How can you gain your consumers’ confidence and loyalty, and what role does Amazon FBM (Fulfillment by Merchant) play in this?
Before anything else, what is Amazon FBM? What is this process?
Amazon FBM, or Fulfillment by Merchant, is a process by which sellers store their inventory in Amazon’s fulfillment centers and the online retailer handles all of the packing, shipping and customer service for those orders.
Customers will want to feel a connection to both your business and the things you offer, which is especially important if you sell handcrafted artisan or niche products. This is made easier in the digital realm by the personal connection established with each buyer and the excitement they feel upon first opening their package. This is when Amazon FBM becomes useful.
Definition and Benefits of Amazon’s FBM
In contrast to the Fulfillment by Amazon (FBA) model, in which Amazon handles all aspects of the fulfillment process, FBM on Amazon requires sellers to handle all aspects of the fulfillment process themselves, including shipping, returns, storage, and customer care. The FBM approach, which Amazon calls “MFN” (Merchant-Fulfilled-Network), is preferred by sellers that have their own logistical system set up, and it also provides several benefits to retailers who offer things with sentimental value. Yes, but who does it benefit, and how?
Who Benefits More from Amazon’s FBM Program?
You Deal in Niche Products.
Amazon FBM merchants benefit from cheaper costs, but they are at a significant disadvantage since Amazon’s algorithm consistently ranks FBA sellers higher. If both sellers were to offer the identical products, the FBA seller would always come out ahead. Sellers that have narrowed their attention to a certain specialty, on the other hand, are less likely to face this kind of rivalry, and they may save money on fulfillment expenses without worrying about being ranked lower than their FBA rivals by Amazon’s A9 algorithm.
Continue Your Low Volume of Sales.
Until the time when Amazon FBA’s costs are offset by its increased sales, it is merely an expense for merchants. As an example, Amazon sellers may experience stress due to the high cost of holding their goods at a warehouse they do not have direct access to, as well as the many other problems that arise from doing so (trust us, we know).
Ample Storage Areas Are Available for Your Use.
Amazon MFN and FBM make more financial sense if you have a warehouse or a large garage to keep inventory, since you may deduct the cost of storage from your operating expenses. This is only one indicator, but the savings from using Amazon FBM might make your business model work if you have a large inventory to store.
You’re Already in Charge of Returns and Customer Service
There aren’t many advantages to using Amazon FBA if you’re currently handling all of your customer care and returns in-house. Since using Amazon FBM is typically connected with time investment and a hard time while attempting to win the Buy Box, it certainly doesn’t harm to search around and see if maybe the online giant may give a better bargain.
You Sell Items That Must Be Shipped As Oversized.
If your firm’s items need special shipment (due to size or handling), selling over FBM on Amazon makes it simpler, since you may choose the shipping provider that best suits your needs. Knowing that your expensive goods is being transported by a shipping firm that specializes in big cargo may alleviate stress and save you money.
You Engaged in “Drop Shipping.”
Drop shipping requires careful consideration of several factors, but storage costs are not one of them. Since the product is sent straight from the factory to the consumer, a warehouse is unnecessary. In this scenario, Amazon FBM for dropshipping is preferable than Amazon FBA due to the lack of storage costs associated with the former choice.
You Have a Novel Approach to Logistics.
Though Amazon’s distribution channels are wide, you may be aware of a better option. Depending on your shipping origin and destination, you may already have a system in place that is competitive with, or perhaps superior than, what Amazon has to offer. Using FBM on Amazon and qualifying for the Prime by Seller badge makes more sense (more info below).
You Offer Goods That Must Be Handled With Extra Care During Transport
In the case of selling delicate or handcrafted items, many vendors are motivated by the satisfaction of the purchaser. Amazon’s fulfillment is swift and accurate, but the company operates on such a massive scale that occasional missteps are inevitable. Handmade items, on the other hand, are not as quickly replaced as they might be with a few clicks of the mouse or a phone call to the manufacturer, and thus sellers are not compensated as fully when errors occur in Amazon’s warehouses. Amazon FBM is preferable because you can control the conditions under which your package is shipped.
Who Benefits Most from Amazon’s FBA Program?
You Can’t Find a Place to Put Your Stock
Not everyone has access to a large warehouse or a spacious garage, and even fewer people have the time to devote to inventory management. To that end, if this sounds like you, Amazon FBA might be a great option.
There is No Independent Logistics Plan on Your Part.
If you need to ship a large quantity of items but haven’t had the time to research which shipping company would give you the best rate, FBA may be a good option for you. Especially considering Amazon’s partnerships with several carriers, which give it much more initial reach than any individual would have.
Insufficient Resources for Customer Service
Many businesses struggle to provide satisfactory help to their customers. The time component, in particular, of providing such a service is consistently undervalued. This is a difficulty since providing stellar customer service is a key component of a high seller rating, which in turn increases your profile on Amazon. Amazon FBM vendors, therefore, must meet at least the same requirement as Amazon FBA sellers if they wish to maintain a top seller rating.
Benefits of Using FBM
An Increased Capability to Manage Your Enterprise
As expected, when you outsource important parts of your business to another firm, you have to give up some control. One major distinction between FBA and FBM is that with FBM, sellers have complete control of their inventory. This is particularly true in regards to shipping, since FBM vendors may choose their own 3PL, perhaps one that specializes in carrying their particular kind of items (e.g. highly fragile or very bulky). Additionally, FBM sellers have complete authority over their own warehouses and storage facilities, making them immune to Amazon’s arbitrary warehouse policies.
