You don’t have to be a pro seller to start Amazon FBM. People with 0% selling experience can start Amazon FBM and make money.

Around 11% of sellers use Amazon FBM only to sell their products in 2022. Let’s walk through the step-by-step guide to starting your Amazon FBM business.

Amazon has a whopping 37.8% market share of retail e-commerce companies in the US as of June 2022 leaving behind Walmart, Apple, eBay, Target, etc. Undoubtedly, Amazon is one of the world’s most complex and competitive online marketplaces with 9.7 million sellers worldwide. Sellers on Amazon can fulfill orders by 2 methods: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). In this article, we will briefly discuss Amazon FBM in detail.

• What is Amazon FBM?
• How does Amazon FBM Work?
• Requirements for Amazon FBM
  • Maintaining Stock Level
  • Managing Stock on Amazon
  • Selecting a Shipping Carrier
  • Packaging Orders
  • Shipping Orders Timely
  • Handling Returns & Refunds
  • Dealing With Customer Inquiries
  • Adhering to Amazon’s Policies
• Pros and Cons of Amazon FBM
  • Pros of Amazon FBM
  • Cons of Amazon FBM
• FBM vs FBA vs SFP
• When to opt for FBM
• Alternatives of FBM
• Amazon FBM Fees
• Important Tips for Amazon FBM
  • Set Shipping Template
  • Set Returns Information
  • Set Return Address
  • Adjust Handling Time
  • Avail of “Buy Shipping” Service
  • Provide Tracking Information
  • Avoid Cancelling Orders
  • Never Include Marketing Material
  • Account Health
  • Requesting Seller Feedback
  • Comply With Amazon Dropshipping Policy
• Conclusion

What is Amazon FBM?

Amazon Fulfillment by Merchant, commonly known as FBM is a fulfillment method in which the seller is responsible for packing and shipping orders to customers themselves after getting sales on Amazon.

If the products you sell are large, you cannot ship them using Amazon’s FBA program. You may use their fulfillment by merchant (FBM) service instead.

Amazon FBA is the fulfillment method in which the seller pays Amazon a fee to store, pick, pack, and ship orders on behalf of the seller. Additionally, Amazon manages returns and offers customer service in this instance.

How does Amazon FBM work?

Sellers who opt for Amazon FBM to run their business are responsible for storing the inventory in their warehouse or partnering with a third-party logistics service provider. Once a customer orders from them on Amazon, they pick, pack, and ship the order themselves.

After shipping orders, they mark orders as shipped on Amazon by providing the tracking numbers for all orders.

FBM Amazon sellers are also responsible for handling returns and providing customer service.

Fulfilled by Merchant Amazon sellers must keep the shipping costs in mind. They need to find reliable and cost-effective shipping partners. If the FBM shipping costs are high, the business might suffer loss instead of profit and the efforts would be useless.

FBA Shipping Rapid Express Freight

Requirements for Amazon FBM

If you wish to sell FBM on Amazon, there are a few requirements for you to fulfill as a seller. These requirements are,

Maintaining stock level

All FBM sellers on Amazon are responsible for maintaining stock levels themselves. To avoid losing sales, you should maintain enough stock to meet customer demand.

Whether the seller stores the inventory at their facility or uses a 3PL service provider, maintaining stock is the seller’s responsibility.

Managing stock on Amazon

The quantity of a product on Amazon is to be set by the seller. The quantity should be the same as what they have in their warehouse. Product quantity on Amazon must not exceed the quantity available in the warehouse. For example if there are 80 units in warehouse then you must not update more than that.

Select a shipping carrier

Since FBM sellers are responsible for shipping orders themselves, working with a reliable and cost-effective carrier is important. Low shipping costs are necessary, and this can only be accomplished by establishing a strategic partnership with reputable carriers.

You can partner with companies like Stamps to get the lowest shipping rates or can also buy shipping from Amazon itself.

Packing orders

Packing all orders firmly to avoid any damage is the responsibility of the FBM seller. If this step is neglected, several customer inquiries regarding receiving damaged products may arise. This will ultimately result in an increased number of returns.

Shipping orders timely

Amazon FBM sellers can set their desired handling times for different products to ship. Yet, FBM sellers are bound to ship products by a certain deadline. If orders are shipped beyond the dedicated time frame, it would affect the seller’s performance metrics.

Handling returns and refunds

Amazon FBM sellers are solely responsible for handling all product returns and providing resolutions within 30 days. Moreover, if any customer remains reluctant to get a refund, the seller is responsible for refunding the customer. If not refunded, the seller may receive an A-Z claim, a chargeback claim, or even negative seller feedback.

Dealing with customer inquiries

In the FBA program, Amazon is responsible for providing customer service but this is not the case for FBM sellers. FBM sellers are bound to respond to all customer inquiries within 24 hours and provide resolutions to keep them happy. Sellers are at the mercy of customers to some extent.

