Sellers on Amazon have two main choices for their order fulfillment: Fulfillment by Amazon (FBA) or Amazon Fulfilled by Merchant (FBM). To navigate the vast marketplace successfully, it’s critical to build the right strategy around these models.

Although FBA is the more popular option (a whopping 82% of sellers use it), Amazon Fulfilled By Merchant presents several unique advantages. Understanding its strengths and weaknesses will enable you to make informed decisions about how best to manage your eCommerce business through the program.

If you previously used FBA exclusively or are still learning how to tackle logistics yourself, this Amazon Fulfilled By Merchant 101 article is for you. Fulfilling your own orders can be complicated, since you have to deal with:

• Amazon prep guidelines
• Finding a reliable third-party logistics provider (3PL)
• Customer service
• Tracking
• Returns
• And more

Having to juggle these elements, it’s no wonder many Amazon Fulfilled By Merchant sellers feel overwhelmed. The good news is, you can avoid the chaos — if you know what you’re doing.

What is Amazon Fulfilled By Merchant?

The Amazon Fulfilled By Merchant program gives the seller or their chosen logistics partner full responsibility for every shipping and handling process aspect. Rather than paying FBA’s fees and sending your inventory to Amazon’s distribution centers for fulfillment, you or your 3PL prepare and deliver items to buyers.

With FBM, you retain complete control over everything, from purchasing and storage to shipping and receiving, as well as customer service and managing returns. Importantly, Amazon Fulfilled By Merchant doesn’t require all of these operations to take place in-house. Many sellers choose to work with 3PLs like MyFBAPrep to support their fulfillment process, helping to ensure professional prep and delivery to high standards.

Amazon Fulfilled By Merchant is not Seller Fulfilled Prime

Before moving on, it’s important to note that Amazon Fulfilled By Merchant isn’t the same as Seller Fulfilled Prime (SFP), which allows you to fulfill orders independently and display the Prime badge on non-FBA listings.

First, you must register and pre-qualify for the SFP program, then participate for 30 days while hitting FBM’s required delivery speeds and SLAs. Once you pass and are fully enrolled, you must continue to meet specific criteria like:

• Provide Prime customers with free one- and two-day shipping.
• Offer free standard delivery to all customers nationwide.
• Meet targets for one- and two-day delivery.
• Ship over 93.5% of your orders on time.
• Have an order cancellation rate of less than 0.5% (seller initiated).
• Maintain a minimum valid tracking rate of 99%.
• Use shipping methods that support weekend pickup and delivery of Prime orders (Saturday, Sunday, or both).
• Allow free returns for items below 50 lb in weight.
• Pass all customer service inquiries to Amazon.

FBA vs. Amazon Fulfilled By Merchant

FBA and FBM share the same goal: get your items to buyers quickly and efficiently. Both can achieve this but in different ways. The programs’ primary distinctions become apparent depending on your business’s role and degree of involvement:

• Responsibility: In FBA, Amazon manages all products, while in FBM, you or your 3PL is in charge of the entire order fulfillment process.
• Storage and inventory: FBA involves handing over items to Amazon’s designated fulfillment centers or warehouses. With FBM, you’re responsible for storage and inventory management.
• Delivery: Amazon takes care of picking, packing, and shipping in FBA, whereas FBM has you assume these duties.
• Customer service: Amazon addresses customer inquiries, issues, and returns for FBA sellers, but you provide these services independently in FBM.
• Prime eligibility: FBA products automatically qualify for Amazon Prime and have badges displayed to Prime members. FBM merchants, meanwhile, must opt into SFP.

In addition, Jungle Scout found a couple other noteworthy differences:

• Revenue: 33% of FBM sellers enjoy more than $25K in monthly earnings versus 26% of their FBA counterparts.
• Starting capital: Compared to 27% of FBA merchants, 37% of FBM sellers started on Amazon with under $1K.

Pros and cons of Amazon Fulfilled By Merchant

Your choice of fulfillment model depends on your business’s specific needs. These will change over time, so your approach must be able to adapt as well. Therefore, knowing the advantages and disadvantages of both FBA and FBM is critical to developing a robust strategy for your brand.

Advantages of Amazon Fulfilled By Merchant

• Total control of your business: Since you’re responsible for inventory storage and management, as well as picking, packing, and shipping, you can offer flexible options and include custom branding. You can also work with a logistics partner that can facilitate everything on your behalf, including customized packaging.
• Better margins and cushions: FBM sellers may enjoy more earnings than those who use FBA, especially if you leverage optimal inventory placement and find the best shipping rates.
• Avoid Amazon-related issues: Amazon regularly updates its policies. You can avoid the potential consequences of missing a policy update, and having an FBA listing removed. You also deal with less paperwork and fewer processes on the Amazon side.
• Relationship building: With total control over your business, you can provide more personalized customer experiences.
• Awareness: You manage end-to-end operations, so you know what’s in stock, what’s selling, and what changes are necessary to maintain success.
• 3PL partners: With FBM, you can freely partner with a 3PL that supports your fulfillment strategy.