Cost Savings via Lower Expenses
Profitability would increase without FBA fees because of the lower operating costs. Income that can be redistributed to programs that might use it more. However, vendors need to understand that this method of calculating might also be misleading. After example, it’s usually more costly to provide storage space and run their own logistics than to use FBA for the same goods.
Amazon is a very organized business, and their FBA criteria reflect this. In addition to the standard standards, FBM merchants are exempt from conforming their operations to Amazon’s inventory policy. This benefit has lately been apparent to sellers even without the context of supply chain problems or changes in long-term storage prices. So, the Amazon FBM shipping standards (if you want to call them that) are more malleable than the FBA shipping rules.
Specialized Packaging and Storage Space
There may be a requirement for specialized packing and additional storage space if the items are very large or fragile. Both of which are costly when using Amazon’s Fulfillment by Amazon service. The sellers of FBM products are not required to do so, but they should be aware that they may incur additional costs when using 3PL services.
The Downsides of Using FBM
The answer to the question “What is FBM on Amazon useful for?” is, in part, because it gives you greater say over your company. More freedom requires more effort and time. It goes without saying that if you want to use Amazon FBM for fulfillment, you won’t be able to do anything else while waiting for your sofa to be packed and sent.
As we’ve seen, FBA sellers often get a larger percentage of the Buy Box than FBM vendors. That’s because criteria like customer support and shipment times (which FBA handles) affect your chances of getting the Buy Box. The fact that the number of FBA sellers is large and growing exponentially also doesn’t help. Assuming your service is on par with FBA’s, this won’t be as big of an issue if you don’t sell wholesale. Without this change, FBA items will also outperform FBM.
Investment in Customer Service, Refunds, and Comments
Once you begin selling through Amazon FBM, you are responsible for handling any returns, contacting with buyers, and managing their feedback. If you’re an Amazon FBM seller, you’ll need to spend more time responding to customer feedback and coordinating with buyers. This is time-consuming and labor-intensive, but it’s essential if you offer specialized or handcrafted items to customers who may have in-depth inquiries and want further communication with the business. In addition, this is often the case with items that have sentimental significance, such as handcrafted jewelry.
Loss of Prime Badge
The Prime Badge is something many sellers care about, and many worry that transferring from Amazon FBA to FBM may cause them to lose it. However, with Amazon Seller Fulfilled Prime, this is not always the case. It’s important to note, however, that Amazon’s stringent conditions for granting this badge are not easy to meet, since the e-commerce giant understandably holds itself (and its large logistical network) as the standard that sellers (who do not have such an extensive network) have to live up to. Aside from being invited by Merchant, Prime members must also meet certain criteria.
Seven Easy Steps for Using Amazon’s FBM and MFN
1. Create a seller account.
Amazon Seller Central is the central hub for online merchants, and you’ll need access to it. You’ll need a seller account and to choose a selling plan to do this.
2. Create ads and product pages.
The products you’re selling may be seen in this “showroom.” If you’re going to list anything, put as much detail as you can into it.
Customers will have an easier time locating your goods if the title is descriptive and easy to understand. With the ability to zoom in on high-resolution images, shoppers are more likely to purchase.
If you are selling an item that is currently available in Amazon’s shops, you do not need to create a new product page. It’s more convenient in these situations to look for the goods in question on Amazon, locate its detail page, and make an offer there. In addition, you may utilize Seller Central to promote your goods.
3. Locate a warehouse or other appropriate storage area.
If you’re going to store things somewhere, whether it’s your own garage or a leased facility, be sure it fits your needs so you’re not paying for unused space. Renting a storage unit for an extended length of time may save you a lot of money, and there are plenty of self-storage facilities to choose from in major cities.
4. Create shipment templates in Seller Central.
In Amazon Seller Central, you may customize both the handling and transit time of your shipment templates to best suit your business’s needs. The meaning of this is unclear. Using the Manage Inventory option in the Seller Central dashboard, you can set up shipment templates for offers that fit your logistics plan for certain items.
5. Double check your packing.
A low return rate and secure delivery are the results of careful choosing, packaging, and shipping. Make sure the quality of your preparation and packing meets Amazon’s requirements.
6. Set up stellar support for your clients.
Since its humble beginnings as a garage bookstore, Amazon has always prioritized its customers above everything else. Therefore, Amazon FBM/MFN vendors have their work cut out for them if they wish to match the quality of Amazon’s FBA service.
Automating time-consuming tasks is the seventh stage.
As an FBM seller, you’ll have your hands full with physical labor. Take full advantage of any automation that may help your business save time and money. Consider implementing a fully automated pricing approach as an example.
Costs for Using Amazon’s FBA Program
Unlike other Amazon services like Amazon FBA, Amazon FBM does not have a set cost. This is because each vendor must have their own fulfillment infrastructure. You may always use the Amazon FBA calculator to see how your logistics stack up against Amazon’s, and determine whether or not your own methods are more cost-effective.
Selling via Amazon FBM does come with certain costs, however, as is the case with any business plan. The following is a rundown of the expenditures you need to keep an eye on if you want to sell on the Amazon marketplace, excluding the possibility of storage space and/or personnel wages.
- The monthly cost of the business plan is $39.99, whereas the personal plan is nothing.
- For each item sold, the business plan charges nothing while the individual plan charges $0.99.
- Amazon deducts a referral fee from the sale price of every item sold. These costs typically amount to 15%, but may go as high as 45% for certain items (such baby gear and Amazon gadget accessories).