Thinking about selling on Amazon but worried about handling your own inventory and shipping? You’re not alone! Many aspiring entrepreneurs wonder, “How does FBM on Amazon actually work?”
Understanding Fulfilled by Merchant (FBM) is essential if you want more control over your products, shipping, and costs. This guide breaks down what FBM means, how to get started, and shares practical steps and tips to help you succeed as an independent Amazon seller. Let’s dive in!
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What is Amazon FBM (Fulfillment by Merchant)?
Amazon FBM, which stands for “Fulfillment by Merchant,” is a method sellers use to list and sell products on Amazon while handling storage, shipping, and customer service themselves, rather than relying on Amazon’s fulfillment centers. You are responsible for delivering orders directly to customers and managing returns, making this a hands-on way to operate an Amazon business.
This model offers flexibility and control to sellers who want to oversee their inventory management, shipping choices, and branding. It’s a great option for businesses with unique or specialty products, lower sales volume, or those that want to build direct relationships with their customers.
How Does Amazon FBM Work? A Step-by-Step Guide
Transitioning to an FBM model may seem daunting, but the process is straightforward. Here’s a breakdown of how you can get started with FBM on Amazon:
1. Set Up Your Amazon Seller Account
- Choose either an Individual or Professional account based on your sales volume (Professional is recommended for more than 40 units per month).
- Provide your business information, tax details, and bank account information.
2. List Your Products
- Create product listings through Amazon Seller Central.
- Fill in all relevant product details, including descriptions, pricing, SKU, and shipping settings.
- Specify that you (the merchant) will fulfill the orders.
3. Manage Inventory
- Store products in your own warehouse, office, garage, or with a third-party logistics provider.
- Track inventory levels to avoid overselling or stockouts.
4. Process Orders
- When a customer makes a purchase, Amazon notifies you via email or the Seller Central dashboard.
- Prepare, package, and ship the product promptly according to Amazon’s performance standards.
5. Shipping and Delivery
- Pick your preferred carriers (e.g., UPS, FedEx, USPS, or others).
- Provide tracking numbers to Amazon and customers for every order.
- Ensure deliveries meet Amazon’s shipping timelines to satisfy customers.
6. Handling Customer Service and Returns
- Respond to customer inquiries about orders, shipping, or returns.
- Manage returns and refunds directly, following Amazon’s guidelines.
Key Benefits of Selling via Amazon FBM
Opting for the FBM route comes with several advantages, especially for certain types of sellers:
- Greater Control: You decide on packaging, branding, inventory methods, and shipping carriers.
- Cost Savings for Some: No FBA warehouse storage or fulfillment fees; potentially cheaper for large or heavy items.
- No Inventory Restrictions: Sell without worrying about Amazon storage limits, restock restrictions, or long-term storage fees.
- Flexibility: Easier to add products with complicated packaging or those not eligible for FBA.
- Build Direct Relationships: More direct interactions with your customers can help build brand loyalty and gain feedback.
Potential Challenges of Amazon FBM
While FBM puts you in the driver’s seat, there are obstacles to consider:
- Time-Consuming: Packing and shipping each order can be labor-intensive, especially as your sales scale up.
- No Prime Badge by Default: FBM orders are not automatically eligible for Amazon Prime, which can affect sales.
- Responsibility for Customer Service: You must manage inquiries, complaints, and returns yourself.
- Shipping Costs: Shipping rates can be higher without Amazon’s discounted FBA shipping partners.
- Performance Metrics: Amazon requires fast shipping and high standards for handling; failure to meet metrics can affect your account health.
When Should You Choose FBM Over FBA?
FBM may be the best fit if:
- You sell products with slow turnover or niche items.
- Your inventory is bulky, heavy, or expensive to store.
- You want to maintain control over branded packaging and personalized interactions.
- You already have a logistics system in place or use third-party fulfillment centers.
- Calculations show it’s cheaper than paying Amazon FBA fees.
FBA (Fulfillment by Amazon) can be better if:
- You want to scale rapidly with less day-to-day logistics.
- Your products benefit from the Prime badge.
- You don’t want to handle shipping, returns, or customer service directly.
Many sellers successfully use a hybrid approach—using FBA for some products and FBM for others.
Costs to Consider with Amazon FBM
While FBM removes FBA fees, you still have costs to consider:
Main Cost Areas
- Shipping Fees: Pay directly to carriers for each package. Negotiate rates if your volume is high.
- Packaging Supplies: Boxes, tape, labels, inserts, and protective materials.
- Storage: Warehousing or rental space for inventory (unless you use your home).
- Labor: Time or money spent picking, packing, and customer service.
- Returns Management: Handling reverse logistics and possible restocking costs.
- Amazon Fees: You’ll still pay referral fees (a percentage of each sale) and a per-item fee if using an Individual account.
Smart Cost Tips
- Compare FBA and FBM total landed costs per order before deciding.
- Group shipping (multi-order batches) to reduce courier fees.
