Amazon Fulfillment By Merchant

Many sellers and vendors join Amazon with the intent of utilizing Fulfillment by Amazon (FBA), which comes with Prime 2-day shipping. However, merchant fulfillment / Fulfillment by Merchant (FBM), similar to vendor drop shipping, is another viable option. FBM is great for sellers who are just starting out, sell restricted items, and particularly in the wake of the COVID-19 epidemic.

Why Would I Want to Self-Fulfill?

There are a variety of reasons FBM may be preferable: it is typically cheaper in the long run, you don’t need to worry about FBA restrictions, and you have more freedom over your shipping method & carrier. You also have a lot more control over the actual packing of your product. You can make sure it is packed with care and protected from damage. You can also customize your shipping box and inserts, which can create a great consumer experience. Sellers who have had a lot of consumer complaints due to mix-ups, damaged/missing product, or even expired product may also prefer to have more control over which units get sent. This also gives you some more control over refunds & replacements, as Amazon can be a bit cavalier in that regard.

What Steps do I Need to Take to Prepare for FBM?

Whether you are starting off with FBM or switching your listings over, make sure you’ve got all your ducks in a row. Amazon has default settings that include handling time and price brackets. Make sure you can match these, or update to what is more realistic for your company. You want to make sure this is taken care of ahead of time, as well as verifying you can handle order processing, before you launch seller fulfilled listings.

This is very important, because many of your seller metrics center around your ability to fulfill orders. If you are selling FBA, you do not need to worry about the shipping metrics. Failure to meet Amazon’s metrics may put your account at risk, so take the time to test & prepare.

Shipping Rates

You may have a product that will have a flat rate charge regardless of destination, and if so, that is wonderful! But more often than not, you’re going to need to do a little footwork to determine your best shipping rates.

Usually FBM means you will be shipping from 1 location, but if you have multiple warehouse locations please make sure to take that into consideration while following the next steps. Look at a few dozen of your previous shipments & quote it out with your carrier (or even better, a few different carriers to find the best option). You can use this information to either determine an average, or look into regional prices.

When running your quotes, don’t just pick orders that are the farthest from you; make sure to get some close to your warehouse, some in the middle of nowhere, etc. Ideally, you will work off a true average. This may result in a loss on some shipments, but overall it will even out. Otherwise, you can use the same information to set up regional shipping rates.

Don’t be afraid to reach out to carriers either. Many will work with you towards discounted rates, and sellers moving a large quantity of product have a good chance of negotiating better rates. Don’t feel restricted here. Amazon may advise on carriers, but they only restrict you if you use their internal Buy Shipping service or if you are enrolled in Seller-Fulfilled Prime.

Shipping & Handling Time

In most instances, you need to resign yourself to relinquishing Prime shipping. Don’t beat yourself up trying to get an order out the same day & delivered within 2. Once you have your pricing in place, make sure you update your shipping time in Amazon’s settings to reflect the same. You can build in buffers if it’s a busy season or the more affordable carrier isn’t the most reliable at meeting their delivery dates.

Don’t neglect your own processing times either! Does your warehouse need a couple days to put together larger orders? Or is your restock on the way but still a few days out? Amazon will determine your shipping window, and failure to meet this window puts your account at risk. You are better off over estimating your processing time and delivering earlier, than underestimating and shipping late (because Amazon cares far more about your ship date than delivery date when it comes to metrics).

Seller-Fulfilled Prime

Some sellers may want to make the effort to participate in Seller-Fulfilled Prime (SFP). This program has some pretty strict requirements, and is not always open for new seller enrollment. However regional Prime and extended handling time can often help mitigate both of these concerns. It may not be for everyone, but if the other pros of FBM appeal to you, it is helpful to know Prime isn’t completely out the window.

Storage & Order Processing

Make sure you have ample room to store your inventory. Maybe you’re an at-home seller and your products are small, so you have space in the garage, shed, or basement. Or maybe you sell bigger products or at a volume where that isn’t manageable. In that case, look into portable storage containers, renting warehouse space, or even 3PL services.

Once you have your location secured, there is a lot you can do to make the process of receiving, tracking, and fulfilling orders easier. Take advantage of programs that you can integrate with Amazon and your carrier. Use these tools to print your packing slips and pre-paid shipping labels. Many programs will submit the tracking information to Amazon as well, which saves you even more time. Schedule pick-ups with your carrier of choice.

One of our favorite 3PL Servicers is ShipCentral. They are a smaller company based out of Utah, but have great customer service and integration. Their system can be linked to Amazon, other marketplaces, and even your webstore. Something we’ve found very advantageous is the ability to set-up multi-pack & bundle SKUs without needing the warehouse to kit them in advance.

In terms of shipping & inventory management software, we have good hands-on experience with ShipStation (unaffiliated with ShipCentral). We found the interface very user-friendly, and recommend it to anyone looking for a similar service. Other sellers have had good experiences with Ecomdash and Shipworks.

Returns & Refunds

With FBM orders, the seller is in charge of monitoring for and handling any refund and return requests. While this is a bit of extra work on your part, it does give you more control over what happens. If a customer only had 1 piece of a multi-piece product arrive broke, it may be more affordable for you to send that piece than issue a full replacement or refund. If you sell clothing, a restocking fee can be assessed for items that may need to be laundered or retagged.

However, you need to make sure you have a system in place to handle all of these before launching your FBM offer. Returns and refunds are metrics tracked by Amazon, so you need to make sure you are responding to requests in time and have clear policies in place. In many cases you also need to compare your own policies to Amazon’s, and be prepared for customers who complain about any differences.

