Although Amazon FBA is the main source of income for the majority of sellers, many have looked into alternative fulfillment strategies in order to maintain a profit due to Amazon's fluctuating restock limits, unforeseen occurrences like the pandemic, and significant supply chain disruptions.
We will cover all things related to Amazon Fulfilled by Merchant in this article. In place of using Amazon FBA, fulfilled by merchant entails shipping goods to Amazon customers directly. We'll go over how to begin using fulfilled by merchant as well as its benefits and drawbacks in comparison to other Amazon fulfillment strategies in this article.
in this article you will learn:
- What Is Merchant Fulfilled by Amazon?
- What is Seller Fulfilled Prime?
- Is My Entire Account Suspended If I'm Banned from Seller Fulfilled Prime?
- What Are Amazon FBM's Benefits and Drawbacks?
- Amazon FBM in contrast to FBA. versus Seller Completed Prime
- When Is It Time to Select Amazon FBM?
- How to Start Being Fulfilled by Merchant
- Conclusions
What Is Merchant Fulfilled by Amazon?
Order fulfillment is the responsibility of the third-party Amazon seller, known as Fulfilled by Merchant (FBM). This includes managing a warehouse or enlisting the help of a 3PL that is capable of handling, packaging, and delivery. It also entails handling returns or refunds on your own and offering customer service.
While Amazon FBA can handle all of these tasks on your behalf, the main benefit is that you maintain complete control over your entire fulfillment process. However, the largest drawback is that your products won't be eligible for Prime unless your Seller Fulfilled Prime (more on that in a moment), which can significantly lower conversion rates. You can still win the Buy Box even if you are not Prime eligible, but your chances of doing so are increased if you are.
What is Seller Fulfilled Prime?
Since its launch in 2015, Seller Fulfilled Prime has allowed you to fulfill orders from a third-party logistics provider (3PL) or your own warehouse while selling goods bearing the Prime badge.
SFP combines merchant fulfillment with Prime eligibility to make it profitable and competitive. The only drawback is that many sellers who initially enrolled in the program have been turned off by the somewhat strict requirements of SFP. It's unlikely that you will be eligible for Seller Fulfilled Prime if you're a brand-new Amazon seller, but more seasoned sellers might fit the bill.
Similar to FBM, Seller Fulfilled Prime works best for sales of high-value or seasonal goods, slow-moving goods, and goods that need special handling or preparation. It also works best for warehouse owners with well-established logistics systems. Although they are scarce, 3PLs that provide Seller Fulfilled Prime do exist.
Amazon fluctuates in when it opens and closes Seller Fulfilled Prime registration (they said they would reopen it in June 2023). However, there are fairly stringent requirements (which Amazon doesn't even regularly meet) if you're willing to sign up for their active waitlist. These requirements include shipping more than 99% of orders on time and having a 0.5% order cancellation rate. Refusing to comply with these requirements may lead to program suspension.
You have to be able to provide Saturday deliveries and nationwide coverage under SFP. Amazon will also require you to fulfill a minimum of 200 Prime orders with an on-time rate of 99%, Buy Shipping Services for at least 95% of Prime orders, and a cancellation rate of no more than 1% during a trial period that could last anywhere from five to ninety-nine days. During the trial period, the Prime badge will not be on your products.
Is My Entire Account Suspended If I'm Banned from Seller Fulfilled Prime?
Your account will usually not be suspended in its entirety if you do not meet the strict requirements for Seller Fulfilled Prime and your SFP privileges are revoked. Although you won't receive any more Seller Fulfilled Prime perks, you can still sell and, if you move to. You'll get your Prime badge back, FBA.
What Are Amazon FBM's Benefits and Drawbacks?
The benefits and drawbacks of using Seller Fulfilled Prime and, for the most part, Amazon FBM versus depending solely on Amazon for FBA are displayed in the table below.
