What Is FBM?
Millions of e-commerce retailers rely on the Amazon marketplace to sell products and grow their Amazon customer base. There are two fulfillment options to achieve this: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Though there are benefits to both fulfillment services, we’ll explore the pros and cons of an FBM seller and which businesses would benefit most from this option.
What Is FBM?
As the name suggests, FBM is a fulfillment method in which a seller lists their products on Amazon’s platform, but decides to take on the fulfillment process themselves. The Amazon FBM seller is responsible for picking, packaging, and delivering orders on time. They’re also in charge of handling returns and customer service questions. In contrast, as an FBA merchant, Amazon fulfillment takes care of the entire process.
Those considering going the FBM route must have enough storage space to secure their inventory, as well as reliable shipping partners that are cost-effective and can pick-up and deliver on time. This option is best suited for businesses with products that have a lower volume of sales or products with a lower profit margin, where saving on warehousing and storage fees is valuable.
How Much Does FBM Cost?
Regardless of whether you choose to operate as an FBM or FBA seller, you must first choose a sales plan through Amazon. An Individual sales plan costs $.99 per item plus additional sales fees, and a Professional sales plan costs $39.99 per month plus additional sales fees. In general, the Individual plan is best suited for businesses selling less than 40 units per month and handling the shipping costs on their own.
All Amazon sellers are also responsible for paying the referral fee, regardless of whether the fulfillment process is performed by Amazon or the seller. Referral fees are applied to each item sold. Referral fees equal a percentage of the total sales price or a minimum amount, whichever is greater, that must be paid to Amazon, in addition to the monthly sales plan fees. These percentages vary by item category. For example, the referral fee for home and kitchen products is 15%.
While FBM sellers are responsible for their own packaging and shipping costs, they do not incur the additional fees FBA sellers do. These include: labeling fees, packaging fees, returns processing fees, long-term storage fees, and stock removal fees. Since Amazon is responsible for millions of merchants who are selling on the Amazon marketplace, maintaining the convenience and efficiency of storing, shipping, and handling returns is built into every part of the Amazon FBA fee.
Amazon FBM Benefits
There are benefits that apply to every Amazon seller. These include building a strong brand, getting strategic advice through Amazon’s seller tools and services, and reducing unexpected costs that can pop up through Amazon FBA. Starting out as an Amazon FBA seller is helpful as entrepreneurs begin to learn the process of e-commerce fulfillment service and grow their brand.
Another FBM benefit is that sellers have more control over their e-commerce business and oversee everything that goes in and out of their store, while also alleviating many of the costs that come with selling as a FBA merchant. However, it takes a lot of time and effort to accurately track inventory, work with shipping vendors, and ensure products are delivered timely to customers without the help of a third party.
Making the Switch to FBA
When it comes to comparing FBM to FBA, one is not necessarily better than the other. It depends on the state of your business and the growth you’re expecting. As you begin to make more Amazon sales and expand your audience base, it can become overwhelming to keep track of all your inventory and oversee picking, packaging, and shipping on your own.
Making the transition from a FBM seller to a FBA seller makes sense as your brand grows. Having a reputable third party available to help you with logistics management lifts a huge burden, which frees up time to concentrate on marketing, product research, and other business development strategies.
Furthermore, if your ultimate goal is to sell your e-commerce business or want to explore that option down the road, many buyers have specific criteria that must be met. At Forum, we require e-commerce brands to have 70% or more of their sales come through Amazon FBA, with at least $200K in annual profit within the past year.
This level of growth and success requires delegating different parts of the process to third-party solutions. FBM is typically more feasible in the beginning stages of launching your e-commerce store, as you’re becoming attuned to the Amazon business and the resources available. Once your brand becomes more sophisticated, you may decide FBA is the better fit for you.