Amazon FBA is the bread and butter for most sellers, but between Amazon’s changing restock limits, unexpected events like the pandemic, and major supply chain disruptions, a lot of sellers have considered other fulfillment methods to keep their businesses profitable.
In this article, we’ll talk all about Amazon Fulfilled by Merchant. Fulfilled by merchant means shipping products to Amazon customers on your own instead of using Amazon FBA. In this article we'll discuss how you can get started with Fulfilled by Merchant along with its advantages and disadvantages over other Amazon fulfillment methods.
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What Is Amazon Fulfilled by Merchant?
Fulfilled by Merchant (FBM) means that you as a third-party Amazon seller are responsible for fulfilling your own orders. That includes running a warehouse or working with a 3PL that can deal with handling, packing, and shipping. It also means providing customer service and dealing with returns or refunds yourself.
These are things that Amazon FBA can do on your behalf, but the biggest perk is that you have absolute control over your entire fulfillment process. On the other hand, the biggest con is that your products won’t be Prime eligible unless your Seller Fulfilled Prime (more on that shortly) which can hurt conversion rates (big time). Being Prime eligible also increases your chances of winning the Buy Box, although you can still win the Buy Box even if you're not Prime eligible.
Related Reading: Amazon Badges and How to Get Them
What Is Seller Fulfilled Prime?
Seller Fulfilled Prime was launched in 2015 and lets you sell products with the Prime badge while fulfilling orders from your own warehouse or from a third-party logistics provider (3PL).
SFP is a blend of being merchant fulfilled while still being competitive and profitable through Prime eligibility. The only catch is that SFP has some pretty stringent requirements that have put off a lot of sellers who originally joined the program. If you're a new Amazon seller, it's unlikely you'll qualify for Seller Fulfilled Prime but experienced sellers may meet the requirements.
Just like FBM, Seller Fulfilled Prime is best when you own a warehouse and have a solid logistics process set up, when you are selling high-value or seasonal products, slow-moving goods and those that require special handling or preparation. There are 3PLs that offer Seller Fulfilled Prime but they are few and far between.
Amazon opens and closes registration for Seller Fulfilled Prime somewhat unpredictably (in June 2023 they announced they would open it again). But if you’re willing to join their active waitlist, there are pretty strict metrics (which Amazon doesn’t even consistently hit itself), such as shipping over 99% of your order on time and having an order cancellation rate of 0.5%. Failing to live up to these requirements could result in suspension from the program.
Under SFP, you must be able to offer nationwide coverage and Saturday deliveries. There is also a trial period that could last anywhere from 5 to 90 days where Amazon will 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%. Your products won’t have the Prime badge during the trial period.
Does Being Suspended from Seller Fulfilled Prime Suspend My Entire Account?
If you fail to hit the stringent metrics for Seller Fulfilled Prime and do proceed to have your SFP privileges removed, generally it does not result in your entire account being suspended. You will lose all of the benefits of being Seller Fulfilled Prime but you can still sell and, if you switch to
FBA, you will regain the Prime badge.
What Are the Pros and Cons of Amazon FBM?
The table below shows the advantages and disadvantages of Amazon FBM and, for the most part, Seller Fulfilled Prime, as opposed to relying on Amazon with FBA.
Amazon FBM Pros
- Full control over your shipping process. If you’ve nailed down your fulfillment process or are working with a reliable 3PL, you can ship orders efficiently without relying on Amazon.
- No inbound shipping costs. With SFP, you no longer have to ship products into a bunch of different FBA warehouses which can potentially save you a lot of money.
- Potentially higher margins. Since you won’t have to pay additional FBA fees, going FBM can yield higher profits. However, the costs of fulfilling orders yourself can just easily offset what you would have incurred in FBA fees if your process is not well ironed out.
- Less reliance on Amazon. With FBM, there’s little to no chance that your business will be affected by Amazon’s huge policy drops on how much inventory its FBA centers will take in. FBM sellers are also able to keep receiving and shipping orders during peak seasons and emergencies.
- Brand building. FBM enables you to develop your brand much better than having Amazon ship your orders out, since you have control over your packaging and they won’t show up in Amazon boxes in customers’ doorsteps.
- Control. Since you’re shipping products from your own warehouse, you get a little bit more control over packaging and the fulfillment process.
- No inventory restock limits. Because you’re warehousing your own products, you won’t face stock limits like you sometimes will with FBA.
Amazon FBM Cons
- No Prime badge. Amazon shoppers usually look for the Prime badge because it represents fast shipping. With Amazon FBM your products lose Prime eligibility.
- Dealing with customer complaints. For better or worse, having Amazon respond to returns and complaints on your behalf with FBA is convenient for sellers. With FBM, you will have to offer customer service and deal with refunds on your own, which can be more of a hassle as your business scales up.
- Less time to grow business. Since you are handling and shipping orders out yourself, you could be spending a lot more time dealing with logistics instead of focusing on brand growth and development.
- Cut-off periods and weekend shipping. Imagine receiving an order at 1:59 PM and still having to ship that within the same day to hit the Prime 2-day guarantee. That’s a real possibility with SFP.
