A Breakdown of Amazon FBM
Selling products on Amazon can be a profitable and adaptable business opportunity, providing a significant income stream for numerous sellers. Amazon a range of fulfillment choices to suit various business requirements, with two main methods for selling and fulfilling orders. While Fulfillment by Amazon (FBA) is well-known, there is another option available. Fulfillment by Merchant (FBM) is a popular selection among sellers. With FBM, businesses have more control over their operations, but also bear more responsibilities. This blog post will delve into the details of Amazon FBM while also comparing it to Amazon FBA, offering insights and recommendations to enhance efficiency and profitability in your online retail journey.
What is Amazon FBM
Amazon FBM is a method of fulfillment in which the seller takes care of all aspects of fulfilling orders on Amazon. The seller can do this themselves or use a third-party logistics provider. Unlike Amazon's FBA service, FBM puts the sole responsibility on the merchant to handle these tasks independently. This involves storing and managing inventory, processing orders, managing returns, and offering customer support.
Amazon FBM Fees
Amazon FBM fees are the costs that sellers incur when they choose to handle shipping and delivery themselves. These fees can vary significantly depending on the seller's shipping options, but there are some standard charges to consider:
The Pro Plan:
Monthly Price: $39.99 per month
Per Item Selling Fee: No fee per item
The Individual Selling Plan:
Monthly Price: No monthly fee
Per Item Selling Fee: $0.99 per product unit sold
Referral Fee: Amazon deducts a referral fee each time a product unit is sold. This fee is a percentage of the total sales price and typically 15% for most categories. It can vary from 6% to 45%, depending on the product category.
Shipping Fee: FBM sellers must cover shipping fees separately.
Steps to Sell Through Amazon FBM
Starting your Amazon FBM journey is very straightforward:
Pick Your Sales Strategy: Choose how you want to sell, whether it be online arbitrage, retail arbitrage, wholesale, or private label.
Research Your Products: Do thorough research to find the best products to sell. Decide if FBM is the right choice for each product.
Create an Amazon Seller Central Account: Make an Amazon Seller Central account to establish your presence as a seller on the platform.
Detailed Product Listings: Create detailed product listings with all the necessary information. Use strategies to boost visibility in searches and attract potential buyers.
Customize Your FBM Account: Set up and personalize your FBM account for smooth operations and efficient order management.
What Makes Amazon FBM an Attractive Fulfillment Option?
Better Understanding and Control: Sellers maintain a sense of control over their business operations. By independently managing inventory and numbers, they gain a comprehensive understanding of their business, which leads to long-term success.
Freedom to Operate: Self-fulfillment gives sellers the freedom to run their business as they choose, providing better control over inventory levels. Expanding an Amazon business becomes easier without the need for additional shipping to warehouses and fulfillment centers, thus avoiding increased FBA fees.
Integrated Online and Offline Retail: It is feasible for sellers to manage both online and offline retail stores with a single inventory. They have complete control over their inventory stored in chosen warehouses, allowing them to use the same stock for offline retail without incurring extra shipping or delivery charges.
Higher Profit Margins: By avoiding FBA fees, sellers can achieve better profit margins. They can save on fulfillment fees, choose cost-effective warehouse options, and reduce shipping costs, which is particularly beneficial for larger products with low-profit margins.
Direct Customer Interaction: FBM sellers have the advantage of interacting directly with their customers, gaining valuable insights into their needs and feedback. This direct involvement helps build a strong independent brand and improves business strategies based on customer interactions.
Reduced Impact from Policy Changes: Amazon frequently updates its fulfillment pricing and policies, including long-term storage fees. FBM sellers are not affected by these changes, avoiding the associated hassles and costs.
Simplified Paperwork: FBM sellers face less paperwork, especially when dealing with non-sales-tax states. They are free from Amazon's fulfillment taxations and the extensive paperwork required for FBA sellers.
Efficient Handling of Oversized Products: Amazon charges higher fees for bulky or heavy products. FBM allows sellers to handle these items more efficiently by adjusting packaging, using different carrier options, or partnering with others.
Drawbacks of Amazon FBM
There are several potential drawbacks to using Amazon FBM, especially if you lack an experienced fulfillment partner. Some of the main challenges faced by FBM sellers include:
Learning Curve: Amazon is really good at getting orders to customers quickly and efficiently, but trying to replicate their process can be quite challenging. It's not always easy to achieve the same level of success with FBM as you would with FBA.
