Selling on Amazon is a great way to get started with your e-commerce business. However, it can be hard to understand how the process works and what's involved in selling on Amazon.
There are two main ways that you can sell products on Amazon - FBA or (FBM). You have probably heard of both terms but don't know exactly what they mean or which one is right for you.
In this guide, we explain everything about Amazon FBM including the pros and cons, and which option might work best for your needs, etc. So without further ado, let's dive in!
What is Fulfillment by Merchant (FBM)?
Just like it sounds, the FBM (Fulfillment by Merchant) is when the merchant fulfills their own orders to the customer. Unlike FBA, merchants are responsible for packing, shipping, and customer service for their products that are sold via FBM.
If you have a product that has a lower profit margin and you don't want to pay Amazon FBA fees, then FBM is the right option. The chart below gives you an idea of how popular FBM is compared to FBA. I was surprised to see that only about ¼ of current Amazon sellers take advantage of both FBA and FBM.
The seller is in full control of the shipment during this process, including the post delivery customer service. Instead of paying a service fee to Amazon, you will be responsible for all costs associated with packing and shipping the product and do not need to send the product to the Amazon warehouse. Because of this, you can save some money, at the cost of spending the extra time to fulfill the orders.
FBM is better for;
- Products that have a low-profit margin
- Small volume products
- If you have a smaller amount of products
- Products with a lower frequency of sales
- When you want to handle the whole process by yourself
How does FBM work?
When you successfully set up your Amazon seller account, you have the option of selling either FBM or FBA.
However, Fulfilled by Amazon (FBA) requires few extra approvals, which means you need to wait before you can begin selling via FBA. As a new seller, FBM is the fastest way to start selling on Amazon because you can start immediately.
As we now know, FBM means the seller is responsible for shipping and customer service while FBA means you send the product to the Amazon warehouse to ship and handle customer service.
Here are a few steps to help you understand how FBM works:
- List your products on Amazon: After opening your seller account, you can list your products on Amazon. Once you list your product on Amazon, it is available for sale on Amazons site!
- Prepare items to ship to your Warehouse: Before you start shipping, you need to prepare all your packing and shipping materials at your home or warehouse. If your firm is still small, storing everything in a storage facility or even at home might be a temporary solution. However, once your business grows and you have many orders, then you can go for FBA.
- Shipping on time: After receiving an order that is purchased by a customer on Amazon, you have to ship it on time. Amazon gives an expected delivery time to their customer and if you fail to ship the product on time, the customer will leave a negative review.
Advantages of Fulfilled by Merchant (FBM)
1. Less cost - Because you don't pay any extra fees to Amazon, you can save some money by using FBM. You don't need to pay an additional fee for storage and handling.
2. More control over fulfillment and inventory -Since you are in full control of your FBM shipping, you have the freedom to fulfill orders quickly for competitive shipping prices. You can also have more control over your inventory by not having to rely on Amazon's warehouse.
3. Greater margins- If you sell a product that has higher profit margins and if your sales volume is low then FBM can be an excellent option for you to utilize your resources.
Disadvantages of Fulfilled by Merchant (FBM)
1. More time-consuming process- As you have to pack and ship products yourself, so it takes time for you to fulfill all orders. Otherwise, with FBA once the order is received, Amazon will handle all the processes of fulfillment.
2. More risk-FBM can be a risky option if Amazon is not involved in the shipping process. It means you have to take all responsibility for any kind of loss or damage.
Conclusion: The Bottom Line!
Now that you know more about FBM, you can make a smarter decision as to what method you will use. The choice is entirely yours. However, if you are a new seller then FBM is the fastest way to start selling. If you sell products that have higher profit margins and if your sales volume is low then FBM can be an excellent option for you. It won't cost you as much because you have to handle everything by yourself. On the other hand, if your business grows and you want to ship more products then FBA is possibly a better option for you. You can save money and invest your resources in other business areas until then.