If unsatisfied, customers might report to Amazon, file an A-Z claim, or leave negative seller feedback. These factors impact the seller’s account negatively.

Adhering to Amazon’s policies

Fulfilling orders yourself means you are subject to many different seller performance metrics. If any of these goes beyond the allowed threshold, you may get at risk of account deactivation. Some seller metrics are; order cancellation rate, late shipment rate, valid tracking rate, and order defect rate.

FBM sellers must adhere to the Drop Shipping Policy, Seller Code of Conduct, Funds withholding policy, and Program Policy. All sellers are required to agree to the Amazon Services Business Solutions Agreement when they open a seller account. Violation of any clause from these policies means your seller account may get deactivated or restricted partially to continue merchant fulfilled orders.

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Pros and Cons of Amazon FBM.

Every fulfillment method has its advantages and disadvantages. Let’s have a glance at both.

Pros of Amazon FBM.

Control

Being an FBM seller, you have more control over every aspect of your business. Since you control your business completely, you can work on developing better strategies to run your business more efficiently over time. This will also increase your decision-making ability in the long run. You get to have full control over the stock levels, packaging, and other things.

Scalability

By regulating fulfillment tasks yourself, you will have full control over inventory levels. Your stock levels can be replenished without any additional fees or storage costs.

You are never bound by any IPI scores like for FBA or other storage limitations. You have the freedom to scale your business as you like.

Better Profit Margins

FBM sellers do not have to pay any FBA fees or storage costs. By negotiating shipping charges with a reliable carrier and taking into account your product cost and other costs, you have the opportunity to yield a better profit margin as compared to FBA sellers.

No storage fees

All sellers whether FBA or FBM, have to pay a referral fee on every sale to Amazon. But unlike FBA sellers, FBM sellers do not have to pay any fulfillment fee or storage fee. Also if you have a slow-selling product, you’ll have an advantage as an FBM seller. FBA sellers get penalized for sitting inventory by a storage cost or stock removal fee.

Freedom

Amazon FBM sellers have the liberty to control inventory and other business operations the way they want to. You are free to use your labeled packaging which increases the chances of repeating customers. You are also not bound by any strict labeling and shipping criteria that are associated with Amazon FBA.

No strict rules

Amazon has pretty strict rules for inventory if you choose to go with FBA. By opting for Amazon FBM, you do not need to follow any strict rules enforced by Amazon. Also, during the peak sales season which is usually the 4^th quarter of the year, Amazon enforces new rules.

These rules are extra inventory limitations and increased fulfillment fees for FBA sellers. FBM sellers are not bothered by any such limitation or extra fee charged.

Cons of Amazon FBM

No Amazon Prime Badge

The biggest disadvantage of Amazon FBM is that you lose the Prime badge. This impacts your sales directly since many customers look for the Prime badge while making purchases on Amazon. Since Amazon has millions of active prime users, this Prime badge holds great value for sellers.

No Prime badge means your products are less likely to be seen by Amazon Prime customers. Contrary to this, FBA products are automatically enrolled for the Prime badge.

Increased responsibility

Generally spending time working on your business is a good thing but if this becomes excessive and overloading, you might get trapped in this and not find time to grow your business.

The daily operational tasks like managing stock levels, packing, and shipping orders are the responsibility of an FBM seller and must be completed timely to avoid negative impacts on the seller account.

Time-consuming

Being an FBM seller, prepare to commit more and more time to daily order fulfillment tasks. These tasks eat into your time and bound you from doing other productive things. Picking, packing, and shipping orders may take many hours daily if you’re not quick at it.

Outsourcing costs

If you choose to work with a 3PL service provider for inventory storage and order fulfillment, be prepared to handle the outsourcing costs.

Just like FBA fees, every 3PL service provider will also charge for the order fulfillment and if these costs are higher than the FBA program cost for your products, there is no point in doing it.

Customer Service

Amazon FBM sellers are required to provide top-notch customer service and handle all customer inquiries themselves. Once FBM sellers receive a customer inquiry, they have 24 hours to reply to the customer inquiry and provide a valid resolution and make the customer happy since Amazon is a customer-centric company and does not compromise on this point. Although you can get a better insight into the problems that your customers face by handling customer inquiries, this also consumes your time.

Manage returns

Unlike FBA sellers who get all returns handled by Amazon, FBM sellers are required to handle all customer returns themselves. This is time-consuming and also eats into your profit. FBM sellers have 30 days to refund the customer or provide a free replacement in case of a return.

Want to Learn More About Amazon Models?

Amazon Dropshipping

Amazon FBA 

FBM vs FBA vs SFP

FBM (Fulfilled by Merchant)

As discussed earlier means the seller fulfills all orders itself or outsources to a 3PL service provider to do it on his behalf. The seller is responsible for providing customer support and handling returns.

