Amazon is the largest global e-commerce website with over 3 million active sellers. FBM (Fulfillment by merchant) is one of the order fulfillment methods on Amazon, which means "fulfilled by merchant." In this method, sellers handle order processing and delivery themselves. FBM has its advantages and disadvantages that sellers need to consider when choosing this method.
What is FBM Amazon (Fulfillment by merchant)?
FBM (Fulfillment by Merchant) is a selling method on Amazon where the seller takes full responsibility for fulfilling orders made by customers. Sellers are obligated to handle order fulfillment, product storage, customer service, and returns. They can manage the FBM process independently or collaborate with a third party to provide logistics and warehouse services, such as outsourcing centers. FBM allows sellers to have complete control over the delivery process to the customer, which is an advantage of this selling method on Amazon.
How does FBM Amazon (Fulfillment by Merchant) work?
When Amazon sellers decide to use FBM (Fulfillment by Merchant), they should be prepared for the complete organization of the logistics process, which includes several steps:
Working with the product and its storage
The goods must be placed in warehouse areas, labeled, and entered into the accounting system. If necessary, the goods should be inspected for defects. The storage location of the goods can be any premises, depending on the characteristics of the product. For sellers who are not residents of the United States, it is more convenient to use the services of prep centers (repackaging centers).
Processing, assembling, and packaging the order
After receiving information about the purchase of the product, it is necessary to assemble the order, pack it, and apply the necessary labeling.
Shipping and delivery of the order
In most cases, specialized transport companies handle the delivery of orders. It is necessary to choose a reliable partner for the delivery. It is crucial that the order is delivered intact and without delays.
Returns
If a customer returns a product, it should be accepted, inspected, and, if necessary, repaired for any damages. If the product is in proper condition, it should be returned to the warehouse.
Calculation of logistics expenses
The most important aspect is accounting for the total cost of all logistics stages. The cost should be reasonable. If the expenses for FBM (Fulfillment by Merchant) are higher than the commission charged with FBA (Fulfillment by Amazon), sellers may consider not handling order fulfillment themselves.
When should FBM be chosen then?
For sellers who prioritize the safety of their products, especially during transportation, Amazon FBM is a good choice. This service allows them to have control over every stage of delivery, from packaging to doorstep delivery, ensuring the safety of the products throughout the entire process.
Choosing FBM is also advisable when the seller already has an established system for storing and delivering products to customers. In such cases, using FBM not only proves to be more cost-effective but also allows the seller to maintain control over the delivery process.
Ultimately, utilizing Amazon FBM provides sellers with more freedom and opportunities in managing their business, especially when it comes to selling unique, rare, exclusive products, or large-sized items with specific transportation requirements.
What are the advantages of Amazon FBM for online businesses?
Full control over the business
Sellers can have full control over their business and effectively manage all aspects of inventory, providing them with long-term advantages. This eliminates the need to worry about additional deliveries to warehouses and fulfillment centers, making business expansion seamless.
Expanded opportunities for selling products
Sellers can effectively manage their inventory thanks to a unified product database. This allows them not only to sell their products on Amazon but also on other popular marketplaces, online stores, and even offline retail locations. Furthermore, sellers can have full control over their inventory by storing them in their own warehouses or prep centers, without the need to incur additional costs for shipping.
Promotion of their own brand
Fulfilling customer orders by the seller themselves provides greater control and flexibility in adding gifts, promotional materials, and other marketing materials to each order. Direct interaction with customers also gives sellers a better understanding of their needs, issues, and preferences, which, in turn, helps create a more successful brand. Additionally, sellers gain valuable insights, feedback, and ideas from customers that can help them improve their business.
Higher profit margin
High fees for FBA order fulfillment can significantly reduce sellers' profits. Using FBM allows for cost reduction in terms of fees, opting for more economical storage and delivery options, which is especially relevant for large-sized products with low profitability. This gives sellers more control over their business, the opportunity to achieve higher profit margins, and fewer unexpected expenses, ultimately positively impacting the success and profitability of their business.
Disadvantages of Amazon FBM for online businesses?
Inclusion in the Buy Box and participation in Prime
Gaining access to the Buy Box on Amazon is a challenging task, and becoming part of the Prime program is impossible. Due to limited partnership with Amazon, the products being sold may not meet all the requirements of the Prime program. As a result, more effort will be required to win the Buy Box on Amazon. It is possible, but significantly more labor-intensive compared to using FBA services.
Shipping cost
High shipping costs can discourage a buyer from making a purchase. It is recommended to consider including the shipping cost in the product price and selling it as a product with free shipping. If that is not possible, you can offer the buyer multiple delivery options with different costs and delivery times. This can increase the likelihood of a purchase and customer satisfaction.
Processing a large number of orders
Processing a large volume of orders can be a challenge for sellers. Sellers who use FBM (Fulfilled by Merchant) handle order fulfillment themselves. However, when dealing with a high volume of orders, managing the entire process can be physically demanding. In such cases, the assistance of a fulfillment center in processing and shipping orders may be necessary. At such a center, orders will be gathered, packaged, and dispatched to customers.
Conclusions about FBM on Amazon
The final choice between FBA and FBM may depend on various factors such as product type, sales volume, and company budget.
When making a decision, sellers should consider factors such as product characteristics, weight and dimensions, as well as quantitative sales indicators. It is also necessary to assess the costs of storage, packaging, and shipping. Sometimes, using FBM can be more beneficial, for example, for unique products that are difficult to package and ship through FBA. However, if sellers want to leverage the benefits of the Prime program and reduce order processing costs, then FBA may be a more suitable choice.