As an Amazon seller, you have several options for delivering your products to your customers. You can either organize shipping on your own or hire Amazon to store and deliver it – this last option is called Amazon FBA (Fulfillment by Amazon).
Even though Amazon FBA is very popular, there are many benefits of Amazon FBM that you can take advantage of as an Amazon merchant. In this article you will find all the important information about Amazon FBM, including the pros and cons and which of the shipping methods you should choose.
What Is Amazon FBM?
Amazon merchants have two options for shipping products: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). With the FBA service, Amazon handles storage, shipping, returns, and customer service. It is currently the more popular fulfillment method.
However, many Amazon Sellers prefer Amazon FBM. They warehouse, package, and ship their products on their own without any service provided by Amazon.
According to a survey by Jungle Scout, two-thirds of Amazon merchants use FBA as their shipping method and one-third use FBM. Likewise, there are Amazon Sellers that take advantage of both options.
How Does Amazon FBM Work?
With Fulfillment by Merchant (FBM), Amazon sellers are responsible for managing their own order fulfillment, either by shipping products themselves or using a third-party fulfillment service, whenever their items are sold on Amazon.
Amazon FBM is typically the only fulfillment method available to new sellers as FBA requires an approval process and proven sales. Small sellers can typically manage their own order fulfillment, while larger sellers often benefit from using the extensive logistics network provided by Amazon to handle their orders.
Ready to get started with Amazon FBM? The following steps will provide a broad overview to help you navigate the entire process.
- List Your Products on Amazon: Start by creating an account with Amazon Seller Central and listing your products. Be sure to include high-quality images, videos, and relevant keywords to boost conversions. Implement a smart Amazon marketing strategy to stay competitive.
- Warehouse Your Products: Consider using nearby fulfillment centers to strategically store your products for faster shipping and reduced costs. For smaller businesses, a storage facility or even your home can serve as a temporary solution for warehousing.
- Ship Orders Promptly: After receiving an order notification, ensure the product is shipped within the customer’s selected delivery timeframe. You can purchase shipping labels through Amazon or your chosen shipping service, but always provide order tracking information to your customers.
Tools for Amazon FBM Sellers
If you choose the FBM option, you must use the right tools. The following tools can help you optimize your marketing strategy, perform competitive analysis, and increase your sales on Amazon:
- Helium 10: This tool offers a comprehensive suite of 22 tools, including product research, keyword analysis, and listing optimization tools. Helium 10 is known for its versatility and cost-effectiveness.
- Jungle Scout: Jungle Scout is a powerful product research tool that helps you find profitable niches and products. It offers insights into revenue estimates, competitive analysis, and key sales metrics.
- AMZScout: AMZScout is another product research tool that helps you find products that can be successful on Amazon. It provides data on sales, rankings, price trends, and more.
Choosing one of these tools can make a significant difference in your success as an Amazon FBM seller. Helium 10 offers the most features and is inexpensive compared to its competitors.
The software suite provides a total of 22 different tools. The best part is that you can sign up for Helium 10 for free. You can also get 20% off your first 6 months at Helium 10 through our link:
How To Select FBM As Your Shipping Method
The FBM shipping option is set by default. Accordingly, you don’t have to make any changes if you are an Amazon seller.
You can use Seller Central to enable or disable FBM for individual product listings. However, it is best to use the “Add Product” option to create a new SKU code. Then select FBM for the respective product.
This approach will make your work much easier and keep your seller account clear. Here’s a summary of what’s involved when getting started with FBM.
- Create an Amazon Seller Account and add your products.
- Set up at least one camp. This warehouse acts as your fulfillment center. If you have multiple warehouses, decide on the optimal distribution of goods to minimize delivery times and shipping costs.
- Ship products on time. Ensure your product arrives on time and adheres to the customer’s selected delivery option (estimated delivery time shown on Amazon). Customers should also have tracking information for their shipments.
- Provide the information for returns and complaints. Once a customer submits a return request on Amazon, they will automatically receive a completed return slip with your business address. Make sure this address is correct.
- Amazon products must be marked with the FNSKU code.
How Much Does Amazon FBM Costs?
Here are the fees that apply to FBM sellers:
- Referral fees
- Amazon Seller Account Fees
- Administrative fees for reimbursement
- Opportunity cost
1. Referral Fees
Referral fees apply once you sell a product through Amazon. They differ according to the product category and are calculated based on a percentage of the sales price.
Important:
Amazon Handmade sellers are subject to a 12% sales charge.
2. Fees for the Amazon Seller Account
Amazon offers two different accounts for Amazon merchants. You can register as an Individual Seller or as a Professional Seller. You can use the Individual Seller Account without a flat monthly fee, while the Professional Seller Account costs €39 (about $42) per month.
However, with the Individual Seller account, you must pay Amazon €0.99 (or $1) for each sale. So this only makes sense if you sell less than 39 products monthly. Otherwise, the Professional Seller Account is cheaper.
The Professional Account offers additional advantages through advertising opportunities.
3. Administrative Fees for Reimbursement
If you need to issue a refund to a customer, Amazon will reimburse you for the referral fee. Amazon charges a handling fee of €5 (about $5.50) or 20% of the referral fee – whichever is lower.
4. Opportunity Costs
Opportunity costs are losses that result from not taking advantage of existing opportunities. Assuming you have to do the storage, packing, and shipping yourself, it will take about 10 hours per month.
At an hourly rate of €20 (approx. $22) per hour, you would lose €200 (approx. $220) per month. You also have to pay for storage, packing, and shipping even though you do these tasks yourself.
You need to take these costs into account when deciding between Amazon FBA and FBM.
