Sellers on Amazon have two main choices for their order fulfillment: Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM). Over the past year and a half, many sellers have been forced to rethink their fulfillment strategies as a result of the COVID-19 global pandemic, worldwide supply chain upsets, and Amazon’s own restrictions for FBA and warehousing.

If you previously used FBA exclusively, or if you’re still learning the ropes of fulfilling orders yourself, this Amazon FBM 101 article is for you.

Fulfilling your own orders can be complicated: You have to deal with Amazon prep guidelines, finding a reliable third-party logistics partner (3PL), customer service, tracking, returns, and more. It’s no wonder many sellers feel overwhelmed.

The good news is that FBM doesn’t need to be overwhelming — if you know what you’re doing.

Read on to learn everything you ever need (or want) to know about FBM.

What is FBM?

Fulfillment by Merchant (FBM) means you, the seller, are responsible for every element of your shipping and handling process. Instead of paying a service fee and shipping your inventory to Amazon distribution centers for fulfillment, you rely on your own resources to prepare and ship items directly to buyers. With FBM, you have complete control over this entire process, from purchasing to shipping and receiving, as well as customer service and managing returns.

Contrary to this description, FBM doesn’t necessarily mean you go it alone. Many sellers choose to work with 3PLs like MyFBAPrep to enable and support the fulfillment process.

FBM is not Seller Fulfilled Prime

It’s important to note that FBM is not the same as Seller Fulfilled Prime, which allows merchants to fulfill on their own and display the Prime badge on their non-FBA listings as long as they meet certain speed requirements and SLAs.

Seller Fulfilled Prime requirements include:

• Offer Premium Shipping Options
• Ship over 99% of your orders on time
• Have an order cancellation rate of less than 0.5%
• Use Amazon Buy Shipping Services for at least 99% of orders
• Have nationwide delivery coverage for all standard-sized products
• Use shipping methods that support weekend delivery and pickup (Saturday or Sunday)
• Meet targets for one-day and two-day delivery promises
• Deliver orders with our supported Seller Fulfilled Prime carriers
• Seller must agree to the Amazon Returns Policy
• Allow for all customer service inquiries to be dealt with by Amazon

FBA vs. FBM

Both FBA and FBM share the same goal: to get your items to your buyers quickly and efficiently. Both methods can achieve this, however, your business’ role and degree of involvement in each differs.

For starters, Amazon manages all FBA products. You send products to a designated Amazon fulfillment or distribution center and Amazon then picks, packs, and ships products when they sell. If any returns come in or customer service issues arise, Amazon handles those, too.

FBA products are displayed automatically with Prime badges to Prime members, and shipment often adheres to the famous two-day Prime shipping. This is in contrast to FBM, where sellers are in charge of these aspects of the order fulfillment process.

According to Jungle Scout, other key differences between FBA and FBM include:

• FBM sellers enjoy more revenue, with 33% earning more than $25K monthly versus 26% of FBA sellers.
• FBM sellers launch their Amazon businesses faster, with more than half going live within six weeks.
• Finally, FBM sellers spend more time on their business, with 20% investing more than 40 hours a week, compared to 16% of FBA sellers.

Pros and cons of FBM

If you’re trying to decide between FBA and FBM, it’s important to review their pros and cons and see how well they meet your expectations. Choosing your fulfillment strategy, either FBM or FBA, comes down to the unique needs of your business, and it’s likely those needs will change over time, which means your strategy will, too.

The most obvious challenge of FBM is that you’re responsible for figuring out the logistics, warehousing, preparation, and customer service required for your Amazon sales. On the other hand, this also means you have all the power.

Advantages of FBM

• Total control of every aspect of your business
• Better margins and cushions
• Reduced risk of unavoidable losses due to Amazon policy changes
• Less paperwork and processes to deal with, freeing up time to spend on other activities
• More easily build a relationship directly with your customers
• Freedom to run your business as desired
• You know exactly what’s in stock, what’s selling, and what changes you need to make to ensure ongoing success because you manage operations from end to end
• You can choose a 3PL tailored to your needs to support your fulfillment strategy

Disadvantages of FBM

• When everything is in your control, it’s also on you to fix it when things go wrong
• For high-volume businesses, fulfillment can be an enormous task (and even an entirely separate business you have to run on the side)
• If you’re not properly set up, you could run into big, unexpected costs
• You have a lower likelihood of winning the Buy Box
• You need enough space to prep, store, and package your inventory neatly and systematically
• Overhead fees for warehousing, staff, and shipping can outweigh FBA pricing if you aren’t careful
• You need to find a reliable logistics network, or risk late deliveries

Creating your FBM strategy

Your FBM strategy will be unique to your business and will include many moving parts. We recommend using a combined approach of both FBA and FBM to streamline your operations and maximize your efficiency and sales.

FBM setup in a nutshell

When you sell using FBM, assuming you already have an Amazon seller account, you simply list a product to sell and select “FBM” as your fulfillment channel. Your FBM product listings should have the same relevant information as your FBA listings: great visuals, strong written content, keywords, and an accurate item description. You’ll also include the price, condition, and the quantity.

When a sale goes through, you need to fulfill your order quickly. To start, you must pack your item according to Amazon’s prep and packaging guidelines. Your chosen delivery service will then get your product to your customer’s doorstep. If customer service requests arise, you’re responsible for those as well, and you’ll need to process returns and refunds when they occur.

FBM implementation

Implementing a strategy is often a difficult task to accomplish, and this is where a little creativity and pre-planning come into play.

To implement your FBM strategy, coordinate your teams and processes so you’re ready to fulfill an order at the drop of a hat. Strategically organize your products in storage into a system that’s easy for you (and your team) to manage. This could include placing lower-volume products in a less accessible spot, and high-volume products at eye level near the front of your warehouse so you can easily grab your best-sellers.