- Buy packaging in bulk to save on supplies.
- Keep inventory lean to avoid unnecessary storage expenses.
- Use reliable, tracked shipping methods to avoid costly customer service headaches.
Best Practices for Success with Amazon FBM
If you decide to go the FBM route, following these best practices can help maximize your success:
1. Maintain Excellent Inventory Management
- Use inventory management software or spreadsheets.
- Regularly audit your stock to prevent oversells.
2. Offer Prompt and Reliable Shipping
- Ship orders within the handling time you promise on your listings (often 1-2 business days).
- Provide tracking numbers for every order.
- Use reliable carriers and insured shipping for valuable goods.
3. Create Attractive Packaging
- Use professional packaging with clear labels and sturdy materials.
- Add branded inserts or thank-you notes to foster loyalty.
4. Provide Great Customer Service
- Respond quickly to questions and concerns.
- Handle returns and refunds professionally.
- Proactively update customers about their orders.
5. Monitor Performance Metrics
- Watch your Order Defect Rate (ODR), Late Shipment Rate, and Cancellation Rate in Seller Central.
- Resolve issues before they hurt your seller account health.
6. Optimize Your Listings
- Write clear, keyword-rich titles and descriptions.
- Use high-quality photos.
- Regularly update listings for accuracy and competitiveness.
Practical Tips for Managing Shipping Costs
Because FBM sellers are responsible for shipping, consider these tips to keep costs manageable:
- Weigh and measure packages accurately before listing; underestimating can erode profits.
- Use shipping comparison tools to find the best rates for each destination.
- If sales volume justifies it, negotiate rates with major carriers for better per-package pricing.
- Consider flat-rate shipping options for heavier or distant orders.
- Be transparent about shipping times and costs in your listings to set clear expectations.
FBM and the Competition: FBA vs. FBM Pros & Cons
Comparing Fulfillment by Merchant to Fulfillment by Amazon (FBA) can help you decide:
| Feature | FBM | FBA |
|---|---|---|
| Storage Location | Your own/3PL warehouse | Amazon warehouses |
| Shipping | Handled by you/your partners | Amazon picks, packs, and ships |
| Prime Badge | Not by default (can get through SFP) | Included |
| Fees | Lower for some sellers | Higher (FBA + storage fees) |
| Customer Service | Managed by you | Managed by Amazon |
| Inventory Control | Total control | Limited (in Amazon system) |
| Returns | Managed by you | Managed by Amazon |
FBM for International Sellers: What to Know
If you sell internationally, be extra mindful of:
- Import/export regulations for each country.
- Cross-border shipping costs, tariffs, and taxes.
- Delivery time variability.
- Offering localized customer service for different markets.
Partnering with an experienced third-party logistics (3PL) provider can simplify cross-border FBM for higher volumes.
Hybrid Fulfillment: Mixing FBA and FBM
Many successful brands use both models to maximize flexibility and reach:
- Use FBA for best-sellers to take advantage of Prime and Prime Day traffic.
- Choose FBM for special products (hazmat, oversized, or slow-moving items).
- Have FBM as a backup during FBA inventory limits or Q4 surges.
- Test new products with FBM before switching to FBA for more exposure.
Conclusion
Amazon FBM (Fulfillment by Merchant) gives sellers more control, flexibility, and potential cost savings when managing their Amazon business—especially for those with unique needs or tight profit margins. While it requires more effort in shipping orders and handling customer service, FBM can be highly rewarding and profitable. By following best practices, managing inventory wisely, optimizing shipping, and delivering excellent customer service, you can thrive as an FBM seller.
Frequently Asked Questions (FAQs)
What is the difference between Amazon FBA and FBM?
FBA means Amazon handles storage, shipping, and customer service for your products in their warehouses, while FBM requires you to manage these processes yourself. FBA offers the Prime badge and often faster shipping, but FBM gives you more control and may reduce costs for certain products.
Can FBM sellers get the Prime badge?
Normally, FBM items are not eligible for Prime, but merchants can apply for Seller Fulfilled Prime. This requires meeting strict shipping and performance criteria, such as offering free two-day shipping and maintaining high customer service standards.
How do returns work with FBM?
For FBM orders, you manage customer returns directly. You’ll need to follow Amazon’s return policy, issue refunds, and process returns through your own warehouse or logistics provider. Good communication with buyers is essential to ensure a smooth process.
Is FBM better for small or large sellers?
FBM can be ideal for smaller sellers, niche products, or those just starting out, since it offers lower upfront costs and more flexibility. Larger sellers often leverage FBA for scalability, but many combine both methods—known as a hybrid strategy—to match their specific needs.
How can I minimize shipping costs as an FBM seller?
To reduce shipping expenses, negotiate rates with carriers if you ship in volume, use shipping calculators to estimate costs accurately, invest in quality packaging to prevent damages, and group shipments when possible. Always factor shipping and returns into your product pricing to protect your margins.