There may also be a bit of a learning curve if you haven’t self fulfilled before, or it’s been a while. You’ll need to decide when to stand your ground and when to give in, how to issue the refund correctly, how to manage prepaid return shipping labels (or determine if that is not something you will cover), and proper documentation of a return. Refresh yourself on what you can, but also be prepared for some hiccups along the way.

What if I want to have FBA & FBM Offers?

There are many reasons you may want both shipping options available on a listing, and likewise there are many reason you may want to switch between shipping options. Most commonly, this will related to stock issues:

  • FBA may be running low & you are worried of running out of stock before replenishment arrives
  • Current FBA inventory is being held for review and/or is stranded
    • You or Amazon may have initiated a bin check due to customer complaints
    • Listing errors are keeping your current FBA inventory in limbo
  • Amazon is restricting your ability to ship in inventory
    • Possibly because you recently removed inventory during a free removal promotion
    • You are at your current storage capacity
    • There are other restrictions in place (such as the COVD-19 limits to essential products only)
  • You have refurbished/used/open box products you want to offer at a discount
  • Changes in shopper behavior or Amazon services
    • You may not like how Amazon is fielding refund & replacement requests
    • Amazon warehouse limitations may cause FBA deliveries to take longer than FBM (such as with the COVID-19 quarantine & online order increases)

Having both FBA & FBM offers active means that you are duplicating your listing. The duplicate listings would have the same current ASIN, but would show 2 buying options from you. Each listing however would have a different SKU (the most common tactic would be to add “-FBA” at the end, but make sure your method makes it easy for your warehouse to identify the product correctly).

How do I Set Up FBM?

Setting up FBM listings is pretty easy. If you are creating your listing for the first time, it is the same process whether you are using FBM or FBA. You can manually adjust your inventory levels, use feed files, or use an EDI. However, if you are planning to convert an FBA listing to FBM, there are 2 different methods:

1. Convert Your Existing Listings
This takes a manner of minutes to initiate & does not cause issues with your listings. You can easily keep a listing on FBM while inventory is in-transit once restrictions are lifted. This is the best chance of letting you sell out of FBA inventory before switching fulfillment methods, but timing may be a concern.

2. Duplicate Your Existing Listings
This process takes a bit longer, as you essentially need to duplicate your entire catalog & edit all existing variations. Doing so does come with a small risk of catalog issues (this can oftentimes create duplicate ASINs, variation problems, content mismatch, or Brand Registry issues). However, this method allows you to have both offers active simultaneously, which is useful if you are concerned of one offer running out of stock.

So, which method do you choose? Digital Brandworks normally recommends flipping listings if possible, as it is quick and there are far less complications to deal with. However, there may be reasons to duplicate your listings, and if you are brand registered you are far less likely to have listing or content problems when doing this. Regardless of which option you choose, or potentially a mix, you need to be prepared for fulfilling these orders first.

When Do I Switch FBA to FBM?

The timing of flipping a listing from FBA to FBM relies on a few different variables. Do you only want 1 active offer? How concerned are you about temporary down time? What type of issue history does your listing have? There are pros & cons to the 2 methods described above, but as far as timing goes, there are actually 3 options:

1. Immediately add FBM listings which will be duplicates and remain on the same listings

This option makes the FBM listings immediately available, and your warehouse can start fulfilling them as soon as they come through. The downside here relates to the potential for listing complications. You will want to ensure all your content matches exactly, as conflicting content contributions can cause issues with both your live content & Brand Registry protection (since, in theory, both contributions will be protected with Brand Registry).

NOTE: While most people choose FBA/Prime as their preferred method, that is not always the case. Particularly in the Spring of 2020, we may see some altered shopping habits from customers who are concerned about the Coronavirus being in FBA warehouses, or who are not happy with FBA’s extended shipping times, and orders may come through you directly instead of using FBA. Regardless of the scenario, your warehouse should still be prepared for orders, even if an FBA offer is still active.

2. Flip the listings to FBM as soon as Amazon inventory runs out.

There would be no duplicate listings on the account, and you can be switch right back to FBA whenever you want. The biggest con to this option is that if the listing goes out of stock in the middle of the night, or on a weekend, Amazon may not send notifications and it may be a few hours being out of stock where customers cannot purchase the item. However, for slow movers this is a very viable option.

Another issue with this, is that when switching them back, there will be a temporary lapse in availability while the inventory is in transit to Amazon. Although, if your product is enrolled in Inventory Head Start, that will not be a concern. This lapse can also be mitigated by an Amazon expert so at most your listing is out of stock for a few minutes.

3. Flip the listings to FBM when there is a limited amount of Amazon inventory left

In this instance, you would convert your listing at a certain unit count, for example 10 left in FBA inventory. This is a safer method to avoid running out stock in FBA in the middle of the night or on the weekend. Again, there would be no duplicate listings, and the inventory can be flipped back to FBA whenever desired.

The potential downside to this one would be long-term inventory storage fees on the FBA items still sitting at Amazon’s fulfillment centers. Expiration dated products are also at minor risk if hanging out in the fulfillment center for an extended period of time. Depending on your needs for converting your listing, this may be minimal due to a short time frame, or you can create a removal order to have all inventory shipped back to you. To combat this, we can switch over before completely running out of inventory, but storage fees will still apply.

Caiti Inc

Caiti Inc is the Analytics Lead at Digital Brandworks, a digital consultancy that provides customized solutions for improving marketplace performance on Amazon and beyond.

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