Small group workshops to help you learn, optimize, and grow.
.svg){kind=logo}
When starting out on Amazon, a common piece of advice is to use Fulfillment by Amazon (FBA). FBA increases product visibility and the chance of winning the Buy Box, leading to more sales. FBA’s also a hit because it helps you reach all those Prime members.
While this is true, FBA is not the only path to success and it isn’t always the best approach for every Amazon seller. In some cases, Fulfillment by Merchant (FBM) may be more cost-effective. This article explains what Amazon FBM is and how it works. We also share tips on how you can use this fulfillment method to grow your online shop.
Fulfillment by Merchant (FBM) or Merchant Fulfilled Network (MFN) is one of the fulfillment methods offered by the Amazon Marketplace. In FBM, Amazon sellers handle order fulfillment and customer support themselves. Sellers may use a third-party service provider but they must manage the entire fulfillment process independently.
Less than 20% of Amazon sellers offer FBM alone, while approximately 22% use a combination of FBM and FBA. Let’s explore the pros and cons of selling on FBM.
With FBM, you can potentially earn more by minimizing your overheads. You don’t have to pay FBA fees which could take more than 50% of your sales. Using FBA can incur the following expenses:
Added to these are other fees such as special handling fees for fragile items, disposal order fees, removal order fees, and aged-inventory fees. All these fees do add up and they may make you consider other, more cost-effective fulfillment methods, such as FBM.
FBA items are packaged according to Amazon’s standard packaging policies. However, if you use FBM, have more leeway on how you want your products to be packaged. Since you’re not restricted by Amazon’s packaging requirements, you can customize your packaging and even incorporate your branding on it. You can even add a personal thank you message in every order.
Another benefit of FBM is that your inventory is not subject to Amazon's storage limit, which sets a cap on the maximum number of units you can store in their warehouses or fulfillment centers. If you have sufficient storage space, you can maintain as much inventory as necessary and restock it more quickly, particularly during peak selling seasons.
With FBM, you don’t have access to FBA-specialized services that make online selling easy. You’d have to handle customer support, including returns and complaints. You’d also need to spend more time on marketing to increase the visibility of your product listings and compete with FBA sellers. If you’re selling on Amazon as a side hustle, this can be pretty exhausting.
If you're only selling a few items each month, you won't qualify for bulk shipping rates. This may also limit your ability to ship products to distant locations, restricting your customer base to those in local areas. Moreover, depending on how savvy you are at handling shipments, FBM may entail higher costs for packaging materials and shipping fees.
Prime benefits do not apply to FBM sellers. Unless you were able to join the Seller Fulfilled Prime program before the cutoff, you won't be able to display the Prime badge on your FBM listings. As a result, you could miss out on reaching millions of Prime members shopping on the platform—and that’s about 71% of all Amazon shoppers.
Apart from weighing the pros and cons of selling on FBM, here are other factors you should consider when deciding which fulfillment method to use.
What products are you selling? Are they restricted products on FBA? Are they oversized or handmade and require special handling? Do you sell temperature-sensitive products?
If your products are fragile, you wouldn’t want to risk them getting broken or damaged due to mishandling in Amazon warehouses. If your items are bulky, you'll likely incur higher FBA fulfillment and shipping fees. In these cases, you might be better off with FBM.
How fast are you going through your inventory? Do you expect to sell them within a few months?
If you have slow-moving items, consider offering them on FBM. Items that stay longer than 181 days in Amazon storage accrue additional fees, such as extra monthly fees and aged inventory surcharge. The surcharge can cost about $0.50 to $6.90 per cubic foot, depending on how long it has been in storage.
Do you have efficient logistics in place? Do you have enough space for storing inventory and packing orders? Do you have a trusted third-party shipping provider?
If your logistics are in place, you don’t have to rely on FBA. If you can manage your inventory and deliver orders on time, you can do away with the FBA fees and handle shipping on your own.
If you're ready to use the Merchant Fulfilled Network, here are the steps you should follow.
The first thing you need to do is to create a seller account and choose a selling plan. Forecast your monthly sales volume to determine which selling plan is ideal for you. An Individual selling plan is free but every item you sell is charged a per-item fee of $0.99. If you expect to sell more than forty items every month consistently, consider the Professional selling plan. Although there is a monthly subscription fee of $39.99, you won’t have to pay any per-item fee.
Once your account is active, you can start listing your products. If you’re selling a product that’s already listed on Amazon, go to the existing product listing, and do the following:
If you’re selling a product that is not yet being offered on Amazon, create a new product listing by going to the Inventory tab.
