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What is Amazon FBM, And How Does It Work?

Amazon fulfillment by the merchant, or FBM, is a fulfillment method where you, as a seller, are responsible for distributing your product to your customer base directly; this includes controlling, handling, and shipping to your buyer.

Whether it is through self-fulfillment or a 3PL (third-party logistics company), Amazon plays no part in the physical distribution of the product.

So what exactly does FBM look like?

Step 1: Your product is listed on Amazon

After setting up and activating your Amazon Seller Central account, you can begin listing your products. This will include displaying all helpful information associated with your product, including images, videos, and details that you will need to encourage conversion and get eyes on your store.

Step 2: Warehousing your products

One way Amazon FBM and Amazon FBA differentiate is whether or not your products get sent to a warehouse.

Amazon FBA will require you to pay a fee to ship inventory to an Amazon warehouse and have Amazon carry out the rest of the fulfillment procedure–including warehousing.

Amazon’s FBM requires you to control your fulfillment. That is inventory storage, handling, processing, and shipping. As an FBM seller, you may choose to warehouse your products in your own home if you are a growing business with small inventory quantities, but as your business grows, you may decide to rent strategic storage locations that are beneficial in reducing your shipping costs to buyer costs.

One great way of saving on shipping costs is by leveraging a 3PL.

Step 3: Shipping out your orders

If you are outsourcing to a 3PL company, shipping out your orders will be very smooth and time-efficient. Your 3PL will cover all the logistics related to processing, handling, and shipping without you having to worry about any ground-level logistics.

If you choose to go down a non-3PL route and ship yourself, then you will have to figure out which carrier is best suited for your shipping needs. If you’re looking to ship local, here are some great ways to reduce shipping costs.

What Are The Key Differences Between Amazon FBM And FBA?

Degree of control over the customer experience

FBM allows you to have more freedom and more connection with your customer base, giving you control of your customer service and how you deliver on your overall customer experience. You will not get tied down within the Amazon ecosystem and can leverage fantastic customer services partnerships and software outside of Amazon.

FBA sellers, on the other hand, have very little to no interactions with their customers as all interactions occur between the customer and Amazon directly with them handling all customer experience; this can be beneficial depending on how “hands-on” you want to be.

Total Revenues

According to statistics, 33% of FBM sellers earn more than $25,000 per month in revenue compared to 26% of FBA sellers.

53% of FBM sellers have total lifetime sales over $100,000, versus 46% of FBA sellers who claim the same revenue.

FBM sellers tend to receive more orders, while FBA sellers can list their products at higher prices and win the Big Box. However, since FBM sellers do not pay the FBA fees, they earn slightly higher profit margins, but this varies from product to product.

Predictability in costs

Selling FBM, whether on your own or through a 3PL, gives you the advantage of having no unexpected costs associated with doing business on Amazon. This is an advantage that FBA sellers do not always have.

  • Policy changes that Amazon makes may result in unanticipated losses for FBA sellers.

Brand-building

Since FBM sellers can connect with their customers directly, delivering your own authentic customer service provides you with an avenue to build your brand.

Although you utilize Amazon as a middleman to facilitate the transaction, further interactions with your customer base are your responsibility. This is very important in the long run as it builds a connection with your customer base and a sense of community with it.

Degree of business freedom

Without the burden of the strict Amazon FBA requirements and policies imposed on you as an entrepreneur, you can run your business on your own terms through FBM.

In this case, you should ask yourself what your priorities are as a business owner. If you are more concerned with order fulfillments, you may choose FBA and have Amazon distribute your products.

On the other hand, if you want to build your business brand in the long term, you may want to consider FBM.

Starting Speed

It’s common knowledge that FBM sellers start selling much faster on Amazon than FBA sellers.

Here are the statistics:

  • 51% of FBM sellers took less than six weeks to get started on Amazon in comparison to 34% of FBA sellers
  • 28% of FBM sellers began earning a profit in less than three months versus 20% of FBA sellers

Product listing diversity

Statistics show that 59% of FBM sellers have more than 50 product listings versus FBA sellers, with 53% having less than ten products listed.

It has also been shown that FBM sellers have a higher presence within all Amazon categories than FBA sellers.

Generally speaking, FBM sells more in quantity than FBA.

What are the Amazon FBM fees?

Amazon FBM fees are all the fees associated with selling through Amazon, including any possible storage costs, plus the shipping costs that FBM sellers incur.

Listed below are common Amazon FBM fees;

Cost #1: Monthly Subscription Fee

Professional Plan: $39.99 per month

Individual Plan: $0.00 per month

Cost #2: Per-Item selling fee

Professional Plan: $0 per unit sold

Individual Plan: $0.99 per unit sold

Cost #3: Referral Fee

Amazon collects a 15% rate for every purchase transaction.

However, in categories such as Personal Computers, the referral fee may reach as low as 6% or as high as 45% for Amazon Device Accessories.

