To FBA or FBM on Amazon? – Part II: FBM

By Tina Marie Bueno | February 2nd, 2016

In Part I of this article we reviewed the pros and cons of having Amazon fulfill your orders (a.k.a. FBA). Now let us look at the pros and cons of FBM (Fulfilled by Merchant) which is when the Seller sends orders directly to customer.

Why would a Seller consider FBM? In my conversations with merchants who have niche products with short expiration dates; they chose this option. Also, some merchants with super fragile products prefer shipping directly to the customer, avoiding that extra stretch of transporting to an Amazon warehouse and less handling. But that certainly isn’t always the case.

Is FBM a more viable option for your Amazon business? Consider this…

FBM Pros:

  • Immediate Product Availability. Since you have the inventory within reach, as soon as it is listed there are no delays in product availability. That cuts the waiting period by at least 2 weeks if shipped in to Amazon.

  • Fewer Amazon Fees. For Sellers subscribed to the Professional Plan ($39.99/month), Amazon charges a Referral and Variable fee on every unit sold. For Sellers registered on the Individual Plan, there is a $0.99 fee as well as the Referral and Variable fees. Customers pay for postage. Remember, the Seller determines how postage should be calculated, so be sure your actual shipping cost is covered. Go to Shipping Settings under the Settings tab of the Seller account to set up your rates.

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If postage was bought from Amazon to send out an order, then a small fee is added to the “stamp” cost for that service.  

Lower charges can possibly mean greater margins; however, figure out if the cost savings is worth your time and effort required to manage the fulfillment process. After all, overhead costs could replace the money saved from fewer FBM Amazon fees.

  • More Control. The Seller controls inventory, shipping, and customer service, giving you the freedom to run your business exactly the way you choose.

  • Prime Members Access. While FBM Sellers definitely have to work harder to access Prime members; it’s not an exclusive FBA Seller’s club. Some FBM Sellers bring their A-game by fulfilling orders quickly, offering fast delivery options, and handling customer complaints efficiently and effectively — to be more specific, they respond on par with how Amazon does for FBA Sellers.

If an FBM Seller avoids delays in shipping or responding to customers, then Seller Ratings and possibly Product Ratings could earn high quality customer responses. Building your reputation as a company is mission critical. Why? Because Amazon’s reputation is already a well established brand and everyone knows they are customer centric. They simply have all of the resources available to back up any of their customer service responses. A small FBM business must maintain a “What would Amazon do?” attitude and respond comparably to compete.

If you have had stellar performance as an FBM Seller, then Seller Fulfilled Prime may be ideal for your business. It is a relatively new beneficial program for FBMers looking to directly compete with FBA Sellers and have equal access to Prime members.

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According to Amazon, to be eligible, Sellers must satisfy the following criteria:

  • Have an active and in good standing Professional Plan.

  • Be enrolled in Premium Shipping (Same-Day Delivery, Two-Day Shipping, or both).

  • Have fulfilled at least 30 Premium Shipping orders over the last 30 days.

  • Have at least one of the approved Buy Shipping Service carriers (currently UPS, USPS, and FedEx) that must pick up at the Seller’s location at or after 4:00 p.m. local time.

In addition, Sellers must meet or exceed the following performance requirements:

  • Customer Feedback: 4.5 stars or higher.

  • Performance metrics (for the trailing 30 days) that meet or exceed:

    • A valid tracking ID provided for at least 94% of Premium Shipping orders

    • An on-time delivery rate of at least 96% for Premium Shipping orders

    • A cancellation rate of less than 1% on Premium Shipping orders

  • If your FBM services don’t quite meet Amazon’s criteria for this program, at least use it as benchmark standards for your own services in order to compete with FBA Sellers.

Of course there are conditions to using this program:

  • Sellers must purchase all shipping labels for orders containing a Prime item through Amazon’s Buy Shipping Service.

  • All post-order contacts regarding Prime items will be directed to Amazon Customer Service.

  • A guaranteed delivery date message will be displayed on the item detail and checkout pages for all Prime items eligible for Two-Day or faster shipping.

  • To ensure a great customer experience, all Prime items are subject to Amazon’s return policies.

  • In most cases, Sellers are responsible for the return shipping cost of any Seller Fulfilled Prime items that buyers return.

FBM Cons:

  • Seller Ratings & the Buy Box Challenge. Since FBM Sellers are in charge of shipping products without a delay, handling any returns and customer service issues in a timely manner; this puts all of the pressure on you. Any and all Seller Health ratings affect your product listing in searches and possibly the Buy Box. Too many errors and Amazon could suspend your Seller account, even permanently. Responding to Buyer Messages within 24 hours is extremely important when it comes to your Account Health calculations. This means covering weekends and holidays too.

  • Lost Sales for Closed Days. If you are a small business and close up shop seasonally like many manufacturers do, this means turning off your product availability. Unless the product is unique, buyers will go elsewhere and rarely wait around for your return. There is some recovery time to rebuild momentum which extends beyond the actual closed days.

  • Lower Selling Price. To move higher in a product listing or even vie for the Buy Box can also mean keeping your price relatively low. Prime members are actually willing to pay more for an FBA product so your price (including shipping) has to be luring enough to grab their attention. Although you may be paying fewer Amazon fees with FBM, competing with lower pricing may offset that pro.  

For products selling at $35 or more, Amazon buyers may qualify for free shipping which is somewhat helpful when competing with an FBA product. I say “somewhat” because although the shipping is free, a Prime member buying an FBA product automatically gets 2 day free shipping. This circles back to earlier comments about competing with fast delivery options.

What Works Best For You?

Fortunately, this isn’t an all or nothing scenario. You can be both an FBAer and FBMer.

Another thing to keep in mind is that a Seller can also make a product available both FBA and FBM. This will list you as the Seller twice on the same listing. If you are the only Seller, then it doesn’t make sense to do so, especially if you have Brand Registry, Frustration Free Packaging, and Bundling. However, if there is plenty of competition, then having your company show up twice on the list of buying options may be a good plan as long as you can manage both FBA and FBM orders.

Tina Marie Bueno
Tina Marie Bueno is a global citizen with an MBA in Int’l Business plus over 20 years of content marketing experience both in the U.S. and overseas.  As iLoveToReview’s Marketing Director, she strives to deliver relevant content to serve Amazon businesses of all sizes.