Wait for listing approval before proceeding to the next step.
Once your product listings are approved, your items will appear in the marketplace catalog. You will also find all your Merchant Fulfilled products on your inventory page. Make sure to manage your inventory and check if their status is “Active” and they are set to “Fulfilled by Merchant.”
You’ll also need to set other details to match your logistic capabilities and protect yourself from a sudden surge in orders. You can do this on the inventory page by locating the FBM item and clicking on “Edit” at the rightmost column.
You can also create a new shipping template for use with multiple items or orders. Go to Settings and click “Shipping Settings.” Update your “Default Shipping Address” if necessary or just leave it as is if it’s the same as before. Then do the following:
The Shipping Settings will also have all the options you need to set a flat rate, charge an extra fee, and/or restrict shipping locations for specific items. You can edit them at any time or create a new template as your logistic capabilities change.
As mentioned, you will have to fulfill the orders yourself when using FBA. All new orders will be listed under “Pending” on the “Manage Inventory” page until Amazon confirms the sale. If there are issues with the payment, the order will remain on pending status. Don’t do anything at this point, even if the buyer requests you to take action. Once the order is verified by Amazon, the status will change from “Pending” to “Seller-fulfilled Unshipped.”
Click “Confirm Shipment” within seven days of the ship date. Orders without confirmed shipping within 30 days of the order date are automatically canceled. So, check your Seller Central dashboard regularly to see if there are new unshipped orders. You can enable email notifications for new orders but these may be affected by firewall or anti-spam software so it’s always best to check your dashboard at least once a day. You can also download the Amazon Seller mobile app to receive alerts when an order is ready for shipping.
There are two ways to ship FBM orders, you can use Amazon Buy Shipping or your local postal service. Amazon Buy Shipping is generally the more convenient option because Amazon gives you a list of available carriers so you can easily compare rates and shipping times. It also automatically generates the tracking number and the shipping labels.
To use Amazon Buy Shipping, go to the Manage Orders page and go to the “Unshipped” tab.
Once the order is properly packed and labeled, drop off the parcel at the shipping service provider you selected. The shipping fees are deducted from your Amazon balance so you don’t need to shell out any money when you drop your parcel off.
If you prefer to use your local postal service or handle shipping yourself, click “Confirm Shipping” instead. You will then be asked to provide a tracking number which you can get from the shipping provider you chose. Make sure to prepare, pack, and ship orders promptly to avoid getting complaints or refund requests.
On FBM, you are responsible for handling all returns. The return policies for each category vary but you must adhere to the general 30-day window Amazon imposes for processing returns. If returns aren’t settled within this period, the buyer can get help from Amazon by filing an A-to-Z guarantee claim. But you wouldn’t want returns and complaints to escalate as they impact your seller’s reputation.
To make sure that you don’t miss requests for returns, enable your email notifications for returns. You should also make your return policy clear to buyers by setting your preferences on the “Manage Returns” page.
When you receive a return request, go to the “Manage Returns” page. You can opt to contact the buyer or issue a refund.
To attempt to resolve the issue and have the return request canceled, click “Contact buyer” and send them a message. To process a refund, click “Issue a refund” and follow the steps below:
Product returns will be sent directly to your home or to whatever return address you specified in the prepaid return label.
You also need to manage customer service and feedback on your own when you sell on FBM. You can use the buyer-seller messaging service on Amazon that allows buyers and sellers to communicate through encrypted channels. To enable this feature, go to “Settings” and click “Notification Preferences.”
If you need to contact a buyer regarding their orders, go to “Orders” and click “Manage Orders.”
To streamline customer service and feedback management, you can also leverage the tools on Threecolts designed specifically for these functions. Use Onsite Support to enable a custom button on product detail pages that allows buyers to contact you when they have questions or concerns about your product listing. You can also use ChannelReply, a tool that makes customer support more efficient by cutting your response time in half and consolidating all customer information in one database.
Now that you know how to sell and fulfill orders on Amazon FBM, here are some actions you can do to increase your chances of success on the platform.
You don’t necessarily have to choose between FBA and FBM. They are not mutually exclusive options. Instead, create a strategy that leverages the strengths of both fulfillment methods. You can use FBA for small-sized fast-selling items and FBM for large-sized slow-moving items. You can also switch from one fulfillment option to another as your business changes.
To learn more on how you can accelerate your growth as an Amazon seller, check out the comprehensive suite of seller tools on Threecolts.