Disadvantages of Amazon Fulfilled By Merchant

• More responsibilities: With FBM, logistics, warehousing, preparation, and customer service are in your hands. Unless you’re working with a logistics partner, you are responsible for fixing any issues that pop up.
• High volumes: Fulfilling countless orders can be an enormous task that could even grow into an entirely separate business you have to run on the side. This is why we always recommend working with an experienced logistics partner, because your expertise is building a brand, not boxes.
• Costs may balloon: If you aren’t careful, your overhead expenses for warehousing, staff, and shipping can outweigh FBA’s pricing.
• Lower Buy Box chances: Compared to their FBA counterparts, FBM sellers are less likely to win the Amazon Buy Box.
• Storage and logistical requirements: FBM sellers must invest in warehousing, packing, and shipping infrastructure to hold, prepare, and deliver goods properly and on time. This can be challenging for smaller businesses that lack the necessary infrastructure or capital. However, working with a logistics partner can alleviate this.
• Lack of the Prime badge: FBM products don’t receive the coveted Prime badge, so Prime members may find these items less attractive, as they prioritize fast and free shipping.

Creating your Amazon Fulfilled By Merchant strategy

Your business’s tailored Amazon Fulfilled By Merchant strategy will include many moving parts. For greater flexibility and control, we recommend combining it with FBA where it makes sense. Doing so also streamlines your operations and maximizes sales. We’ve broken down how to accomplish this below.

Amazon Fulfilled By Merchant setup in a nutshell

Before you build your strategy, properly configure FBM first.

How to create an FBM listing

Assuming you already have an Amazon seller account, all you need to do to sell through FBM is list a product for sale and select “FBM” as your fulfillment channel.

If you’re in the FBA program though, you have three options to create FBM product listings:

1. Convert FBA listings to FBM listings: Use this method if you want to remove your inventory out of FBA entirely. In this case, you no longer need Amazon since you or your 3PL will handle operations. You’ll have to set up customer service as well.
2. Duplicate FBA listings, then turn them into FBM: This is ideal if you’d like to sell a product on both FBA and FBM, such as if you want your own inventory to supplement FBA stock when it sells out.
3. Create a new FBM listing: We mentioned this earlier, but this is the most straightforward approach.

In addition, make sure your listings have the same relevant information as that of your FBA ones, including eye-catching visuals, strong written content, keywords, and an accurate item description. Include the price, condition, and quantity as well.

Fulfilling orders

When a sale goes through, you must fulfill your order quickly. First, pack your item according to Amazon’s packaging and prep guidelines. Here are the general requirements for this stage:

• Each FNSKU must be unique and correspond to one unique product. That means you must have a different number for every variation, such as size, color, etc.
• Each unit should have an accessible exterior label with a scannable barcode and matching readable numbers.
• Prevent the accidental scanning of incorrect barcodes during the receiving process by removing, covering, or rendering unscannable any located on shipping box exteriors.

Amazon also has specific instructions for loose products, items sold as sets, boxed units, bubble-wrapped merchandise, and the like.

Once packing is done, your chosen delivery service or 3PL will deliver orders to your buyers’ doorsteps. If any customer service issues arise afterward, you must process them, including requests for returns or refunds.

Tip: Work with MyFBAPrep to leverage our deep Amazon knowledge and extensive FBM warehouse network.

Amazon Fulfilled By Merchant Implementation

Implementing your FBM strategy can be difficult, but creativity and pre-planning step in to smooth the path forward.

Establish teams and processes

Coordinate your personnel and develop clear processes. This readies you to fulfill orders at any moment. For example, you could assign specific staff members to certain product lines with set protocols for them to follow.

Arrange your inventory systematically

Strategically organize your stored products in a way that’s easy for everyone to manage. You could place lower-volume products in less accessible spots, for instance, and high-volume ones at eye level near the front of your warehouse so packers can easily grab your bestsellers.

Stock up on materials in advance

Make sure you have the appropriate packing materials, labels, inserts, and other items you need for Amazon prep. Always keep adequate amounts on hand to avoid last-minute orders or trips to the store for boxes, packing tape, or bubble wrap.

Ensure proper fulfillment and tracking

Establish place systems for fulfilling and tracking your order progress. Will you handle this exclusively? Or, will you designate a team member to be responsible? Assigning roles and ensuring accountability will bolster your strategy. Remember, you don’t have to shoulder the burden alone; many sellers use 3PLs to streamline their processes and operations.