FBA (Fulfilled by Amazon)

FBA means the seller transfers the storage, pick, pack, and ship operations to Amazon and pays a fee for this. Amazon is responsible for providing customer support and handling all returns.

SFP (Seller Fulfilled Prime)

SFP means Seller Fulfilled Prime. This is a variation of FBM that allows FBM sellers to get the Prime badge without using FBA. FBM sellers are required to meet certain criteria of very high-performance standards to qualify.

Sellers go through an extensive trial period that lasts between 5 to 90 days to prove themselves as qualifying sellers. A few conditions which are necessary to be met for SFP are that sellers must ship over 99% of orders on time, have an order cancellation rate below 0.5%, use Amazon Buy Shipping services for over 99% of orders, agree to Amazon’s return policy, allow Amazon to handle customer inquiries.

Conclusively, using the FBA calculator might help a lot to identify the estimated profit which you may be able to generate with FBA and FBM for a specific product. This will help to choose which fulfillment method to choose.

When to opt for FBM

For order fulfillment, FBM is usually preferred for the following reasons,

• If you sell products that are heavy and large in dimensions, FBM would be a better option instead of FBA since FBA fees are calculated depending on the item weight and dimensions. Typically, FBA costs for larger items would be way too high. FBM is a feasible option in this case.
• Products with low-profit margins are preferably sold via FBM as it saves storage and fulfillment fees charged by FBA.
• Products that sell slowly are preferred to be sold through FBM instead of FBA. Products that sit in the warehouse for long periods bring in additional costs for FBA such as storage costs. By selling through FBM, you would not have to worry about getting penalized for any sitting inventory.
• Exclusive products commonly handcrafted products are recommended to be sold via FBM as this builds more credibility for the customers.
• FBM is beneficial for businesses with small order volumes where orders can be fulfilled without any complication.
• Choose FBM if your products are fragile so you can pack them tightly. This ensures the customer receives the order as intended.

Alternatives of FBM

Dropshipping

In this fulfillment method, the seller does not carry any inventory. When the online seller receives an order from a customer, they forward the order details to their dropship supplier.

The order is picked, packed, and shipped to the customer directly by the dropship supplier on behalf of the seller and the seller earns by keeping the profit from the price difference.

Dropshipping is quite convenient since the seller does not have to carry any inventory which reduces upfront costs, storage costs, and packaging costs. Although, dropshipping is always not the best solution since you have no control over the quality of products being sent to your customers. Sellers must read Amazon’s Drop Shipping Policy before they consider this fulfillment method.

3PL service center

A third-party logistics service provider or 3PL company usually provides the service of storage and order fulfillment at some cost per unit. This is an alternative to Amazon’s fulfillment services.

You can opt for this if you do not want to handle fulfillment yourself or if FBA is too costly for your products. The plus points of using an efficient and reliable 3PL company are that you get access to a larger warehouse and more storage space, and your orders ship faster than you could ship yourself since 3PL companies have the proper resources in place.

You can also focus better on other aspects of your business as you won’t be spending time packing and shipping orders.

These services also come at a cost that must be factored into your product price to generate a profit. By completely understanding the fulfillment method, you can choose the best suitable way for your business.

Amazon FBM Fees.

Subscription fee

Selling on Amazon can be done via 2 types of seller accounts. Individual seller account and Professional seller account. The Individual seller account has no subscription fee but Amazon charges $0.99 for every unit sold.

The Professional seller account has a monthly subscription fee of $39.99 which automatically gets deducted from your revenue. However, there is no additional fee for every unit sold in this plan.

Referral fee

Since you use Amazon’s massive platform to sell, Amazon takes a commission on every sale you get. This is the referral fee and it is usually 15% of the sale price in most categories. However, in some categories, this is 8% of the sale price if it is below a stated value. You can view the Referral fee rates for more insights.

Shipping fee

The shipping fee is to be paid by the FBM seller whether they use a carrier and pay directly or use Amazon’s Buy shipping service. The seller must also factor this fee into their sale price.

Important tips for Amazon FBM

Set Shipping Template

All FBM sellers need to set their shipping template in seller central. If you do not set this template, it remains set to default which may not be suitable for most FBM sellers.

The default shipping template adds shipping to Hawaii, Alaska, and Puerto Rico. It also includes all street and PO Box addresses and the shipping fee is free by default. If you do not set the shipping template according to your business, you might face issues.

Set Return Information

Don’t forget to update your order return instructions for all merchant fulfilled orders. Updating these instructions helps ensure a better customer return experience.

Many customers choose to shop on Amazon due to its easy return policy. If your return information is not set in place equal to or better than that of Amazon, you might lose customers in the long run. Providing a hassle-free return experience makes your customers confident in purchasing from you.

You can find information related to setting these instructions on the Manage returns page in seller central.

