Amazon FBA v Fulfilled by Merchant FBM

The pros and cons of having Amazon fulfil your orders

One of the big differences between a marketplace like Amazon and Etsy is that on Amazon you can actually outsource your fulfilment so that Amazon delivers your products to the customer and handles returns.

But how does Amazon FBA work and what do we mean by FBM or fulfilled by merchant?

How does Amazon FBA work?

Amazon fulfilment (FBA), is an Amazon programme whereby Amazon arranges product storage, packing, shipping and returns on behalf of sellers

You simply ship your products in bulk to Amazon’s distribution centres and then Amazon will take over distributing products to customers and handling returns.

Of course, there’s a fee for this service!

What do we mean by Fulfilled by Merchant (FBM)?

Fulfilled by Merchant (FBM) means that you are responsible for storing your products, packing and shipping them to your customers, as well as handling returns.

So which should you choose?

If your products are customised (you add monograms to your product for example) or they are made to order then you need to fulfill your orders yourself (so FBM).

You obviously can’t ship them in bulk to an Amazon warehouse.

But if your products aren’t customised for each customer then it’s worth considering FBA.

FBA comes with a few added benefits:

👉 It means your products qualify for Prime delivery/free shipping which can get you a lot more sales.

👉 Using FBA also means that you can easily sell your products in international markets regardless of where you are based.

👉 Through Amazon FBA, a UK based seller can sell on Amazon.com and sell products to US customers by shipping products in bulk to an Amazon distribution centre in the US.

All you need to do is send your products to an Amazon distribution centre in the US and Amazon will take care of the rest.

This is a really easy way for sellers to expand their business and build a global customer base without all the challenges that come with building an international fulfilment network.

How much does FBA cost?

If you use the FBA programme then you will pay an FBA fee and storage fees and these will be automatically deducted from your payments from Amazon.

The FBA fee is a flat fee which you pay on each product sold based on the product type and the size and weight of the product.

Storage fees are charged on a monthly basis and are based on how much space your products take up in an Amazon warehouse.

Amazon calculates this as the daily average volume in cubic feet per month. The fee varies throughout the year with prices increasing during October to December.

The fees for selling via FBA often work out cheaper than storing and sending products to customers yourself, plus it’s a lot less work!

If your products are fulfilled via FBA then they will also be eligible for Prime which gives you a significant advantage over sellers who don’t offer Prime delivery.

Should I fulfil my orders myself?

There are a few reasons why you might want to do your own fulfilment:

• You want to include more marketing information with your packages (Amazon has strict rules about what you can put on product inserts if you sell via FBA)

• The products you sell are oversized or heavy

• The products you sell are customised

• You already have logistics in place to handle postage and returns

• Your inventory turns over slowly

Just bear in mind here that Amazon is very hot on customer service. It will closely monitor your orders to check that you are fulfilling orders on time and handling returns promptly.

Failing to fulfil your orders on time will negatively impact your seller performance rating (the metric Amazon uses to rate sellers).

If you sell on Amazon Handmade then you’ll be able to set production times in your listings.

This gives customers a clear timeframe for when they can expect their products, giving you plenty of time to produce and send the products.

Summary

What works best for you will depend on your products and business set up.

If you’re a handmade seller, it can take a bit of a mindset adjustment to sell via FBA because it may feel like you’re giving up some control to Amazon over the ordering process.

This isn’t easy for most of us to do initially but it can be a helpful way to grow your business.

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