Amazon Fulfilled by Merchant (FBM): How it Works and How it Compares to Fulfillment by Amazon (FBA)
May 4, 2020
What do you want to learn?
Amazon is the biggest ecommerce site in the world. Having your products listed and sold on the marketplace can get you in front of a large audience. Amazon gives sellers the opportunity to fulfill orders themselves or let Amazon handle fulfillment.
In fact, Amazon sellers can use a combination of the following fulfillment methods:
- Fulfilled by Merchant (FBM) — also known as Merchant Fulfilled Network (MFN)
- Fulfilled by Amazon (FBA)
- Multi-Channel Fulfillment (MCF)
- Seller Fulfilled Prime (SFP)
While each acronym is different, all options enable Amazon sellers to get their orders to customers’ doors. Although FBA is the most common method, it has become less effective in recent times. Since the COVID-19 pandemic began, many Amazon sellers have been rethinking their ecommerce fulfillment strategy.
Not only have Amazon sellers seen sales drop as well as major delays in the inventory replenishment and fulfillment of non-essential items, many have also had Prime badges — and even listings — removed and been unable to get in touch with Amazon support.
Between multiple glitches due to Amazon’s algorithm and Amazon temporarily shutting down its merchant support phone number, ecommerce brands have unsurprisingly looked for alternatives to FBA. Many have flocked to Amazon FBM to ensure they can fulfill orders on Amazon.
With Amazon FBM, products lose Prime status but may ship with a faster delivery date than Amazon can do at this time. And shoppers who check out with the default option that Amazon offers in the Buy Box (which used to primarily be for Prime-eligible, Amazon-fulfilled options), will now see products with faster shipping options from third-party merchants — regardless of fulfillment method.
In this post, we’ll go into the details of how Amazon Fulfilled by Merchant works, the pros and cons of Amazon orders that are fulfilled by the merchant, alternatives to Amazon FBM, and whether Amazon Fulfilled by Merchant (or other Amazon fulfillment services) can truly grow your business.
What is Amazon Fulfilled by Merchant (FBM)?
Amazon Fulfilled by Merchant is a fulfillment method in which an Amazon seller is responsible for fulfilling their products purchased on Amazon. FBM can be managed through a seller directly or by partnering with a third-party logistics service provider.
Instead of your products having Prime status and you using either Amazon to handle fulfillment or the Seller Fulfilled Prime program, the merchant is responsible for inventory storage, order fulfillment, returns, and customer service.
How does Amazon FBM work?
Fulfilled by Merchant works exactly as it sounds: The merchant fulfills orders when their products are sold on Amazon, either through self-fulfillment or a 3PL.
Amazon FBM is usually the only fulfillment method available to new merchants selling on Amazon, as FBA requires a few approvals, demonstrated inventory turnover, and takes time to set up. Small sellers can often fulfill orders themselves, while larger sellers are more likely to utilize a logistics network to fulfill orders.
Here are a few steps to getting Amazon FBM up and running (and be sure to read these common Amazon mistakes you should avoid):
List your products on Amazon
Once you create an account with Amazon Seller Central, you can begin listing your products. Make sure to include the information needed on your listings to help improve your chances of conversion using the right imagery, videos, copy, and more.
Be sure to have the proper Amazon marketing strategy. In these uncertain times, many Amazon sellers are cutting back on ad spending, which may be an opportunity to have your ad dollars go a lot farther.
Warehouse products in your own fulfillment center
Depending on the number of fulfillment centers you have at your disposal, you may be able to distribute your products to strategic locations so you can save on shipping costs and reduce your average shipping zone. If your business is still small, a storage center or even your home can be a short-term solution for warehousing.
Ship orders out on time
Once you receive an order notification, you must ship the product based on the selected delivery timeframe from the customer. Amazon provides an estimated delivery time to buyers on the offer and checkout pages so customers know when to expect an item they have ordered from you. This takes handling and transit times into consideration. You can modify your shipping and handling time and transit time to better set customer expectations.
Finally, be sure to update your Amazon selling account with valid instructions for ecommerce returns for all Fulfilled by Merchant orders. When you approve a buyer’s request to return a product, Amazon sends the buyer a return label with your default return address, which must be a valid return address.