Cost #4: Shipping Fees

Typically, the average parcel may cost anywhere between $7-$15, give or take depending on the size of the parcel, destination, carrier and so forth. This will also vary depending on when and where the product is being shipped. However, here are some general costs that you may incur.

  1. Weight of package
  2. Parcel dimensions
  3. Delivery time
  4. Packaging and Supplies
  5. Parcel pick up, pack and dispatch
  6. Courier collection and parcel delivery
  7. Import/export fees associated with an international shipment
  8. Shipping insurance (if applicable)
  9. Shipping-related charges such as package return or refusal (if applicable)
  10. Fulfillment

In terms of fulfillment, you are essentially presented with 3 options:

  • Amazon FBA: Where Amazon is responsible to fulfill the costs
  • Amazon FBM: Where you are responsible to fulfill the costs
  • Outsourcing to a 3PL: Where your 3PL company (such as AMZ PREP) will fulfill the costs

Potential fees associated with international shipping may include:

  1. Potential peak seasonal surcharges
  2. Ocean or air freight charges
  3. Cargo insurance
  4. Pickup fees
  5. International ship and port facility security code
  6. Terminal Handling Charges
  7. Customs duty

Note: Amazon FBM fees will vary based on the weight and size of your product and the season of the shipment.

Switching the FBM May Just Be The Best Option For You; Here’s Why.

Inventory Issues

During the first waves of the COVID-19 global pandemic, Amazon implemented ASIN-level quantity limits on FBA products. ASIN or Amazon Standard Identification Number (ASIN) is a unique, ten-digit alphanumeric code identifying each product on Amazon.

Until FBA sellers were able to increase their IPI (inventory performance index) scores, they were limited to 200 units stored at Amazon warehouses during a time where eCommerce was substantially growing; this put stress on many vendors.

As of April 2021, this storage limit was altered from ASIN-level to storage-level. Therefore, instead of being limited to the quantity stored per unit, you are limited to the amount stored based on product size.

Fulfillment by the merchant, on the other hand, does not rely on Amazon warehouses for storage and are not subject to such limitations. Whether storing at home or partnering with a 3PL, you will avoid this restriction.

Q4 Peak Season

Christmas time will always be the big payday month for eCommerce shop owners, and Amazon is not an exception. With the rise of digital shoppers, more and more people are looking online to fulfill their shopping needs.

However, with the rise of demand comes the need for supply, and this has put a ton of sellers in a stressful situation–if they can’t meet the supply needs of the modern consumer, they will lose out on business. Pair that with the need for quick and reliable shipping, and you can see how selling online can be a tough challenge.

So what can you do to stay ahead of the competition?

For one, inventory outages are not a very good thing for your business ranking. Amazon favors sellers who can restock inventory promptly since more sales results in more revenue for Amazon.

Not correctly managing inventory will lead to the loss of:

  1. Potential Sales
  2. Ranking on Amazon
  3. Competitive Edge
  4. Buyer Trust

You may also have to start worrying about delays in shipping since eCommerce demand is high and transit is scarce.

Remember, Amazon is composed of millions of vendors, all looking to fulfill their orders in the most efficient and timely manner possible. Therefore, your FBA competition during Q4 is higher compared to the rest of the year.

FBM avoids this since you are fulfilling orders independently from Amazon. Everything gets done on your terms, and if you partner with a 3PL, the amount of customization you can have with your brand are significantly more than on Amazon.

Larger products

The larger your product is, the more you will be charged by Amazon FBA for the fulfillment, shipment, and product control.

Going FBM with larger, heavier products tends to increase your profit margins in comparison to FBA.

How do I set up Amazon FBM in Canada?

Option #1: Doing it Yourself

Once you have selected the marketplace you would like to enter as well as having determined what business model you will be following, here are the necessary steps to take to run your FBM business:

Creating your Amazon Seller Central account

You will be required to provide the following information:

  • Business name and type (state-owned, privately-owned, publicly listed, individual etc)
  • Business information (address and contact information)
  • Phone number
  • Email address
  • Credit Card information
  • Tax ID

You will also be required to choose which Plan you would like to register for:

  • Professional Plan ($39.99 per month)
  • Individual Plan ($0.99 per unit sold)

Listing your products

Here, you will be required to input:

  • Details regarding your product
  • Fulfillment type (FBA or FBM)
  • Videos/Pictures related to your product

Here’s a quick video on how to make the best photography for your Amazon listings:

Fulfillment of orders

This includes:

  • Packaging the product using:
    • Boxes
    • Envelopes
    • Packing and Scotch tape
    • Airbags
    • Brown paper
  • Printing the necessary mailing labels
    • This may slightly vary depending on the carrier you choose to ship with
  • Shipment of your product that may be done through the following carrier examples:
    • eShipper
    • DHL
    • USPS
    • UPS
    • FedEx
    • Canada Post

Shipment timelines

  • Standard Shipping: 3-6 business days
  • Express Shipping: 2-4 business days
  • Priority Shipping: 1-3 business days
  • 2-day shipping: Within 2 business days
  • 1-day shipping: Within 1 business day

As demonstrated, shipment costs may differ based on a variety of factors. Getting an instant quote from a carrier such as eShipper can help you get a very good idea of what these costs will look like for you.