The largest benefit of being FBM, as previously mentioned, is that you have complete control over your business and are not subject to Amazon's fluctuating restock limits. Additionally, SFP can occasionally be less expensive than FBA, particularly if you need to ship and store your inventory in several locations. Not only can FBA charge exorbitant storage fees and inbound shipping costs be prohibitive, but Amazon's restocking and storage policies are subject to abrupt changes.
However, for sellers who would prefer to concentrate more on developing their brand and less on logistics, FBA might make sense. For a fee, FBA also gives you access to Amazon customer service, which handles returns and customer complaints on your behalf. However, most sellers would argue that this service isn't particularly excellent.
Amazon FBM in contrast to FBA. versus Seller Completed Prime
For Amazon sellers, Fulfilled by Merchant (FBM) and Fulfilled by Amazon (FBA) are the two primary fulfillment options. Essentially, fulfillment by Amazon (FBA) entails paying a fee for Amazon to store, pick, pack, and ship your orders while also providing you with a few internal features that help your selling process run more smoothly. In contrast, FBM requires you to handle all of those tasks on your own or collaborate with a 3PL in order to fulfill orders on your own.
The third option is Amazon Seller Fulfilled Prime (SFP), which is essentially Fulfilled by Merchant but has Prime eligibility for possibly higher sales, as was previously mentioned. Despite being a good combination of FBA and FBM, SFP has quite stringent eligibility requirements as well as metrics that must be met in order to remain in the program.
This table illustrates the differences between FBM, FBA, and SFP.
Source: www.ecomcrew.com
When Is It Time to Select Amazon FBM?
For Amazon sellers, Amazon FBA remains the best option available. Most of the time, the seller tools and convenience that come with FBA outweigh the costs (even though fees are expected to rise sharply).
Having said that, there are some situations in which FBM makes far more sense. To keep ahead of the competition, some sellers also combine FBM and FBA.
FBM is the preferred technique these days for circumventing Amazon's stringent restock restrictions. You won't have to deal with the inconvenience of being unable to ship your inventory into Amazon warehouses if you choose to go FBM and manage your own warehouse (or partner with one). Knowing that lead times for shipments are taking significantly longer to arrive at and be checked into an Amazon warehouse, largely due to the global shipping crisis, makes this especially convenient during peak shopping seasons.
Make sure you know exactly how much your FBA fees will cost in comparison to what you would pay for FBM. This will make determining which fulfillment strategy is best for your company much simpler. Selling large or bulky products is a good example of this, as there are instances in which the FBA storage and handling costs for these large items are significantly higher than with FBM, and they might even be subject to Amazon shipping restrictions.
In addition to circumventing Amazon's restock limitations, FBM is advantageous for vendors whose goods are unique to their brands. For low-volume or low-margin products, where sellers do not really need to rely on Amazon for pick, pack, and shipping, it is also the only viable option.
How to Start Being Fulfilled by Merchant
Fulfilled by Merchant is the standard fulfillment option for new sellers. The first few steps are pretty much the same as if you choose to use FBA, including creating an account and listing your products. For a thorough tutorial on getting started with Amazon selling, see our Ultimate Guide to Selling on Amazon.
In order to store and process orders on your behalf, you must also have a well-managed warehouse or a dependable third-party logistics provider. We cover the factors you should take into account when searching for a 3PL, such as their capacity, location, and pricing, in our guide, How to Find a Great 3PL.
Additionally keep in mind that handling all after-sales customer service issues with FBM, such as returns, refunds, and other customer grievances, is your responsibility. When a customer uses FBM, Amazon instantly provides them with a pre-made return label along with your address when they request a product return.
Conclusions
As an alternative to FBA, Fulfilled by Merchant or Seller Fulfilled Prime are a good way to avoid restock restrictions and stay ahead of the competition during busy shopping seasons or emergencies. Even though your operating costs under FBM could have easily covered the FBA fees you would have paid, having an effective system could result in future savings of thousands of dollars.
A comparison of the costs, potential sales, and drawbacks of each fulfillment method should be made when choosing between FBA and FBM. To ensure that inventory never runs out, you might also think about combining FBM and FBA.
