop better practices and strategies to ensure that you are steering your business to your identified goals.
Merchants will also have a clearer overall view of how the business operates when they manage customer service, admin, inventory, and profits. That helps them craft better and more practical decisions.
- Freedom to quickly expand your Amazon business.
Merchants who use the Amazon FBM will have full control over their stock levels at all times. Whenever required, they can quickly increase their stocks without dealing with increased storage costs and added shipping fees from Amazon FBA.
- Avoid Strict FBA requirements.
Merchants will have to adhere to strict rules and regulations when using Amazon FBA. However, it can do away various tasks and processes involved in operating a business in the said platform. Since you can set your standard with Amazon FBM, you don’t have to deal with the said issues. You can then focus on shipping orders promptly to ensure your business’ good reputation.
- Generate more profits.
Take note that this is not a given. But here is the thing. If you have negotiated the ideal prices for your products and calculated your other costs, including shipping fees, your profit margins should be bigger. Compared with FBA, you’ll save on storage and fulfillment fees, especially if you’re selling low-profit products with large volumes.
- Direct communication with your customers to build your brand.
Instead of letting Amazon do the needed customer service for you, you would have to do it yourself as an Amazon FBM seller. Although it may seem like a time-consuming duty for you, it’s more advantageous.
Aside from dealing firsthand with all your customers’ positive and negative feedback, you’ll gain a better and more in-depth understanding of their requirements. Even though the interaction can often be negative, you can learn valuable insights regarding your business’s management as a whole. In that way, you can set practices to ensure that your brand becomes famous for its ideal motives.
- No long-term storage fees.
When using Amazon FBA to market slow-selling items, Amazon may charge added storage fees as they would have to let your products stay longer in its warehouses. This is not a problem when using FBM since you would have to hold your stock.
- Consistent sales and shipping
Some Amazon merchants were placed in a disadvantaged position for several months during the COVID-19 pandemic. That’s because Amazon halted the shipping via FBA for products that were considered non-essential.
But because the fulfillment of orders was entirely under their control, Amazon FBM sellers could continue selling and shipping without issues. When another similar issue strikes, Amazon FBM sellers will most likely enjoy efficiency and continuing operations.
Disadvantages of Amazon FBM
As with any other strategy, Amazon FBM also comes with its own set of disadvantages. Here are some of them.
- Picking, packing, and shipping consumes significant time
Handling your fulfillment can take a significant amount of your time, as you would have to allot many hours weekly to your Amazon business. You would have to be hands-on to ensure that all the said operations run smoothly.
- Prepare to allocate more time daily to operate your Amazon business
The above statement can either be a boon or a bane, depending on the situation. But yes, more time spent means more resources lost. But here is the thing. Spending more time in your business allows you to understand the ins and outs, thus, ensuring long-term success. But it’s another story when you get dragged down with customer service issues, general admin, and other responsibilities.
- Shipping fees are often higher
In typical settings, Amazon FBM sellers spend a lower amount as they pack and ship their orders compared to those who use Amazon FBA. But here is the thing. As an FBM seller, your shipping costs can spiral if you don’t make up an excellent deal with your chosen courier even though the storage costs are more economical.
- The merchant handles the customer service
FBA sellers have the benefit of leveraging Amazon’s customer service department that will handle all relevant refunds, returns, and queries. That’s not possible for those using the FBM.
- Ineligibility for Amazon Prime
Those who use the FBM cannot qualify for the Amazon Prime badge, which is an essential factor for one’s listings to rank higher on organic search results. But thankfully, there’s an alternative option you can avail of namely, Seller Fulfilled Prime.
How much Does Amazon FBM Cost?
The subscription fee for a Pro FBM Amazon seller is $39.99 per month. If you’re an individual seller, there is no subscription fee, although you’ll have to pay $0.99 for every item you sell. So to remain effective, it’s a good idea to switch to the Pro package if you’re selling more than 40 units monthly.
Since you are a seller on their marketplace, Amazon charges a referral fee considering that they’re driving customers to your store.
The referral fee is computed from your total sales price’ percentage. Most product categories entail 15% but others range from 6% to 45% depending on the item you are selling. That’s why consider reviewing ahead depending on your listing. You can check the Amazon website for a full disclosure of the seller fees.
Don’t also miss out on your shipping fees as these are essential considerations. Do note that it’s up to you to handle the packaging and shipping of products to your customers on time. Don’t only include the actual packaging and shipping fees but also the time allotted for picking, packing, and delivering the item.
Can You Use Amazon FBM with Amazon FBA?
What many Amazon merchants don’t know is the fact they can use FBM and FBA simultaneously. With this strategy, you can avail of the benefits and features of both. That is called doubling up. It comes in handy, especially to merchants who have an extensive inventory that contains a wide variety of products with different income margins and price points.
So what’s the bottom line? Consider splitting your inventory between FBM and FBA. In that way, your FBM can handle slower selling products while FBA will manage fast-selling products with high margins.
So which is better? Is it FBA or FBM? As we’ve discussed earlier, it depends on the situation, product, and the available resource. Here is the thing. Set clear and achievable goals before identifying which approach is more ideal for reaching them.