There are many opportunities when selling via Amazon, yet there are certain considerations when making a decision on which fulfillment approach is better to use. Whereas many sellers opt for letting Amazon handle their inventory and deliveries, some choose the other way round and do everything on their own via Fulfilled by Merchant.
Fulfilled by Merchant allows sellers to have full control over their inventory, packaging, shipping, and even customer service. With this approach, sellers can save money, build a stronger brand image, and stay independent of Amazon's fulfillment service.
However, is this fulfillment option appropriate for your business? Find out about Amazon FBM and what kind of sellers will find it beneficial in this article.
What Is Fulfilled by Merchant (FBM)?
Fulfilled by Merchant (FBM) is an Amazon fulfillment solution whereby the seller handles the order fulfillment processes entirely on his/her own or via the use of a third party logistics (3PL).
Contrary to Fulfillment by Amazon (FBA), in which Amazon takes care of storage, packing and shipment of the items to customers, in FBM,
- Sellers handle the stocking of their goods
- They manage inventory and stock levels
- They pack and ship orders
- They provide tracking information
- They offer customer support services and handle returns
Simply put, in FBM, the seller has total control over all activities in Amazon.
FBM is suitable for business owners who require:
- Control over inventory and order fulfillment process
- Independence from Amazon's warehouses
- Customized packaging and branding
- Cost savings
How Does Amazon FBM Work?
Learning the Amazon FBM is crucial when you operate an online business using Amazon. It goes as follows:
1. Create Listings and Maintain Inventory
The first step would be creating your Amazon seller account and posting your products. This could include posting products to an existing listing or making new listings for different products.
Inventory here will not be maintained within the Amazon warehouse but will remain external to their facility.
2. Processing of Orders
Once the customer makes an order, Amazon informs the seller via Seller Central.
Hereafter, the seller has to:
- Select the requested product
- Package it carefully
- Create shipping labels
- Ship it through the carrier of choice
Giving immediate information about the tracking number of the product is important for maintaining good customer relations.
3. Customer Service & Returns
In the FBM model, it becomes the duty of the sellers to handle queries from customers and manage product return policies.
Responding swiftly helps boost seller ratings.
4. Track Performance Metrics
Amazon carefully monitors the performance metrics of sellers to make sure that consumers enjoy a superior shopping experience.
Key performance metrics include:
- Order Defect Rate (ODR)
- On-Time Delivery Rate
- Tracking Accuracy Rate
- Late Shipment Rate
Achieving high performance metrics enables sellers to be in good standing and increases their visibility on Amazon.
What is the Difference Between FBM and FBA?
The selection between the two models is based on individual preferences depending on goals and resources.
Control:
FBM enables full control over product stock, packaging, and shipment. On the contrary, all these matters are controlled by Amazon in the FBA model.
Financial Aspects:
FBM implies zero cost of storage and order fulfillment at Amazon. In the FBA model, the customer should pay for storage and fulfillment.
Branding:
FBM allows using custom packaging, promo items, and brand items while FBA orders are usually packed according to Amazon standards.
Coverage of Customers:
Items that use FBA services automatically get Prime delivery. Sellers using the FBM channel need to join the Seller Fulfilled Prime program offered by Amazon in order to enjoy Prime shipping.
Efficiency in Operation:
FBM involves sellers handling their own logistics, whereas FBA makes operations easier due to outsourcing to Amazon.
Pros & Cons
Both strategies have strengths and weaknesses, but FBM is favored more than FBA.
Benefits and Challenges of Amazon FBM
Any fulfillment service has its strengths and weaknesses.
Main Pros of FBM
Reduced Fulfillment Costs
As products are stored and shipped by sellers, they pay less than when using Amazon's fulfillment services.
Control Over Operations
Sellers can decide on shipping providers, manage inventory, and streamline the process for themselves.
Branding Possibilities
With FBM, businesses have more freedom in creating a branded unboxing experience.
Versatility in Products
FBM is often suitable for larger, heavier, fragile, and seasonal products that can be easily handled and cheaper managed under the FBM program.
Challenges Associated with FBM Program
Increased Responsibilities
In the case of FBM, sellers have to worry about managing inventory, shipping, customer care, and handling any returns on their own.
Higher Investment in Time
Taking care of daily tasks becomes time-consuming, particularly if you start getting many orders.
No Guaranteed Prime Eligibility
Standard FBM listings do not enjoy the benefit of having prime status and thus might not convert customers into buyers.
Seller Performance Expectations
Shipping items late or delivering bad customer experience could result in reduced ratings.
Who Should Choose Fulfilled by a Merchant?
Even though FBM might not be an optimal approach for all merchants, there are specific sellers who benefit greatly from its use.
You should choose FBM if:
- You already have a warehouse or logistical system in place
- You sell heavy or fragile goods
- You want full control over your packaging and marketing
- You run a niche business
- You wish to avoid fulfillment costs on Amazon
For these kinds of sellers, using FBM proves to be highly beneficial.
Final Words
Merchant fulfilled Amazon is one of the highly efficient options on Amazon where sellers can have full control over the business. Though this strategy demands high involvement of sellers in operations, there are many benefits like lower prices, flexibility, and increased branding.
Efficient inventory management, good shipping services, and high-quality customer service are the three important aspects of success under the Merchant fulfilled Amazon program. In case you can successfully do this, Merchant fulfilled Amazon becomes an important strategic tool for you.