Fulfillment by Merchant vs. Fulfillment by Amazon
To maintain COVID-19 ecommerce sales velocity, many Amazon sellers are converting their FBA listings to be Fulfilled by Merchant. For instance, Men’s grooming company BAKblade has seen the same issue with Amazon.
“One night during quarantine when I was in the process of shipping a bunch of product to Amazon, I saw that all of our products no longer had the Prime badge. Using ShipBob, we were able to transition from FBA listings to FBM right away. With Amazon FBM, our delivery times were much shorter than what FBA was showing on all of our products and we didn’t see a huge drop in orders.”
Marc Fontanetta, Director of Operations at BAKblade
When BAKblade got their Amazon Prime badge back after being gone for a month plus due to the COVID-19 pandemic, they decided to keep both FBA and FBM open, knowing Amazon can change again at any time.
Think Crucial, who sells replacement parts, wants to be diversified on as many channels as possible and always does both FBM and FBA. With many Amazon sellers pivoting to FBM, let’s dive into the benefits and disadvantages.
The pros and cons of Amazon Fulfilled by Merchant
Amazon Fulfilled by Merchant is often the fulfillment method of choice for sellers just getting started on Amazon and even common for those whose primary sales are made on their ecommerce store.
Advantages of Amazon FBM
With Fulfilled by Merchant, Amazon sellers can still take advantage of the valuable real estate on Amazon’s high trafficked site.
Access Amazon’s customers with fewer fees
Amazon FBA fees are far heftier than FBM. With Amazon Fulfilled by Merchant, sellers primarily have a monthly subscription fee, a small fee per order placed, and a referral fee for each order.
Avoid Amazon’s strict FBA requirements
Amazon is known for changing its FBA requirements without giving sellers enough time to adapt to changes (and they get much higher during Q4). These requirements can be a hassle for merchants fulfilling on Amazon. With FBM, there are fewer rules and penalties for failing to hit their strict standards for each Amazon Prime order.
Retain greater control of your business
With Amazon FBA, your branding takes a hit. Customers receive a box with Amazon’s branding — not yours. Customers may associate your products with Amazon and will communicate with Amazon’s customer support if there are issues. When you use FBM for the order fulfillment process, you can better ensure you are providing the customer experience you want.
Canned water brand Open Water moved to FBM from FBA and has ShipBob fulfilling all of their orders. They found not only ShipBob did a better job of packing it all correctly (their water comes in aluminum cans, which dent easily) and had better rates, but Amazon was putting too much plastic in their orders, which doesn’t align well with their eco-friendly brand.
Get better support
For support, Amazon is known for being hard to get in touch with a human being. Canned water brand Open Water really likes having direct contacts with their retail fulfillment provider, ShipBob. While they lost some sales moving to FBM, they now have better service and reduced lead times.
Disadvantages of FBM
Amazon is the best at fulfilling Amazon orders, so giving up their perfected process may be tough. Additionally, FBA sales do not always translate to Amazon FBM sales.
No Amazon Prime badge
The main downside to using Amazon FBM over FBA is not having Prime-eligible products. The point of Amazon Prime is to get orders delivered in two days. However, during the coronavirus pandemic, long delays for non-essentials are still present and consumers don’t want to wait over a month.
If you fulfill these orders yourself or work with a 3PL like ShipBob, who is fully operational at all fulfillment centers and not suspending fulfillment of non-essential products, you can get a similar effect to Prime.
Of course, Amazon sellers that want to switch fulfillment options from FBA to FBM must be aware and prepared to drive organic traffic without the Prime designation that helps them succeed on the Amazon marketplace.
Spend more time on fulfillment (if self-fulfilling)
If you’re managing your Amazon FBM orders, you can end up spending a lot of time packing boxes. There are hidden fees in self-fulfillment including the opportunity cost of you not completing higher-value tasks.
Costs of warehousing and in-house fulfillment (if outsourcing)
Outsourcing fulfillment to the pros can be costly, especially if you have a lot of inventory sitting and not selling. You can potentially reduce shipping costs by splitting inventory to multiple strategically located fulfillment centers.