Prepare for Prime Day

Prime Day is Amazon’s biggest yearly shopping event, with its 2024 iteration smashing records for the platform:

• The two-day event saw more items sold than any previous Prime Day.
• Millions of people around the world signed up for Prime in the three weeks leading up to the event.
• Independent merchants alone saw over 200 million items sold during Prime Day.

It’s safe to say this event opens a massive opportunity for sellers, so taking advantage of it should be a key component of your FBM strategy. Here are a few tips on how you can prepare for Prime Day with FBM:

• To navigate Amazon’s FBA inventory limits effectively, supplement FBA with FBM.
• Keep most of your high-volume stock in FBA while having a backup supply ready in FBM.
• Place slower-moving stock in FBM, as you can sell it yourself without cutting into your restock limits.
• Identify lower-volume products in FBA, recall them, and create FBM listings for all items likely to sell out through FBA on Prime Day.
• Choose a 3PL that can handle your excess inventory and FBM orders.

When to choose FBM vs. FBA

At times, Amazon Fulfilled By Merchant will be more sensible than FBA and vice versa, but knowing when can be tricky. Several factors influence whether you should opt into either fulfillment method:

• Item exclusivity: If you sell something distinctive like handmade products, FBM may be better. FBA offers little in the way of personalization and branding, while FBM lets you build more credibility through unique packaging and inserts.
• Product size and weight: If you sell large or more expensive products that incur significantly higher FBA fees, FBM is the ideal choice. In such instances, it’s best to find a 3PL that either specializes in or supports your offering.
• Turnover rates: Products with slower sales velocities can rack up considerable storage fees in FBA. Instead, put them in FBM, where shipping is less overwhelming for low-turnover items. It also won’t diminish the standards Amazon and customers expect.
• Sales volume: Converse to the previous point, FBA is the stronger option for high-volume or best-selling products. Placing these items in the program also passes the bulk of your work onto Amazon, which reduces the burden of managing large numbers of deliveries. Further, the more you sell, the more customer support inquiries will pour in — which Amazon handles when you sell via FBA.

That being said, you can still manage high-volume offerings via FBM if you work with a 3PL that can expertly handle fulfillment.

• Operational capacity: The successful implementation of FBM requires the presence of warehousing and fulfillment infrastructures. Sellers who already possess this capability are well positioned to maximize FBM. Those who lack it, on the other hand, may benefit more from FBA.

Fees and pricing to keep in mind

FBM’s fees differ from FBA’s since you don’t purchase Amazon’s storage and fulfillment services. Instead, you’ll have to account for the standard costs of selling on Amazon. The three primary charges you’ll incur through the program are a monthly subscription fee, per-item selling fee, and referral fees.

Monthly subscription fee

• Professional Selling Plan: $39.99 per month. If you sell 40 or more products each month, this plan is more cost-effective.
• Individual Selling Plan: No subscription fee, but you have to pay the per-item selling fee instead.

Per-item selling fee

• Professional sellers: No per-item fee, since you shoulder the monthly fee.
• Individual sellers: $0.99 fee for each item sold. This is most cost-effective for low-volume or casual sellers.

Referral fees

When you list and sell your products on Amazon, every successful sale is considered a referral. The incurred referral fee will depend on the type(s) of product you sell, but it usually falls between 8% and 15% (with 30% and 45% on the higher end, as they’re tied to Amazon products).

Here are a few examples from popular categories:

• Video Game Consoles: 8%
• Business, Industrial, and Scientific Supplies: 12%
• Sports and Outdoors: 15%
• Pet Products: 15% (except 22% for veterinary diets)
• Gift Cards: 20%
• Amazon Explore: 30% for Experiences
• Amazon Device Accessories: 45%

Other categories, meanwhile, follow a structure where the referral fee percentage is based on the total sales price. Take these rates for Clothing and Accessories as examples:

• 5% for items with a total sales price of $15 or less
• 10% for items with a total sales price greater than $15 and less than or equal to $20
• 17% for products with a total sales price greater than $20

Lastly, keep in mind that Amazon charges an applicable minimum referral fee on a per-unit basis. It’s $0.30 across almost every category except Amazon Explore, which charges $2.

Additional fees

Anticipate charges outside of Amazon as well. When you choose to partner with a 3PL to handle FBM, you need to factor in storage and fulfillment expenses.

If you intend to store and fulfill customer orders on your own, calculate how much warehousing, packaging, shipping, and returns will cost. This will help you fully understand what solution is best for your bottom line. Look into opportunity loss, too; you’ll be spending your own time packing boxes and running to shipping supplies stores instead of growing your business.

Common Amazon Fulfilled By Merchant challenges

As with any strategy (including FBA), Amazon Fulfilled By Merchant has its challenges, all of which you’ll have to manage.

Bandwidth

One of the greatest challenges for small businesses using FBM for their Amazon sales is the time and effort needed to pick, pack, and ship items during busy periods. For lean teams, that can quickly become overwhelming, particularly with high-volume items. This, in turn, creates shipping delays that diminish the customer experience and potentially break compliance with Amazon’s shipping time requirements.

