Most of the six million+ Amazon sellers use Fulfillment by Amazon (FBA) to store their products at Amazon’s warehouses and ship them through Amazon’s fulfillment centers.
The benefit of using FBA is that Amazon handles picking, packing, and shipping the products. The company also provides customer service and handles returns.
FBA is costly, however, and sellers have minimal control, plus the Amazon FBA inventory restock limit can be stifling.
The good news is, that FBA is not the only route to profitable selling on Amazon. You can overcome these challenges and more by using the Amazon FBM or Fulfilled by Merchant method.
So, what is FBM? When should you use it? What are its advantages and disadvantages? Let’s dive in and answer all these questions.
Fulfilled by Merchant (FBM) is the same as Merchant Fulfilled Network (MFN). Amazon prefers using MFN instead of FBM. Thus, you can use these two terms synonymously.
FMB or MFN is a fulfillment method in which sellers list their products on Amazon. However, the seller manages storage and shipping.
The merchant or the seller is also responsible for providing customer support, which Amazon otherwise handles when a seller uses Amazon FBA.
Also, the sellers must handle their own returns in the Merchant Fulfilled Network approach.
Since storing, shipping, handling returns, and providing customer support is complicated and time-consuming, many sellers offload the responsibility to Amazon by signing up for FBA.
Still, many sellers choose FBM as their preferred fulfillment process.
You are likely aware that when you sign up as an Amazon Seller, you can choose between an Individual or a Professional Selling Plan.
You must select between FBM and FBA during the product listing process.
Here is a step-by-step guide to assist you (assuming that you completed Product Research and you have the products you want to sell):
Start by selecting the marketplace where you want to sell. There are 20 global Amazon marketplaces, and the U.S. marketplace is the largest among them.
I recommend selling in the U.S. marketplace if you are a U.S. citizen. If you are a resident of the UK or EU, you should select Amazon’s EU marketplace, which covers the UK, France, Germany, Poland, Italy, Netherlands, and Spain.
If you live in any other country, try selling in the U.S. marketplace and your country’s marketplace (if Amazon has one).
Most sellers on Amazon are Private-Label sellers, i.e., they sell products under their brand name. With a private-label business, you will make a long-term asset you can sell later.
Start by registering your business as a corporation or an LLC.
You can also choose a sole proprietorship that allows using personal tax ID. However, depending on your country or state, you may need to file a DBA (Doing Business As) form and give your business a name.
After registering your business, visit Amazon Seller Central and sign up.
Keep the following following information handy:
- Business info (name, address, contact)
- Email ID
- Credit card
- Phone number
- Tax ID (state and federal)
Feed the information during account creation and select between Individual and Professional Selling Plans.
For the Professional Plan, you’ll pay $39.99 a month with the following benefits not available with the Individual Plan:
- List products in multiple categories
- Sell more than 50 items a month
- Several professional tools to manage your business
Step 4: List Your Products
Once Amazon approves your account, you can start listing your products. There are two options:
Sell a product that already exists on Amazon:
Some other sellers may be selling the exact or a similar product that you want to sell. So, there will be a core listing. In that case, go to the existing listing and click on the button – ‘Sell on Amazon.’
Now, provide the following information:
- Your selling price.
- The number of units you have (quantity).
- Product condition – new or used.
- Preferred fulfillment channel – FBA or FBM.
Sell a product that does not exist on Amazon:
If you want to sell a new product that no other seller offers on Amazon, you must create a new listing.
Follow the steps below:
- Click on ‘Inventory’ from the Seller Central Dashboard.
- Click on ‘I’m adding a product not sold on Amazon.’
- Enter product details.
Now, wait for Amazon to approve it. After approval, the product will appear in Amazon’s Catalog. The process can take a few minutes to a few hours.
You must fulfill an order once someone buys your product on Amazon. If you select Amazon FBA, you’ll first send your inventory to Amazon fulfillment centers. From there, Amazon will ensure that the customer receives the product.
But if you select FBM (or MFN), you’ll ship the product directly to the customer, handle customer service, and process returns.
Amazon will set the shipping rates for all your products. You must ship the orders even if shipping costs exceed the shipping credit, so you’ll need to ensure you set the prices for your items in a way that guarantees profits.
With the Professional Plan, you can set shipping rates and can customize shipping templates for specific international and domestic regions, including handling time and transit time.
You can also customize the shipping cost per item, per weight, and by order.