Option #2: Outsourcing to a 3PL

There are many benefits to Amazon FBM; however, depending on the size of your business, you may be able to allocate your time in other areas better. A third-party logistics company, 3PL, may be able to facilitate the logistics of your FBM process.

Your 3PL will:

  1. Label, prep & ship your products to Amazon fulfillment centers
  2. Fulfill FBM orders by shipping your products to your end customer
  3. Storing your products within the warehouse

The question is, Are you ready to outsource fulfillment?

There is no “right” time that will be the same for every brand when it comes to outsourcing fulfillment, but there are signs to look out for. Here is a checklist to help you decide if you’re ready to partner with 3PL. If you checked off any of the following statements, then partnering with a 3PL could be worth the investment.

  • I spend several hours a week packing boxes and shipping orders.
  • I don’t want to fulfill orders myself.
  • I’m running out of space to store my inventory.
  • I need more time for strategic projects like marketing and product development.
  • I don’t want to invest in distribution infrastructure (e.g., warehouses, forklifts, labor, etc.)

Have a look at our warehouse here:

How does Shipping for FBM in Canada work?

Now that you better understand the benefits of FBM shipping, what a 3PL is, and the benefits of working with one, let’s dive into shipping to actual customers!

Depending on where you are with your business, your shipping method may change based on your current needs.

Here are some scenarios to consider:

Amazon FBA Guide 2021

You’re stuck using only courier services

At this point, it’s time to branch out and diversify your couriers to ensure you have the best rates and the best routes in place for effective shipping, and last-mile delivery, to your customers.

Besides, partnering with a 3PL means you will gain leverage over couriers, and with its help, negotiating better shipping rates becomes much easier!

Unable to scale your business to global operations.

Suppose you’re looking to expand internationally and business is booming overseas. In that case, it’s time to seriously consider partnering with a global shipping and fulfillment company that can accommodate worldwide delivery.

Or, you may choose to switch to a multi 3PL model, where you have a separate 3PL handling your order fulfillment based on the country your customers are buying in!

Shipping Cost

Which forms of shipping are viable for my business?

Now you might be asking if you’re a Canadian-based business, “how much is shipping in Canada?”, the answer…it depends. If you’re looking to expand across the nation, finding the exemplary shipping service can be tricky, and shipping courier rates can add up; check out a more affordable solution here.

And if you’re looking to ship to your customers in the south, here is the best way to keep our friendly neighbors from not feeling left out.

You can expect:

  1. Faster Transit Times
  2. Reduced Shipping Costs
  3. A Robust & Reliable Fulfillment Network

“The experience has been great so far. AMZ Prep offers reasonable rates overall. Terrific and easy group of people to work with. Shout out to Minhal for being readily available for any shipping or storage-related service requests.” — Shah Rai, Founder of Nimble

How to calculate your shipping costs

There are about five factors that you should consider when calculating the price of shipping:

  1. Package Dimensions
  2. Package Weight
  3. Shipping Destination
  4. The Value of Contents Being Shipped
  5. Delivery Times

eShipper and many other major shipping carriers like USPS, FedEx & UPS calculate their shipping charges based on your package’s dimensions or by its weight.

To calculate manually, multiply the length, width, and height of your package to determine the shipping cost, or use these three shipping calculators:

  1. USPS Shipping Rates & Shipping Calculator
  2. FedEx Shipping Rates & Shipping Calculator
  3. UPS Shipping Rates & Shipping Calculator
  4. eShipper Rates & Shipping Calculator

Either by manually calculating or using one of the calculators above, you will quickly find that shipping manually without a 3PL can soon add up in cost, depending on the size of your business.

Reduce your shipping costs by partnering with a 3PL; you will unlock discounted shipping rates, rapid delivery times, and order fulfillment across North America.

Final Thoughts

Your Amazon business success has a lot to do with the fulfillment method you choose to carry out your orders. Whether you choose fulfillment by Amazon (FBA) or fulfillment by merchant (FBM), that is completely up to you.

There are pros and cons to both methods, but it all comes down to what is most suitable for your business.

This blog focuses on FBM, which is most optimal for businesses who:

  • Sell large/heavy items
  • Want more control over the customer experience
  • Are more interested in building their brand
  • May have slower turnover rates
  • Sell exclusive products
  • Want the freedom to run their business on their own terms

As your business grows, you may begin to feel more and more overwhelmed with the logistics of shipping and handling your products. But this does not mean that you cannot continue with Amazon FBM.

This may be the time to outsource to a third-party logistics company, or 3PL, who will be the one contact that will be able to handle all of these matters for you.

Your job is to be creative and work on building your brand and providing innovation! Let us take care of the rest!

Contact us today for an instant quote!