No Amazon Prime Badge: FBM sellers don't have the advantage of the Prime badge, which can really help drive sales on the Amazon marketplace. They have to rely on attracting organic traffic instead.
Time-Consuming Fulfillment: Managing FBM orders yourself can be a real time drain. There's a lot of packing and shipping involved, and it can take up a significant amount of your time. Plus, there are hidden costs involved, like the opportunity cost of not being able to focus on more valuable activities.
Warehousing and Fulfillment Costs: If you decide to outsource your fulfillment, it can end up being quite expensive, especially if you have unsold inventory. You'll have to pay for warehousing, and third-party logistics providers might charge extra for storage or specific inventory management services.
Variable Cost Structures: Different cost structures can lead to higher expenses in certain situations. For example, if you need to meet a two-day delivery window, shipping costs can add up. Running your own warehouse also comes with additional costs like utilities, HR, and maintenance.
FBA vs FBM
Amazon FBA is a convenient service that lets sellers hand over their order fulfillment tasks to Amazon. Sellers simply send their products to Amazon's fulfillment centers, and from there, Amazon takes care of everything - storage, packaging, shipping, and even customer service, including returns. With FBA, sellers can tap into Amazon's vast logistics network and offer Prime shipping to customers, which not only builds trust but also has the potential to increase sales. This service allows sellers to focus on other important aspects of their business, like sourcing products and marketing, while Amazon efficiently handles the logistics of delivering products to customers.
Amazon FBA Fees
As an alternative to Amazon FBM, Amazon FBA service includes a different fee structure where Amazon handles all shipping and delivery logistics. Here are the key components of Amazon FBA fees:
1. Monthly Storage Fees: Charged based on the volume of inventory stored in Amazon's fulfillment centers. Rates vary by season:
January - September: $0.75 per cubic foot
October - December: $2.40 per cubic foot
2. Fulfillment Fees: These fees cover the cost of picking, packing, shipping, and handling customer service. They vary based on the product size and weight. For example:
Standard Size (1 lb or less): $2.50 per unit
Oversize (over 1 lb): $8.26 + $0.38 per lb above the first lb
3. Referral Fee: Amazon deducts a referral fee for each product sold, similar to FBM. This fee is a percentage of the total sales price, typically around 15%, but can range from 6% to 45% depending on the product category.
4. Long-Term Storage Fees: Additional fees for inventory stored in Amazon's fulfillment centers for more than 365 days. These fees are $6.90 per cubic foot or $0.15 per unit, whichever is greater.
Choosing Between FBA and FBM: Which is Better?
The choice between FBA and FBM really comes down to the specific situation of each seller, the products they're selling, and a bunch of other factors. FBM gives sellers more control over their business and can help save on extra expenses, but it also means taking on important responsibilities like shipping, handling refunds, keeping track of orders, and managing customer service. On the flip side, FBA makes things easier by letting Amazon handle most of the logistics, so sellers can focus on other important parts of their business. In the end, the best option depends on the seller's business model, available resources, and what they prioritize.
In conclusion, selling products on Amazon can be a profitable and adaptable business opportunity, providing a significant income stream for numerous sellers. Amazon offers a range of fulfillment options to suit various business needs, with two primary methods for selling and fulfilling orders: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). While FBA is well-known for its convenience and efficiency, FBM remains a popular choice among sellers who prefer greater control over their operations. FBM allows businesses to manage their inventory, shipping, and customer service independently, but it also entails more responsibilities. Conversely, FBA enables sellers to leverage Amazon's extensive logistics network, offering Prime shipping and handling most logistics, which simplifies the process but comes with additional fees. Best of luck selling Amazon FBM! You got this!
Thank You,
Commerce Canal Team
Amazon Prime Day 2024 is officially upon us! Read all of the updates and important information about Prime Day 2024, simply by clicking here.
Commerce Canal is a leading Amazon Agency and Walmart Agency. Additionally, we offer clients a vast selection of partnerships and services for all major eCommerce platforms. To view our partners, click here. To get in contact with us, click here.
In need of the newest analytics and marketing dashboard? With our partner Purvey.ai, all of your eCommerce data is simplified and centralized. To sign up for a FREE trial, click here. To see the list of integrations Purvey.ai offers, click here.