Set Return Address

Handling returns are the responsibility of the FBM seller and this is not an optional thing. All returns must be accepted to avoid inconvenience selling on Amazon. Therefore, you must set a valid return address as Amazon sends the buyer a return label with your provided return address.

Adjust Handling Time

Set your handling time for orders by considering the time it would take to pick, pack, and ship the orders. If you have solid control over your fulfillment processes, you can set your handling time to 1 or 2 days. Otherwise, 3 to 5 days would be fine in most cases.

This step is important since you might delay orders if you overestimate your handling time. Under-estimating the handling time would result in over-promising, ultimately making customers angry.

Avail of “Buy Shipping” Service

Availing of Amazon’s Buy Shipping feature ensures your orders are on time and tracked thoroughly by Amazon. Amazon has integrated with different carriers like UPS, FedEx, and USPS to provide discounted shipping labels for your orders.

Choosing this service helps you maintain excellent account health and reduces the risk of A-Z or chargeback claims for orders not received. By availing of this feature, the tracking number gets generated and the customer is notified automatically.

Once done, the order gets marked as shipped. Shipping can be bought through Amazon for every order.

Provide Tracking Information

All FBM sellers are required to provide valid tracking numbers for all FBM orders. The tracking number alerts the customer about their order being shipped.

This is extremely important since Amazon has certain algorithms in place to check the tracking validity and status. If the seller uses Buy Shipping as discussed earlier, the tracking gets updated automatically. But if the seller chooses to ship via its partner carrier, Amazon requires the tracking number for each order.

If your provided tracking is invalid, it might impact your Valid Tracking Rate (VTR).

Avoid Cancelling Orders

Your Cancellation Rate gets impacted negatively if you cancel orders yourself. Amazon requires sellers to maintain this rate under 2.5% to continue selling on Amazon.

Orders are typically canceled by sellers before the order is fulfilled if the product being sold goes out of stock. Despite the fact that these issues may arise as a result of normal business practices, they must be minimized.

Order cancelations initiated by the customers do not count towards affecting your cancelation rate.

Never Include Marketing Material

Including marketing material in the shipping box might seem like a good idea to promote yourself. But remember that Amazon prohibits this type of behavior in its policies.

Unless it is their receipt or packing slip, no other items may be enclosed in the package.

Amazon will terminate your account if it discovers that you’ve engaged in this activity. Amazon only allows marketing through its own provided channels.

Check Account Health

The key to a successful Amazon FBM business is to keep a daily check on your seller account’s health. You can view your account health under the performance tab on your seller central dashboard. The account health page shows various seller performance metrics which are,

• Order Defect Rate (ODR): The order defect rate is required to be kept under 1%. It has a breakdown of 3 further metrics related to customer service. These are; negative feedback, A-to-z guarantee claims, and chargeback claims.

• Policy Compliance: Policy compliance has a breakdown of several metrics. A few are; Intellectual property violations, product authenticity customer complaints, listing policy violations, product condition customer complaints, and other policy violations. A list of Amazon policy violations can be found out here.

• Shipping Performance: This tab includes 3 shipping performance metrics which are,
  • Late Shipment Rate.: This must be kept under 4%.
  • Pre-fulfillment Cancel Rate: This must be kept under 2.5%.
  • Valid Tracking Rate: This must be kept above 95%.

Request seller feedback

It’s a good idea to request feedback from your customers once they receive the products you’ve sold them. Most FBM sellers neglect this and never request their customers to leave seller feedback. By doing this, there are greater chances of getting more customers to leave you positive feedback.

Having more positive seller feedback ultimately improves your sales to some extent. You can also automate this task by using paid tools. If you want to know more about Amazon seller tools to help you with your business, click here.

Comply with the Drop Shipping Policy

If you choose Drop Shipping or a third-party logistics company to fulfill your orders, make sure you follow the Drop Shipping Policy.

FBM sellers must make sure they choose a dropship-friendly supplier like DailyDealsCo. This supplier offers a vast variety of products and ships in blank boxes so you don’t face any issues. Amazon requires every FBM seller to:

• Be the seller of record of your products.
• Identify yourself as the seller on all packing slips, invoices, receipts, packaging, and other information.
• Remove any packing slips, invoices, or external packaging identifying a third-party drop shipper before shipping the order.
• Be responsible for accepting and processing all customer returns of your products.

Conclusion:

Amazon FBM is the best way to sell if your products are either oversized or have a slow inventory turnover. If you have a small inventory and can store it at your facility, FBM might be for you.

Though the FBM model requires more time and effort, it still yields more profit as compared to FBA. People who want more control over their business can opt for Amazon FBM. If you work consistently and follow the tips for Amazon FBM discussed earlier, you can run a successful business. As an FBM seller, one is responsible to maintain their reputation by shipping orders timely and providing good customer service.