Amazon FBM fees
Amazon FBM works on a fee-based structure, and there are three main fees: referral fees, a monthly subscription fee, and a fee for each item sold.
Since your products are listed on Amazon and not your own site, each sale made is considered a referral. The total referral fee will depend on the type of product you sell, and can range from 6% to 45%. To view the fees for each product type, you can check out the referral fee table on Amazon’s website.
Monthly subscription fee
Amazon offers a subscription fee for the Pro FBM service that costs $39.99 per month. By subscribing to this plan, you can waive additional fees when a product is sold.
Per-item selling fee
The per-item selling fee is $0.99 for each item sold. This fee can be waived if you sign up for the Pro FBM plan.
Other fees you’ll encounter
If you partner with a 3PL to handle Amazon FBM, there are costs like storage and fulfillment costs. If you do it yourself, you may think you’re saving money, but there are always opportunity costs with the amount of time you’re spending packing boxes and running to the local UPS store.
Save time, cut shipping costs, and speed up deliveries with ShipBob
ShipBob is able to fulfill Amazon FBM orders (as well as your website orders). Below are some of the advantages that come with letting ShipBob handle your fulfillment.
Note: If you utilize Amazon fulfillment today, we highly recommend diversifying your fulfillment options (e.g., use both FBA and FBM) to maximize sales. Learn why sellers have moved off of Amazon to ShipBob for FBM here.
Use multiple fulfillment centers
ShipBob has fulfillment centers throughout the world, and you get to choose which and how many locations you use for greater flexibility. When an order is placed, ShipBob automatically sends it to the fulfillment center closest to the customer. This reduces shipping costs and allows for faster deliveries.
“Storing inventory in different regions is key to reducing costs and transit times. Not only is this better for our customers but we also gain a 13% savings to our bottom line. We want to offer a custom experience for our customers and we can’t do that at a reasonable cost with Amazon. It’s also difficult to have remarketing capabilities.”
Pablo Gabatto, Business Operations Manager at Ample Foods
Get best-in-class support
ShipBob is a partner and an extension of your brand. While Amazon is not known to be the most merchant-friendly option, with ShipBob, you always speak to real people who you can get in touch with, and the same reps who know your account and products.
“In my eyes, ShipBob is competing against the Amazons of the world. Not only are they very cost-competitive and quick, they actually care.”
Carl Protsch, Co-Founder of FLEO Shorts
Use our cutting-edge technology
ShipBob integrates with Amazon FBM seamlessly so it’s easy to link your Amazon account to our proprietary technology. ShipBob’ dashboard gives you valuable insights into digital fulfillment performance, orders, inventory levels, and advanced business analytics. You can easily set reorder points to ensure you don’t run out of inventory and find all of the data you need.
“In contrast to working in the Amazon fulfillment dashboard, which looks like a Bloomberg terminal upon opening it, the ShipBob dashboard is awesome and extremely user-friendly.”
Steve Staffan, Founder and CEO of Brummell Co.
Grow other channels
COVID-19 has made it evident that now is the time to diversify your sales and fulfillment channels to keep orders shipping during a global pandemic — not only from Amazon FBA to FBM but to your own website as well.
Right now, brands with a website are seeing record sales there since people who normally bought their product on Amazon are checking there. Behavior is shifting, and consumers are getting more comfortable making purchases directly on brands’ websites.
While Amazon is still a great channel with a lot of demand, now is the time to make sure you’ve set up your own store for success. With FBM and Amazon in general, there are some tradeoffs like lack of access to your own data, no ability to build or remarket to your customers, and the risk of Amazon using your data to launch its own competing products.
ShipBob helps ecommerce brands scale their fulfillment while offering 2-day shipping. It doesn’t have to be selling on Amazon or your website — it can be selling on both Amazon and your website.
Amazon’s Fulfilled by Merchant is a good option for Amazon sellers. Working with a 3PL like ShipBob to fulfill high-demand products can benefit your business — especially if you can offer an Amazon Prime experience like ShipBob strives to provide.
To learn how ShipBob can help you with Amazon FBM fulfillment, click the button below to request a fulfillment quote.