Shipping times

Two-day shipping has become the standard for online consumers thanks in large part to Amazon’s ability to offer same- and two-day delivery. However, that timeline may be unrealistic if you lack a strong supply chain network or shipping partner to support you.

Space

Leasing or owning warehouse space can be pricey, which is an obvious issue for smaller brands with limited resources. You also need a place to physically prepare orders for fulfillment. Adequate storage can thus be a major challenge for FBM sellers, especially those with high-volume businesses that keep large quantities of stock on hand.

Customer support

Direct access to your customers is an aspect of FBM that FBA sellers typically miss out on, as Amazon handles their customer service and support. However, that reach is a double-edged sword.

Customers can be needy, and handling their requests is time-consuming. Moreover, Amazon requires vendors to match their return, customer satisfaction, and timeliness policies, and that can be a major obstacle for FBM sellers.

No Prime badge

The previously mentioned lack of the Prime badge presents a couple of drawbacks:

• You miss out on Amazon Prime shoppers. Since they expect fast and free shipping, these shoppers may find your FBM products less compelling due to the absence of Prime eligibility.
• Fully enrolling for SFP may be difficult and time-consuming for those without proper storage and fulfillment networks. To pre-qualify, you must first meet certain speed criteria and SLAs over a 90-day span. Then, you’ll need to pass a 30-day trial with stricter standards.

After, you must continuously adhere to Amazon’s guidelines as a fully enrolled SFP seller. That means fulfilling nationwide orders on weekends while consistently meeting one- and two-day delivery promises.

Choosing a partner for your Amazon Fulfilled By Merchant strategy

If you’re worried about the challenges you may face when adopting an Amazon Fulfilled By Merchant strategy, look into contracting with a 3PL. An experienced partner can mitigate your concerns and support smooth operations.

MyFBAPrep specializes in handling fulfillment on behalf of Amazon sellers, ensuring products are properly and efficiently picked, packed, and shipped to customers for quick and seamless delivery.

We even offer services tailored to FBM and SFP, so you can diversify your fulfillment strategy, attain Prime-like shipping speeds, and obtain your Prime badge with ease.

If you’re looking for a 3PL that deeply understands Amazon’s requirements and helps you stay on top, reach out to us for a free quote.

Amazon Fulfilled By Merchant FAQs

We’ve taken a comprehensive look at Amazon Fulfilled By Merchant and how you can build a strategy around it. However, you may still have some concerns. To address them, we’ll cap things off by answering a few frequently asked questions.

1. Can I use both FBA and FBM for the same products?

Yes, you can. This hybrid approach could involve listing fast-moving inventory under FBA and backup stock under FBM in case the former sells out.

You can also keep high-volume goods in FBA for Prime customers and leave slower-moving items in FBM for better control.

2. Is FBM more cost-effective than FBA?

That answer depends on your business model. Sellers with established warehousing and fulfillment infrastructures tend to enjoy lower costs through FBM, especially for goods that would incur higher FBA storage fees (think large, heavy, or low-turnover items).

But, if you rely on Prime customers more or lack the resources to handle fulfillment, FBA would provide more value despite its fees.

3. Does FBM affect my chances of winning the Buy Box?

FBM can affect your Buy Box eligibility, as Amazon typically favors FBA listings due to the program’s fulfillment network speed and reliability. However, FBM sellers can compete by successfully enrolling in SFP and consistently meeting its standards.

4. How do FBM returns work?

FBM sellers are entirely responsible for handling customer returns. For effective reverse logistics, establish a strong policy that complies with Amazon’s guidelines and develop a seamless process for customers.

If handling returns proves to be too taxing, MyFBAPrep offers quality reverse logistics solutions as well.

5. How can I monitor my FBM performance?

Amazon provides a few tools that let you track your performance as an FBM seller:

• Fulfillment Insight Dashboard: Compare promised and actual delivery times to identify and address gaps, as well as boost sales.

• Account health: Monitor rates for late shipments, order defects, pre-fulfillment cancellations, and valid tracking all on one dashboard. You can also view your compliance with Amazon’s policies.

Wrapping up — Strengthen your eCommerce operations with Amazon Fulfilled By Merchant

Amazon Fulfilled By Merchant is a valuable fulfillment option that gives eCommerce businesses complete control over their Amazon operations. Although this model offers the flexibility to deliver more personalized, branded experiences to customers, remember that it also requires careful planning and execution to realize its full potential.

When incorporated thoughtfully into a comprehensive strategy, FBM can help optimize and grow your business on Amazon, whether you elect to handle fulfillment on your own or with a 3PL that perfectly matches and supports you.

Published: February 8, 2022
Updated: November 4, 2024