Mastering the Fulfilled by Merchant (FBM) Model on Amazon: A Comprehensive Guide

The Fulfillment by Amazon (FBA) program has long been a popular choice for sellers, offering the convenience of Amazon’s logistics and customer service. However, the COVID-19 pandemic has highlighted the importance of diversifying fulfillment strategies and maintaining greater control over the supply chain. Enter the Fulfilled by Merchant (FBM) model, which empowers sellers to manage their own inventory and shipping processes. In this comprehensive guide, we’ll explore the FBM model, its advantages, costs, and best practices to help you make an informed decision for your Amazon selling business.

Understanding the Fulfilled by Merchant (FBM) Model

The FBM model, also known as Merchant Fulfilled Network (MFN), puts the responsibility of order fulfillment squarely on the shoulders of the seller. This includes sourcing, packing, shipping, and handling customer service and returns. Unlike the FBA model, where Amazon handles these aspects, FBM sellers maintain complete control over the entire fulfillment process.

While this approach requires more hands-on involvement, it also offers several advantages, such as reduced Amazon fees, greater flexibility in packaging and shipping, and the ability to leverage existing logistics infrastructure. Additionally, FBM allows sellers to maintain direct customer relationships, enabling them to provide personalized service and gather valuable feedback.

Advantages of the FBM Model

1. Cost Savings: By handling fulfillment yourself, you can potentially save on Amazon’s FBA fees, which can be substantial, especially for oversized or heavy items. This can lead to higher profit margins and increased competitiveness.

2. Inventory Control: With FBM, you have complete control over your inventory, allowing you to implement your own inventory management strategies, minimize storage fees, and respond quickly to fluctuations in demand.

3. Branding and Customer Experience: FBM enables you to maintain your brand identity throughout the customer journey, from packaging to customer service. This can enhance customer loyalty and provide valuable insights into customer preferences and experiences.

4. Flexibility: By managing your own fulfillment, you can experiment with different packaging options, shipping carriers, and even explore new fulfillment models, such as buy online, pick up in-store (BOPIS).

5. Reduced Reliance on Amazon: While Amazon is a powerful platform, FBM allows you to diversify your sales channels and reduces your dependence on a single platform, mitigating potential risks.

Costs Associated with the FBM Model

While the FBM model offers potential cost savings, it’s essential to understand the associated expenses to make an informed decision. Here are the primary costs to consider:

1. Selling Subscription: Amazon charges either $0.99 per unit sold or $39.99 per month for a Professional Seller account, which is typically required for high-volume sellers or those running promotions and utilizing Amazon’s API.

2. Referral Fees: Amazon charges referral fees on each sale, ranging from 6% to 45% depending on the product category. These fees are unavoidable, whether you fulfill orders yourself or through Amazon.

3. Fulfillment Costs: As an FBM seller, you’re responsible for shipping, inventory management, storage, packaging, returns handling, and any additional kitting expenses. These costs can vary significantly based on your business model and logistics setup.

4. Labor and Overhead: If you’re handling fulfillment in-house, you’ll need to account for the cost of labor, warehouse space, and other overhead expenses associated with order processing and shipping.

It’s crucial to carefully analyze these costs and compare them to Amazon’s FBA fees to determine the most cost-effective approach for your business. Additionally, consider leveraging tools like Hivearchive’s Profit Tracker to gain insights into your sales data and profitability over time.

Best Practices for Successful FBM Implementation

Transitioning to the FBM model requires careful planning and execution. Here are some best practices to ensure a smooth and successful implementation:

1. Optimize Your Logistics: Partner with reliable shipping carriers and explore options like Amazon’s Buy Shipping feature to streamline the fulfillment process and ensure timely deliveries with tracking information.

2. Implement Efficient Inventory Management: Invest in robust inventory management systems and processes to maintain accurate stock levels, minimize overselling, and promptly fulfill orders.

3. Streamline Order Processing: Develop efficient workflows for order processing, picking, packing, and shipping to maintain high levels of customer satisfaction and minimize delays.

4. Prioritize Customer Service: Establish clear return policies, provide prompt and effective customer support, and gather feedback to continuously improve your processes and customer experience.

5. Leverage Technology and Automation: Explore tools and software solutions that can automate various aspects of your FBM operations, such as inventory management, order processing, and shipping label generation, to increase efficiency and scalability.

6. Monitor Performance and Adjust: Regularly review your FBM performance metrics, such as shipping times, customer ratings, and profitability. Use these insights to identify areas for improvement and adapt your strategies accordingly.

Conclusion

The Fulfilled by Merchant (FBM) model on Amazon offers a compelling alternative to the traditional FBA approach, providing greater control, cost savings potential, and flexibility in fulfillment strategies. However, its success hinges on careful planning, efficient logistics, and a customer-centric mindset.

By understanding the advantages, costs, and best practices outlined in this guide, you can make an informed decision about whether the FBM model aligns with your business goals and operational capabilities. Remember, tools like Hivearchive can assist you in tracking your sales data, profits, and overall performance, empowering you to optimize your Amazon selling business continually.

Ultimately, the choice between FBM and FBA depends on your unique circumstances, priorities, and willingness to take on the responsibilities of order fulfillment. Embrace the approach that best suits your business needs while remaining agile and adaptable to navigate the ever-evolving landscape of eCommerce.