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Amazon Fulfillment By Merchant (FBM)

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The Ultimate 2021 Fulfillment Guide By Amazon Fulfillment By Merchant (FBM)

Fulfillment By fbm Amazon is a convenient solution for Amazon sellers who don’t want to waste time on shipping, logistics and customer service. By passing the ball to Amazon, sellers have a chance to focus on other important aspects of their operation.

This program allows brands to access the retail giant’s logistics machinery without moving a finger. Among many other advantages, with FBA, sellers are free to deal with inventory management.

Brands registered with the FBA just pack and deliver the stock to a warehouse, and Amazon departs from there.  

In this comprehensive guide, you’ll learn the basics of this great Amazon service offering.

FBM Amazon over the years

FBM Amazon over the years

FBM Amazon’s preferred business model for millions of sellers. This is what the retail giant sought to accomplish when it launched the program in 2006.

Back then, Amazon realized it could help hundreds of small brands grow. Like? Sharing your own fulfillment capabilities as a third-party logistics company. 

Amazon has developed a program that gives you access to your own logistics machine. This includes warehouses, inventory management, suppliers and customer service for sellers. 

In short, small companies could deliver products on time and on a national scale, just by adopting the “Amazon Way”.

This simple strategy allowed sellers to focus on growing their brands without investing in storage and personnel. Thus was born Fulfillment by Amazon.

Amazon has invested a lot of resources in fbm Amazon over the years. The system is so simplified that customers don’t know they’re buying from third-party vendors using FBM.

Over time, applying to the FBM Amazon has become an obvious task for online stores, and this is why:

How Amazon FBM Works

As mentioned above, Fulfillment by fbm Amazon has become a reference solution for sellers. In 2021, there were few online stores that didn’t have some presence on Amazon.

What’s more, many sellers now use the FBM system to serve products through non-Amazon channels. And thousands of merchants are still embracing the FBM model.

FBM Amazon model

The program works with a pretty straightforward process. 

First, sellers must take the following steps:

  1. Search and select products with high demand but low competition. The goal is to find (or create) the most profitable items to sell, even after FBA fees.
  2. Source the items from a trusted supplier or manufacturer at a reasonable rate. In some cases, the vendor also ships the product to Amazon.
  3. Create product lists to advertise and sell your items on the market. Use high quality images, targeted keywords and detailed descriptions to engage customers.

Now, this is what Amazon handles with FBM:

  1. Store products in your call centers. Amazon will distribute items across different warehouses to reduce shipping time.
  2. Process transactions for each item ordered. Amazon then chooses, packages and ships the product.
  3. Handle customer service tasks such as providing tracking details or requesting ratings and analysis.

It is crucial to track sales constantly to track sales in the Seller Center to assess the success of each item. Also, this will tell sellers when to update inventory when stock levels are low.

Later in this guide, we’ll list the pros and cons of this program in more detail. But here’s a brief summary:

The benefits of FBM Amazon

There’s more to Fulfillment By Amazon than on-time deliveries. Signing up for FBM opens up many other Amazon benefits for sellers.

For example:

●  Brand Membership – Users expect great delivery service from Amazon. This means that most shoppers will appreciate it when a third-party store handles delivery via FBM.

●  Higher Search Ranks – Amazon’s algorithm favors FBM Amazon products, leading to better search rankings. Also, this increases the chances of winning the purchase box.

●  Customer Service Management – FBM Amazon provides complete customer service management 24 hours a day, 7 days a week. The Amazon team handles all inquiries, refunds and returns on behalf of sellers.

●  Multi-Channel Fulfillment – Storing inventory in Amazon warehouses doesn’t mean sellers can only sell through the marketplace. Amazon can package and ship products sold through a variety of online channels.

●  Amazon Prime Eligibility – FBM products are eligible for Prime. This comes with 3 perks: free delivery option for customers, better chances of winning the shopping box and sporting the Amazon Prime badge.

The Disadvantages of FBM

Of course, FBM is easy to use and offers many advantages. Sellers may forgo handling inventory, packaging and shipping.

The program also allows Amazon to handle customer refunds and returns for brands. In this way, companies can focus on improving sales and profit.

However, FBM may not be the best solution for some sellers. 

Here are some factors to consider before applying for FBM.

●  Competition – There are thousands of sellers who benefit from FBM around the world. This is a large group of competitors, including Amazon’s own brand.

●  Adhesive-free blending – The warehouse tends to bulk similar products from each manufacturer together. So the stocks get mixed up. This can lead to incorrect deliveries.

●  Enhanced Returns – Amazon’s return policy makes it much easier for customers to return items. Because Amazon FBM handles branded returns and refunds, some sellers get more returns after joining the program.

●  Product Guidelines – FBM’s Inventory Storage Policy establishes how products are to be packed, labeled and shipped to the warehouse. Failure to comply will result in items being rejected for storage.

●  Long-term storage fees – Selling a stock slowly is bad news for sellers. Amazon expects a constant rotation of products to save storage space. After 180 days of storage, Amazon will charge sellers long-term storage fees.

FBM Amazon costs

amazon fbm cost

When using FBM Amazon, sellers must pay specific fees for storage and servicing. The main fees are monthly, fulfillment and storage fees.

How to calculate FBM costs

An important deciding factor is how much the FBM program will cost. Here’s how it works: the more inventory you have, the more you’ll be charged, because you’re paying for the space your items take up in Amazon’s warehouse. 

This means that lower cost items can become less profitable when considering these fees.