Ensure you have the appropriate packing materials, labels, inserts, and any other items you need for your Amazon prep on hand to avoid last-minute trips to the store for things like boxes, packing tape, or bubble wrap.

Finally, establish a process for fulfilling and tracking your order progress. Are you handling this exclusively? Or is a team member going to be responsible? Assigning roles and accountability is an important step in implementing your strategy.

And don’t forget — you don’t have to do it all alone.

When to choose FBM vs. FBA

At times, FBM will be more sensible for you than FBA and vice versa, but knowing when can be tricky.

If you sell exclusive items such as handmade products, FBM can be the better option. An FBA seller has little chance of winning a deal because FBA can deliver more quickly, and you can build your brand and credibility using unique packaging and inserts.

FBM is also a good solution if you sell large or more expensive products, which carry significantly higher FBA fees. In these instances, it’s best to find a prep partner and 3PL that specializes in this type of product to support your needs.

Small-volume businesses would benefit from using FBM as well, since shipping isn’t an overwhelming task and won’t impact the standard Amazon and customers expect.

Similarly, FBM is a great solution for your lower-volume products (those that don’t fly off the online shelves and might incur higher long-term FBA storage fees).

That means FBA is a good bet for your highest-volume and best-selling products. This puts the bulk of your work onto Amazon and reduces the burden of managing a high volume of deliveries. Not to mention, the more you sell, the more likely customer support inquiries will pour in, which Amazon handles when you use FBA.

Of course, you can expertly manage even your high-volume products via FBM if you work with a 3PL who can handle fulfillment on your behalf.

Fees and pricing to keep in mind

FBM comes with a different set of fees from FBA, since you aren’t purchasing storage and fulfillment services from Amazon. Instead, you’ll have to deal with the standard cost of selling on Amazon.

The three main fees to keep in mind are a monthly subscription fee, referral fees, and per-item selling fee.

Monthly subscription fee

Professional Selling Plan: USD $39.99 per month. If you sell 40 or more products every month, this one would be the most cost effective.

Individual Selling Plan: No subscription fee, but you need to pay the per-item selling fee instead.

Per-item selling fee

Professional sellers: No per-item fee, as you would be paying the monthly fee.

Individual sellers: USD $0.99 fee for each item sold, so this is most cost effective for low-volume or casual sellers.

Referral fees

When you list and sell your products on Amazon, every sale made is considered a referral. Amazon’s referral fee will depend on the type(s) of product you sell and usually falls between 8% to 15% (with 30% and 45% being on the higher end, associated with Amazon products).

Additional fees

If you choose to partner with a 3PL to handle your Amazon FBM, you need to factor in expenses like storage and fulfillment costs. If you store and fulfill sales on your own, look into these fees to understand what strategy or solution is best for your bottom line.

Don’t forget opportunity costs, too — you’ll be spending your own time packing boxes and running to shipping supplies stores instead of growing your business.

Common FBM challenges

As with any strategy (including FBA), FBM comes with a few challenges that need to be managed and mitigated.

Bandwidth

Perhaps the greatest challenge for small businesses using FBM for their Amazon sales lies in the bandwidth needed to pick, pack, and ship items during busy times.

For lean teams, this can quickly become overwhelming with high-volume items, which, in turn, creates shipping delays that diminish the customer experience and potentially breaks compliance with Amazon’s shipping time requirements.

Shipping times

Two-day shipping has become the standard expectation for Amazon buyers, but this timeline may be unrealistic if you lack a strong supply chain network or shipping partner to support you.

Read: What to look for in a third party logistics provider

Space

Storing items takes up space, and leasing or owning warehouse space can be pricey. Additionally, you need a place to physically prepare those orders for fulfillment.

Adequate warehouse real estate can be a major challenge for FBM sellers, especially those with high-volume businesses that keep large quantities of stock on hand.

Customer support

Both a challenge and a perk, direct access to your customers is an FBM characteristic typically not experienced by FBA sellers since Amazon handles customer service/support.

However, customers can be needy, and handling their requests can be time-consuming. Since Amazon requires vendors to match its return, customer satisfaction, and timeliness policies, this can produce a major challenge for FBM sellers.

No Prime badge

Unless you’re already a member of Seller Fulfilled Prime (there’s currently a waitlist and Amazon doesn’t appear to be expanding the SFP program), missing out on that Prime badge can be a drawback for FBM sellers.

However, your FBM products can still offer free two-day shipping or any other free shipping speed that works for you. Once you’ve consistently met the Seller Fulfilled Prime requirements you can then consider applying for the program to get the Prime badge.

Choosing a partner for your FBM strategy

Even if you use FBM for some or all of your Amazon selling, you can still seek outside help. A partner like MyFBAPrep specializes in handling fulfillment on behalf of Amazon sellers to ensure products are picked, properly packed, and shipped quickly to customers for a seamless and efficient experience. Better still, a great partner will help mitigate the challenges outlined above.

Look for a partner who understands Amazon’s requirements and who will help you stay on top of policy changes as they arise so you remain in compliance. Depending on your business, you may need a nationwide or even global network to support your sales processes. A good 3PL partner will also advise you when to make changes to your business, such as switching a product to FBA.

Wrapping up — Strengthen your eCommerce operations with FBM

Fulfillment by Merchant is a great way to manage your Amazon business needs and to differentiate yourself from other sellers. It also allows you to develop a more personal connection with your customers so you can build strong relationships and establish trust and loyalty among Amazon buyers.

With a bit of pre-planning and a solid strategy in place, FBM can be an effective way to grow your business and give you more control over your Amazon store, whether you elect to handle fulfillment on your own or with a 3PL partner to support you.