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"I have been consistently impressed by their ability to handle our complex needs and willingness to say yes to any challenge. Most importantly, I believe in the character and work ethic of the team."
Mike, Co-Founder & CEO
Amazon is the world's largest e-commerce platform, enabling sellers to list and sell their products to a vast global customer base. Amazon offers various options for sellers to get their orders fulfilled and delivered to customers, including Fulfillment by Amazon (FBA), Seller Fulfilled Prime (SFP), and Fulfillment by Merchant (FBM), among others. In this blog, we will outline how FBM, or Fulfillment by Merchant, works, discuss its benefits and disadvantages, explore alternatives to FBM, and offer some tips for success.
FMB stands for Fulfillment by Merchant, referring to a suite of solutions that help you fulfill customer orders. Unlike FBA (Fulfillment by Amazon), where Amazon manages the inventory and delivery, FBM gives you the freedom to manage your stock levels and process your own orders. You can use FMB for your entire catalog or in combination with FBA to suit your needs.
Amazon FBM is a straightforward fulfillment solution for Amazon sellers. It works exactly like it sounds: the seller fulfills their own orders through self-fulfillment or a third-party logistics (3PL) service provider. Below is a detailed overview of the process.
The first step is listing your products on Amazon by creating an account on Amazon Seller Central. Add products, descriptions, copies, images, and videos to increase the chances of conversion. Since Amazon is very competitive, you’ll need a good strategy to stand out.
Manage your inventory in a self-storage unit or a warehouse. Make sure you keep track of your inventory so that you know when to reorder or manufacture more. You can partner with a 3PL fulfillment center if you don’t have a warehouse or a storage unit.
Implement order processing systems in your warehouse or fulfillment center to streamline operations. If you run a mid-scale or large-scale shop, chances are that you’ll need automated order receiving and processing systems to avoid delays and ship products within the estimated delivery time.
After receiving an order, pack the products using appropriate packaging materials. If you sell fragile items, make sure you pack them in bubble wrap before placing them in a box. After packing, label the box and prepare it for shipment.
Once the order is prepared for delivery, send the products through a reliable shipping provider to the customer’s address. Check that your Amazon selling account is up to date and includes valid return instructions. When a buyer returns a product, Amazon uses your default return address.
Amazon FMB operates on a fee-based structure. These are the three types of fees:
Each sale made is considered a referral. The total referral fee depends on the type of product you sell and its price, ranging from 6% to 45%. Below is a breakdown of the referral fees by product category.
Amazon FBM can be very beneficial for new sellers. Below are some advantages of using Amazon FBM.
You don’t have to pay Amazon for order processing, shipping, and inventory management. You can plan and implement the process with the budget you have.
Amazon FBM offers greater control over such processes as order receiving and processing, inventory management, and shipping and fulfillment. This means you can plan your operations independently of Amazon’s involvement.
Managing your own inventory and order fulfillment gives you greater flexibility in your business operations. You can adapt to changes as your e-commerce business grows more easily.
Amazon FBM is ideal for businesses that sell unique and unconventional products, such as custom-made items. If you sell your products to a niche audience, you can conveniently customize packaging and shipping.
Amazon FBM frees you from relying solely on Amazon for fulfillment and offers the option of using a 3PL provider, which may provide additional features not available through Amazon.
Besides the significant benefits, there are certain disadvantages associated with using Amazon FBM as well.
Since you manage your own inventory and order processing, you are responsible for ensuring that products are appropriately packaged and shipped on time to customers. You also need to manage your marketing operations simultaneously.
Returns are a big challenge for e-commerce businesses. With Amazon FBM, you are responsible for managing and sorting complex return processes yourself.
If you are not experienced in fulfillment, you might face logistical challenges, such as delivery delays, poor return handling, and inefficient order processing.
It may seem that you must choose between two options: either use Fulfillment by Amazon (FBA) or do it yourself. However, there’s a third option as well: Fulfillment by Merchant (FBM) and partnering with an experienced 3PL service provider for seamless operations. Each of these methods has its own set of advantages and disadvantages, which can make it harder to decide what’s right for your business.
FBM is better if you own a large warehouse, want to use your own custom packaging instead of Amazon’s standard boxes, or if you’re selling large, heavy, or temperature-sensitive items. Another reason to choose FBM is if you want your logistics to be handled by a reliable 3PL provider rather than Amazon.
FBA is a good choice if you don’t own a warehouse, don’t have the relevant experience managing orders and returns, or need professional help managing inventory and fulfilling orders. An additional reason to choose FBA is to get a Prime badge from Amazon.
You get many of the benefits of FBA through fulfillment by a reliable 3PL provider, sometimes at a cheaper rate than at Amazon. If you’re looking for all the benefits of working with professionals but also more personal, flexible fulfillment options, this is the choice for you.
If you are using Amazon FBM, below are some tips for success.
Implement a robust inventory management system. Track each inventory item throughout its lifecycle and update your inventory if it’s returned. If you sell perishable items, ensure you keep track of their expiration dates to maintain accurate fulfillment. To avoid losses and liability, follow the first-in, first-out (FIFO) method with these items.
Since FBM enables you to offer your own shipping rates to customers, this is an aspect of e-commerce where you can really stand out from the competition. Offer competitive shipping rates to provide value to customers, especially if you are a new seller on the market.
Using FBM allows you to adjust your shipping times for customers, and it is a good opportunity to outcompete Amazon by offering faster shipping. However, you must ensure that you deliver products within the estimated timeframe to meet your customers' expectations.
Keeping track of inventory includes ensuring accurate product listings. Keep your stock levels and product categories in check, and make sure you update the information in your product listings.
Using Amazon FBM puts you in charge of customer service. Therefore, you need to manage each aspect of the customer journey yourself. A customer may reach out to complain, to ask a question, or to return products, all of which require prompt and professional responses.
Since you are in control of your performance, it is essential to review performance reports and make necessary improvements regularly. Create a list of KPIs (key performance indicators) and metrics to track on a weekly or monthly basis.
Choosing Amazon FBM is a great decision for your business. However, managing inventory and ensuring accurate fulfillment can be a challenge. Partnering with a 3PL to handle fulfillment allows you to participate in operations as needed while leaving the rest to the experts.
Amazon FBM offers excellent control over pricing, shipping time, and inventory management. However, by choosing this option, you will be responsible for fulfillment accuracy and excellent customer service. Even a minor hurdle can escalate into a company-wide issue if you are not optimized for efficiency. That’s where our services can help. Encore Fulfillment is a reliable 3PL provider that will help you reach 99.9% fulfillment accuracy. We offer robust warehousing and inventory management solutions that can boost your sales and grow your business. Contact us today and see how we can help you.
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