You are free to create multiple shipping templates and map them to your specific offers to match your shipping logistics potential for different types of products.
You can find the option to assign shipping templates in the Manage Inventory dropdown menu from the Amazon Seller Central Account Dashboard.
Amazon FBM -What Are the Advantages and Disadvantages?
Faster business expansion flexibility:
With FBM, you can bypass some of the FBA product restrictions of Amazon and add and sell in more product categories than available to FBA sellers.
Avoid other FBA requirements:
FBA has stringent rules for labeling and shipping to Amazon warehouses. With FBM, you can avoid those requirements entirely.
Profit maximization with better strategies:
FBM has lower fees than FBA, which helps to increase your profit margins. You can implement strategies like testing multiple 3PLs to minimize shipping costs and maximize profits.
Brand building with direct customer interaction:
With FBM, you’ll provide customer support independently. Responding to customer service inquiries will allow you to interact with Amazon customers. You can quickly build your brand with excellent customer service and direct contact.
Save on storage fees:
You will manage your own inventory. You can save on storage fees if you keep your products at home or negotiate a good rate with a stand alone fulfillment company. Also, you can avoid the long-term storage fees that Amazon charges for slow-moving products.
More control over inventory:
There are some inventory restrictions with the FBA model. This restriction can hamper your business growth. Even if you use 3PLs, you can store as much or as little inventory as you need in FBM. Moreover, you can use the same stock for offline and online sales channels.
Amazon uses a lot of plastics, which can hurt your business image, especially if you are positioning yourself as an environmentally friendly brand. With FBM, you can avoid this issue and control your own packaging material.
Streamlining your Amazon business:
You will be responsible for streamlining your business. Time management will be an issue because you need to spend time picking, packing, and shipping.
You could use the time for other essential operations like product research, listing optimization, customer service, etc.
However, you can avoid the problem with 3PLs.
Amazon has warehouses all over the country, which gives FBA buyers an advantage no matter where they are. Amazon FBM sellers don’t have that advantage and can incur high shipping fees depending on location.
Using a 3PL service is a solution because they usually have nationwide warehouses. Also, such services ship products in bulk, effectively reducing shipping charges.
Prioritize customer satisfaction:
One problem with Amazon FBM is providing customer service. You’ll need to invest time and money to build the capacity if it’s not your strength or you lack customer service overall.
If you outsource customer service to a third-party provider, you’ll run the risk of losing control of the customer experience, damaging your brand image.
By prioritizing customer satisfaction, you’ll likely have less time for other tasks.
Overcoming Amazon Prime ineligibility:
Losing the Amazon Prime badge is a disadvantage of the Fulfillment by Merchant model. Many customers prefer buying Prime-eligible products. So, you need to find alternatives to Amazon Prime.
It will be challenging to win the Buy Box due to the absence of the Prime badge.
The best option will be to use 3PL shipping services that offer Prime-like fulfillment even for non-essential products (if that’s what you are selling).
The Seller Fulfilled Prime is an Amazon Prime program that allows an FBM seller to deliver directly to domestic Amazon Prime customers straight from their warehouse without using Amazon’s fulfillment network.
Simply put, FBM sellers will be eligible for the Prime badge provided they commit to guaranteed two-day delivery without charging extra to the Prime customers.
There are very stringent requirements, which are,
- You must offer Premium Shipping options.
- You must ship 99%+ orders on time.
- Your order cancellation rate must be less than 0.5%.
- For at least 99% of your orders, you must use Amazon Buy Shipping Services. This service allows sellers to buy shipping labels from Amazon-approved carriers.
- Your shipping method must support weekend pick-up and delivery.
- For standard-size products, you must provide nationwide delivery coverage.
- You must fulfill 1- and 2-day delivery promises.
- You must use Amazon-supported Seller Fulfilled Prime Carriers to deliver orders.
- You must agree to Amazon’s returns policy.
- You must allow Amazon to deal with all customer service inquiries.
Amazon has multiple options to fulfill orders, and they include:
- FBA – Fulfilled by Amazon
- SFP – Seller Fulfilled Prime
- FBM – Fulfillment by Merchant
- MCF – Multi-Channel Fulfillment
Amazon FBA sellers send their stocks to Amazon’s warehouses. Amazon then picks, packs, and ships the products charging FBA fees. Sellers also get the Prime badge.
This fulfillment option is for Amazon sellers who use the Fulfilled by Merchant framework but satisfy specific conditions to earn a Prime badge.