- Returns. Unlike with FBA, you will need to handle customer returns yourself, but you still have to abide by Amazon’s free return shipping policy.
As observed above, the biggest perk to being FBM is you have absolute control over your entire business and you won’t have to rely on Amazon nor be affected by Amazon's changing restock limits. Also, in some cases, SFP is less expensive than FBA, especially when you’re having to ship and store your inventory in multiple locations. Inbound shipping fees can be very high as well as FBA’s storage fees, not to mention that Amazon’s storage and restock policies could literally change overnight.
On the other hand, FBA could make sense for sellers who want to focus less on logistics and more on building their brand. FBA also includes Amazon customer service that can deal with customer complaints and returns on your behalf for a fee, although most sellers would say that this service is not exactly world-class.
Amazon FBM vs. FBA. vs Seller Fulfilled Prime
The two main fulfillment methods for Amazon sellers are FBA (Fulfilled By Amazon) and Fulfilled by Merchant (FBM). FBA basically means having Amazon store, pick, pack, and ship your orders out for you with corresponding fees and also with a few inhouse features designed to streamline your selling experience. FBM, on the other hand, means you have to do all those things yourself or work with a 3PL to ship out your own orders.
As discussed earlier, the third option is Amazon Seller Fulfilled Prime (SFP), which basically means Fulfilled by Merchant, but with Prime eligibility for potentially stronger sales. Although SFP is a nice blend of FBA and FBM, it has pretty strict eligibility requirements and required metrics to stay in the program.
The table below shows how FBM differs from FBA and SFP.
|Amazon FBA||Seller Fulfilled Prime||Fulfilled By Merchant|
|Customer service||Amazon Customer Service||Amazon Customer Service||Seller handles customer service|
|Shipping costs to customer||Amazon arranges and bills the seller||Seller arranges and pays shipping costs||Seller deals with shipping and handling|
|Inbound shipping costs to FBA||Yes||None||None|
|Performance metrics||None||Seller must hit strict metrics to quality and remain eligible||None|
|Storage & Fees||Amazon takes care of storage and fulfillment. Sellers can pay FBA fees and track their inventory all in one place||Sellers have to set up their own warehouse or work with a 3PL and incur storage costs themselves||Seller has to set up their own warehouse or work with a 3PL|
|Returns||Amazon handles returns||Seller handles returns, but must comply with Amazon standards||Seller deals with returns, refund requests, other customer complaints|
When Should I Choose Amazon FBM?
Amazon FBA is still the preferred choice among Amazon sellers. The convenience and seller tools that come with FBA are still, for the most part, worth all the fees (Although FBA fees are set to increase significantly).
That being said, there are certain instances where FBM makes so much more sense. Some sellers also use a combination of both FBA and FBM to stay ahead of the competition.
These days, FBM is the go-to method for getting around Amazon’s strict restock limitations. Going FBM and running your own warehouse (or working with a 3PL) will spare you the trouble of not being able to send your inventory into Amazon warehouses. This is particularly convenient during peak shopping seasons, and knowing that lead times for shipments are taking much longer to arrive at and be checked into an Amazon warehouse, largely due to the global shipping crisis.
Make sure to have a clear idea of what your FBA fees are going to be compared to the costs you would incur when doing FBM. This will make it much easier to assess which fulfillment method is best for your business. A good example of this is when you’re selling oversize or bulky products, as there are situations where the FBA storage and handling costs for these large items are much higher than with FBM and may even be subject to shipping restrictions by Amazon.
Also Check Out: EcomCrew Amazon FBA Fees Calculator 2021
Aside from getting around Amazon’s restock limits, FBM also makes sense for sellers whose products are exclusive to their brands. It is also the only profitable alternative for low-volume or low-margin products where sellers do not really need to rely on Amazon for pick, pack, and shipping.
How to Start Being Fulfilled by Merchant
For new sellers, Fulfilled by Merchant is the default fulfillment method. The initial steps, including account creation and listing your products, are essentially the same as when you go for FBA. Check out our Ultimate Guide to Selling on Amazon for a detailed walkthrough on how to start selling on Amazon.
Secondly, you need to have a warehouse all buttoned up or have a reliable 3PL that can store and fulfill orders on your behalf. In our Guide to Finding a Great 3PL, we go over the things you should consider when looking for a 3PL, including their capacity, location, and pricing.
Also remember that with FBM, you are responsible for dealing with all after-sales customer service—including returns, refunds, and other customer complaints. With FBM, when a customer requests a product return, Amazon automatically sends them a ready-made return label with your address.
Fulfilled by Merchant or Seller Fulfilled Prime are good alternatives to FBA for getting around restock limitations and being more prepared than your competition during peak shopping seasons or emergencies. While the FBA fees you would have incurred could easily be offset by your operating costs under FBM, having an efficient system could translate to thousands in savings down the road.
When deciding between FBA or FBM, consider the costs, potential sales, and the disadvantage of each fulfillment method. You might also consider doing a mix of both FBA and FBM to make sure inventory never runs out.
Are there other perks for being Fulfilled by Merchant that we missed? Leave a comment down below.