With nearly 346,000 sellers joining the Amazon Market so far this year and an estimated 91 new sellers joining every hour, we figured it might be best to share an essential piece of fulfillment insight to the roughly 1.6 million active Amazon sellers wondering when it is appropriate to use an FBM strategy.
Let’s Start with the Difference Between FBA and FBM
As an Amazon seller, you have two ways in which you can fulfill orders: Fulfillment By Amazon (FBA) or Fulfillment By Merchant (FBM).
The first of these options, FBA, allows companies to ship their goods directly to an Amazon Fulfillment center where Amazon employees pick, pack, label, distribute and manage the customer service experience.
On the other hand, FBM allows companies to sell their products on the Amazon platform while still maintaining control of the entire packaging, distribution, and customer experience process- from order preparation to delivery to the end customer.
Both options provide advantages if strategically employed.
Due to the advantages of FBA being widely published and highly accessible, we decided to focus this blog post strictly on the benefits of FBM. When a company chooses to utilize the FBM program, it assumes ownership of the entire order cycle. Whether using a 3pl specializing in FBM(recommended) or doing it themselves, the company is responsible for picking, packing, labeling, shipping, and any subsequent customer support that may be required. This complete control of the process can mean:
· A higher profit margin: By sourcing your warehousing and fulfillment, you can negotiate rates and customize value-added services.
· Complete control of the business: By overseeing all aspects of the product life cycle, you will clearly understand the ebbs and flows and pain points of your business. Allowing you to quickly pivot and re-strategize for better efficiency.
· Brand positioning: Controlled Customer Experience allows for better positioning of your brand. The customer experience starts and stops with you.
· Online and offline sales: Using a 3PL for warehousing and fulfillment solutions, you open the door to omnichannel distribution, further optimizing revenue flows.
Although, the benefits of FBM can be perceived as relative based on the business model and strategy of the company. One thing that most people can agree is not relative is the bottom line. And when product offering includes oversized goods or products which require special handling, your bottom line is always better off when using FBM.
What should you do if the merchandise that you are selling through Amazon is oversized?
Amazon’s fees are significantly higher than most 3PL’s specializing in eCommerce fulfillment when shipping an oversized good or a good that requires specialized handling. Therefore, employing the services of a 3PL for the storage and distribution of your goods will ultimately result in a more cost-effective solution, increasing your bottom line.
So now that we have established some of the benefits let’s learn how to choose a quality 3PL.
When choosing a logistics company for FBM, you should consider the following:
· -Is the company strategically located, thus offering nationwide coverage and offering two-day shipping.
· Is the company an Amazon Approved Carrier capable of making appointments at Amazon distribution centers nationwide. * Important if you choose to utilize both FBA and FBM strategies.
· Do they have sufficient nationwide storage capacity capable of helping you scale?
· Do they offer EDI (Electronic Data Interchange) connectivity so that you can transmit orders electronically?
· Do they have various delivery options (urgent, priority, overnight, or at specific times)? Several ground transportation options, including LTL, FLT, and Small Parcel Service, among others.
· Do they offer a portfolio of value-added services, including white glove kitting, subscription boxes, product testing, and returns?
In conclusion, if you are one of the 1.6 million active sellers on Amazon or one of the 91 becoming a seller in the next 60 minutes, you should seriously consider an FBM strategy, especially if you are/plan on selling oversized goods. The often-overlooked fulfillment program can increase your margins, give you better control of your order cycle/customer experience, and open the door to omnichannel distribution channels.