FBM vs. FBA
In e-commerce, market conditions are always evolving. So whether you’re new to Amazon or a seasoned seller, choosing between FBA and FBM can be challenging. To help you decide, we’ve outlined key factors to consider when determining the best fulfillment option for your business.
When Should You Consider Amazon FBA?
Amazon FBA may be a good choice for your e-commerce business if you:
- Need warehousing for inventory storage and order fulfillment*
- Are looking to outsource fulfillment and save time*
- Don’t have in-house customer service or returns management*
- Want the Prime badge
*These benefits are also achievable through FBM when you outsource fulfillment to a logistics provider.
When Should You Consider Amazon FBM?
Amazon FBM may be better for your brand if you:
- Have a warehouse
- Ship large, heavy, and/or temperature-sensitive items
- Want a responsive and dedicated fulfillment partner
- Use packaging with your business’s branding (rather than Amazon-branded standard boxes) or are looking to curate the unboxing experience
- Don’t want to deal with complex pricing structures and extra fees
Amazon FBM drawbacks you need to know
There can be some downsides to using Amazon FBM, particularly if you don’t have an experienced fulfillment partner. Some of the main challenges include:
- Learning curve: Amazon is the best at fulfilling Amazon orders, so giving up its perfect process may be tough. Additionally, FBA sales do not always translate to Amazon FBM sales.
- No Amazon Prime badge: Amazon FBM sellers must be prepared to drive organic traffic without the Prime designation that helps them succeed on the Amazon marketplace.
- Spend more time on fulfillment (if self-fulfilling): If you’re managing your Amazon FBM orders, you can spend a lot of time packing boxes. There are hidden fees in self-fulfillment including the opportunity cost of not completing higher-value tasks.
- Costs of warehousing and in-house fulfillment (if outsourcing): Leaving outsourcing fulfillment to the pros can be costly, especially if you have a lot of inventory sitting and not selling.
Advantages and disadvantages of Amazon FBM
Amazon FBM merchants are responsible for shipping their Amazon products themselves. This has some advantages and disadvantages. We have summarized them in the following table:
Pros | Cons |
---|---|
You have full control over the delivery of your products | FBA products are usually preferred by Amazon and are often placed before FBM products on the Amazon SERPs (=> your product gets less attention from Amazon customers) |
Fewer Amazon fees, as you are only really tied to the monthly subscription fee and the referral fees | FBM products have a lower chance of winning the Amazon Buy Box |
Higher margin due to lower fees | You lose your Amazon Prime status (but can use seller-fulfilled Prime) |
You have to follow fewer guidelines than retailers who use Fulfillment by Amazon | You bear the costs for the fulfillment of the logistics partner |
You can ensure that your goods are properly packed and shipped (Amazon employees may lack the know-how) | You are responsible for the entire order processing process yourself |
Amazon FBA vs. FBM – Which Should You Choose?
The decision between Amazon FBA and FBM is an important one that must be carefully considered. Both fulfillment methods have pros and cons, and your choice can have a significant impact on your business results.
When you choose Amazon FBA, you benefit from the convenience of the Amazon network, which handles warehousing, shipping, and customer service for you. This can be especially beneficial if you sell large quantities of products or delicate goods. However, there are higher fees and requirements associated with Amazon FBA.
In contrast, Amazon FBM offers greater control over the shipping process, which is useful if you have special packaging requirements or offer personalized services. It also allows for better inventory management, especially if you have products with seasonal demand.
To make the right decision, consider the things below:
- Cost analysis: Compare the costs of FBA and FBM for your products and sales volumes. Note that FBA usually incurs higher fees.
- Product type: Consider your products. Sensitive or personalized items might benefit from FBM, while common products with high demand might be more profitable with FBA.
- Scalability: Think about your long-term goals. If you plan to scale your business in the long term, Amazon FBA might be a better choice.
- Availability: Make sure you have the resources and infrastructure available for Amazon FBM if you decide to do it.
- Market analysis: Investigate other sellers in your niche and their fulfillment methods to determine which one is right for you.
Your final choice will depend on your specific circumstances and business goals. Many successful sellers combine both methods to leverage the advantages of each. Keep in mind that your strategy can evolve over time to align with your business’s changing needs.
Amazon FBM is ideal for sellers with small print runs or low-profit-margin products. If you only sell a few units per month, the costs of Amazon FBA could erode your profits, making Amazon FBM a more cost-effective option.
However, scaling your business with Amazon FBM can be more challenging than with FBA. Amazon FBA products are often favored by Amazon and have a better chance of winning the Buy Box. Plus, with Amazon FBM, you’ll need to manage the logistics of order fulfillment yourself.
Beyond shipping options, it’s crucial to evaluate your product costs. Your profit margin must be high enough to ensure profitability. Use an Amazon FBA calculator to determine which approach offers the best financial outcomes for your business.
The main difference between FBM and FBA is who is responsible for storing and shipping the products. With Amazon FBA, Amazon takes care of these tasks. With Amazon FBM, the seller is responsible for them.
Amazon FBA offers convenience and scalability because Amazon handles warehousing, shipping, and customer service. Products with FBA also have a higher chance of being placed in the Amazon Buy Box.
Amazon FBM offers greater control over the shipping process and can be more cost effective, especially for specialty products or low inventory. It also allows the seller to maintain Prime status.
The choice between FBA and FBM depends on a number of factors, including product type, sales volume, storage capabilities and long-term goals. It is important to perform a cost analysis and a market analysis to determine which option is suited to your needs.
Amazon FBA charges storage and shipping fees, as well as monthly subscription fees. There are no storage fees with FBM, but there are sales commissions and monthly subscription fees for the Professional Seller Account.