The problem is that inventory fees tend to get more expensive when a product is stored for more than 180 days.

Amazon will let you know if any of your products aren’t moving enough with an inventory report.

The good news is that you don’t have to include all of your listings in the FBM program, so you can exclude products that you don’t think will sell as quickly. Rates also increase during the holiday season, so remove any inventory that you know will not be for sale at that time.

Here is a list of FBM service fees sellers should consider:

FBM Service Fees

serviceFee
professional seller fee$39.99 per month
Individual seller fee$0.99 per item sold
Individual sales fees$0.45 to $1.35 per unit
Removal of stock$0.50 to $0.60 per unit
Marking$0.20 per unit
Product preparation$1.00 to $2.20 per unit
long term storage$6.90 per cubic foot or $015 per unit

The watch item is charged a variable fee depending on its weight and size. And to meet high demand, FBM storage fees increase during the holiday season.

Amazon FBM storage fees

monthsStandard storage feeLarge Size Storage Fee
January to September$0.69 per cubic foot$0.48 per cubic foot
October december$2.69 per cubic foot$1.20 per cubic foot

 

Amazon FBM sellers also incur a Fulfillment Fee. This is the cost to pick, pack and ship an item. The fee starts at $2.41 per unit, for items 1-10 oz.

Similar to the increase in storage fees, fulfillment fees can go up to $137.32 for oversized specialty products.

Plus, there’s Amazon’s standard seller fee. The market takes approximately 15-18% of the price of an item after it is sold. 

It can be difficult for small sellers or newbies to cover these expenses. However, the investment is worth it, once a company establishes a solid foundation on Amazon.

How to find products to sell on FBM Amazon 

How to find products to sell on FBM Amazon

Sell ​​products with low competition but high demand. That’s the key to success at Amazon. The question is how to find these items.

For great results, the best a seller can do is find the most profitable niches. These are small, specialized subsets of buyers, products, or categories.

Well-known items translate to greater visibility and more competition. Niche products come with targeted customer engagement, with fewer competitors in the market.

● Home and kitchen

● Outdoor sports and activities

● toys and games

● Health, home and baby care

● Beauty and personal care

● Kitchen and dinner

● Clothes, shoes and jewelry

● Garden and outdoor

● Tools and home improvements

We recommend that you find niche products within these categories to increase visibility and profits.

Once you’ve found the best niche for your brand, it’s time to find the best products to sell. Here are some guidelines for accomplishing this mission:

The right price

Sell ​​items for $25-50 for healthy revenue, even after accounting for all FBM costs and fees. Lower prices will erode your profit margins. Also, getting high can turn customers away from products they don’t already know about.

Limit your choices

Select some products to track for a few weeks. This will tell you which items are free from seasonal spikes. It’s also great to discard inflated products due to special offers or discounts.

Low seasonality

A good rule of thumb is to stock around 300 units a month to make 10 daily sales. But that would be quite a feat when dealing with seasonal products, right? Therefore, it is better to deal with niche products that sell throughout the year.

Improvement

Find products with 3 to 4 star ratings, but less than 200-100 ratings. Why? There is room for improvement and an opportunity to beat the competition.

Simple, small and light is ​​best

You don’t want to mess with shipping, manufacturing and quality control.

  1. Be wary of IP issues. Amazon is always on the lookout for counterfeits and trademark infringement claims. So make sure your selected items have the production and sale rights.
  2. Importing. We live in a global market. If you want to sell outside your country, please comply with the import regulations of your chosen sales territories. You will avoid tedious customs hassles.

Product Research Best Practices

These practices will help you enormously in your product research quest:

●  Let the data guide you , rather than choosing a product to sell simply because it’s something you like.

●  Do not rush . Product research is an essential preparation that requires some time and analysis to be successful.

●  Use a tool such as Jungle Scout that can extract large amounts of data from Amazon to find a product with the triad of: high demand, low competition, and positive profitability. Let’s show you how.

Outsourcing your Amazon FBM products

Finding the products is only the first half of the process. Sellers also need to find a supplier.

As we said, you want to find products with low competition and high demand. But it’s also crucial to get the highest quality items available.

You can find thousands of manufacturers of the same product. The trick is to narrow the list down to 5 to 10 vendors who have the following qualities:

●  Quality. It goes without saying that the best-made products sell better, get high reviews and continuous sales.

●  . Check the supplier’s import history to see if they have manufactured the product for at least 3 years.

●  Communication. A good vendor-supplier relationship increases the productivity of your FBM brand. Assess response times and how vendors respond to your questions.

●  Fair price. Your final choices should share similar price ranges. Much higher or lower prices can be a red flag.

But how to find suppliers? There are several options to start searching, such as online arbitration.

Leveraging Retail Arbitrage

This strategy consists of searching for products below the retail value online. Then compare prices on Amazon to check profitability.

If the item and supplier meet all your criteria, you can order in bulk and ship them to Amazon. Finally, you can submit your listings and sell.

One of the best sites to find products and suppliers is Alibaba . Being the biggest B2B platform in the world. The site features many products, sold directly by the manufacturers.

Now a second sourcing option is retail arbitrage . This involves product selection at retail stores or clearance centers.

Look for chain stores with discontinued products. You will find products at 50-70% and some meager niche items to profit from.

Collect some copies and store them in Amazon’s warehouses. Then create your product lists and start selling.

The trick is to focus on important purchases that last for months. And regardless of which method you use, remember Amazon fees when purchasing products. 

Final profits are the difference between the selling price, less FBM fees, and the original cost of the item.

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