With SFP, Amazon sellers don’t need to ship their products to Amazon’s fulfillment centers. Instead, they can ship the products directly from their warehouse.
But the Amazon sellers must buy and use labels from approved carriers, use 3PL or in-house fulfillment with nationwide coverage, keep 1- and 2-day delivery promises, and allow supported Seller Fulfilled Prime Carriers to collect and deliver orders.
FBM sellers use in-house or 3PL fulfillment services to ship products directly from their warehouses. The sellers handle returns and provide customer service. FBM fees are lower than FBA fees, leading to higher profit margins.
The Multi-Channel Fulfillment option uses Amazon’s warehouse for product storage and order fulfillment for both the brand’s and Amazon’s website. MCF also supports other marketplace websites.
MCF offers next-day, 2-day, and standard 3-to-5-business-day delivery.
For MCF, you must sync your eCommerce website, app, and other sales channels with Amazon. By such integration, Amazon will receive orders placed on your other channels and forward them to the warehouse holding your inventory.
MCF fees for orders placed outside Amazon’s website are lower than FBA fees but depend on order size and weight. Amazon MCF charges the standard FBA fees for orders placed through Amazon’s website.
Top Tip for Saving Money on Packaging.
Here’s a tip to help you save money on cardboard boxes and other supplies for shipping your goods if you intend on using Amazon FBM. By following these steps, you can get better-than-public pricing using Uline and save anywhere from 10-25% on your purchases, depending on the item.
First, go to your “Order History” on Uline and make a note of the item numbers (S-XXXXX) of anything you order in large quantities and the largest quantity you’re willing to order. This information will help you get the best price.
Next, log in to your Uline account and click on “My Account” > “Quoted Items”. If there aren’t any quoted items in your possession yet, click “Request a Quote” and for each item you wish to purchase, key in the S-XXXX item number and the quantity.
Uline will usually get back to you the same day with a special price just for you. The best part is that you don’t have to place an order right away. They’ll update your account with the pricing that you can use whenever you’re ready.
This method can save you anywhere from 5-25% off the maximum tier price, depending on the item.
For further savings, call and ask Uline to apply ‘Last Column Pricing’ to your account. This means that whether you buy one or one thousand, you’ll always get the maximum volume price on everything.
Combining the aforesaid tips can result in significant savings, especially for high-volume eCommerce businesses.
Both FBM and FBA frameworks have advantages and drawbacks. FBA sellers enjoy better ranking on Amazon search results, automatically become eligible for Prime shipping, and have a better chance of winning the Buy Box.
FBM sellers must fulfill Seller Fulfilled Prime conditions for Prime shipping and the chance to win the Buy Box. These shortcomings of FBM give FBA sellers an edge.
But FBA sellers don’t own customer data. Amazon does! Amazon uses this data to launch and sell competing products as a private label seller (Amazon Basics).
With FBM, sellers enjoy complete control over inventory and customer satisfaction while paying lower fees. If these factors matter for your business and brand building is vital, FBM is a considerably better choice.
However, with FBM, the onus will be on you to fulfill customer orders, handle returns, and provide customer service. All these tasks consume time you could otherwise spend on product research, inventory acquisition, and other vital tasks.
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Who should I use to cut shipping costs when doing FBM?
Our recommendation is to use Unishippers. They get preferred rates with the major carriers as they negotiate on behalf of many pooled partners. You can expect to cut your shipping costs by around 7%.
What happens when my products get damaged during delivery?
You can expect 2-5% of our products to get damaged by customers or shipping carriers. Create a standard operating procedure (SOP) to file MFN damaged product reimbursement claims with each carrier easily. You often get reimbursed by UPS/FedEx/etc. more than you would with Amazon.
Understanding Amazon FBM – Summary
Understanding Amazon FBM (Fulfillment by Merchant) is crucial for Amazon sellers looking to optimize their business operations and maintain control over their inventory and shipping processes.
By choosing FBM, sellers can benefit from reduced fees, increased profit margins, and a more personalized customer experience. However, it also comes with increased responsibility, as merchants need to ensure timely order fulfillment, effective customer service, and adherence to Amazon’s strict performance metrics.
As the e-commerce landscape continues to evolve, staying informed on the various fulfillment options is essential for businesses aiming to achieve success in the competitive online marketplace.
Ultimately, Amazon FBM could be an advantageous choice for sellers who are confident in their ability to manage order fulfillment and customer service while still meeting Amazon’s high standards for performance.