When Amazon suspended inbound shipments due to Coronavirus, many sellers were left confused and scrambling to keep sales up. Although some inbound shipments are being accepted now, Amazon still can’t meet their own shipping deadlines, causing lots of frustration for both customers and sellers.
This is a shitty situation for sure, but it’s also an opportunity to diversify your fulfillment methods and make your business stronger. At least a third of all Amazon sellers participate in Amazon’s FBM (Fulfilled By Merchant) program, and it’s something you should consider doing too in order to reduce the risks that come with relying solely on Amazon’s FBA program.
What’s the Difference Between Amazon FBA and Amazon FBM?
You probably already know how FBA works:
+ You upload your shipping plan to Seller Central and send your products to Amazon’s warehouses
+ The products are scanned in at the warehouses and the inventory is made available on Amazon’s marketplace
+ Amazon stores all your products in their warehouses until they sell (or you ask for them to be returned)
+ When your products are ordered, Amazon picks them from storage, packs them up, prints shipping labels and gets them to the appropriate shipping carriers for delivery
+ Amazon also accepts and processes returns for you
Amazon FBM is the same process but with you or a third-party logistics (3PL) company doing all that work. Your products are still listed on Amazon’s marketplace, but you handle everything on the back end.
How Much Are Amazon FBM Fees?
Amazon FBM can be much cheaper since you pay no storage fees or fulfillment fees to Amazon. However, you will be paying for your own shipping and you won’t get the same discounted shipping rates that Amazon does since you aren’t shipping nearly the same volume.
But consider the cost of returns. Amazon has a pretty lax return policy, and sellers often complain that Amazon accepts returns that should be rejected due to customer damage or fraud. If you’re in charge of your own returns, you can potentially cut down on those costs by being less lenient.
Costs will obviously vary based on what you’re selling and what kind of deals you can find on your own, but according to JungleScout, sellers who use Amazon FBM are typically more profitable than FBA sellers.
Who Should Use Amazon FBM?
Uhhh… everyone? Amazon lets you do both FBM and FBA, so why not do both?
FBM gives you total control over your customers and allows you to save money on storage fees if you have slow-moving products. Plus, it’s a great way to expand internationally. Since Amazon won’t let you use FBA for most international orders, you can just use FBM for those orders.
The only situation where it’s objectively better to stick with FBA is if your products are small and light, your inventory turns over quickly, you don’t want to deal with customers and it would be too expensive to set up your own logistics system.
But even in that situation, you still have to worry about problems like we’re experiencing now. If all your eggs are in the FBA basket, you end up getting screwed when they have problems with their fulfillment network.
How to Change Listings to Fulfilled by Merchant
It’s super simple to switch from FBA to FBM (and back again). Just go to your Amazon listings, select which listings you want to change and click “Bulk Edit.” Then select the fulfillment type you want (Fulfilled by Amazon or Fulfilled by Merchant) and click “Save & Publish.”
Tips for FBM Shipping and Fulfillment
If you’re just starting out or you don’t sell a large volume, you might be able to handle fulfillment from your garage or a spare bedroom. If that’s not quite enough space, consider renting a storage unit (we ran a fulfillment operation out of a storage unit for years before starting ByteStand). If your operation is too big for that or you don’t want to deal with fulfillment yourself, partnering with a 3PL company is the way to go (more on that below).
If you choose to handle fulfillment yourself, it’s best to break the process down into four parts:
+ Receiving – getting inventory in stock
+ Storage – organization of products
+ Order processing – picking, packing and shipping
+ Returns – evaluation for restocking or disposal
Set up a dedicated area and system for scanning in new inventory. Ideally, inventory will move quickly from receiving to storage so you don’t end up with an unsorted mountain of products.
Our method was to set up several empty boxes that were labeled by product type. New inventory was tossed into these boxes as we scanned it in. Once a box was full, it was taken to the storage area for that product type and further sorted into individual product locations.
Keep in mind that a lot of businesses waste time manually inputting info into various systems and performing repetitive data entry tasks. You can automate a lot of processes by using software that integrates upstream activities like purchasing and receiving inventory with downstream activities like shipping and customer follow up. The amount of time you save will more than make up for the cost of the software.
A few tips to keep your storage system organized:
+ Batch items by product line or SKU so they can be quickly located
+ Keep fast-moving items in easy to access locations and slower-moving items in a different area
+ Kit items that are frequently sold together (i.e., prepackage items such as a game that comes with a carrying case)
When it comes to packaging, less is more. It’s much simpler to have three box sizes than 100 different sizes plus envelopes, packing tubes, carrier pigeons, etc. Create a clear plan for how each product will be packed. Consider if it needs protection like bubble wrap or packing paper and what size box will be used.
Shipping methods can also get complicated. From the number of carriers (UPS, USPS, FedEx, DHL, etc.) to the many options they provide (Ground, Express, Expedited, Priority, etc.). Again, less is more. Customers will be overwhelmed if you offer 10 different shipping options at checkout. Try and limit it to no more than three or four options.
Definitely don’t waste time running to the post office or UPS store every day. Instead, schedule a carrier pick up. That way, the mail carrier/delivery driver will come directly to you and load up your items for you.
Create clear guidelines on what types of returns you’ll accept and the process customers will use to return items. When you receive returns, do a thorough inspection to determine if the item should be placed back into inventory, returned to the manufacturer or disposed of.
Tips for Using a 3PL Company
Obviously, this whole process takes up a lot of time that could otherwise be spent on things like marketing, developing new products and other business tasks. If you don’t have time for all that, consider partnering with a third-party logistics (3PL) company. It works basically the same as using Amazon for fulfillment (you send them your inventory, they pick, pack and ship your orders), but they may offer additional services such as custom packaging.
The benefits of working with 3PL companies over self-fulfilling are lower shipping prices (they can negotiate with carriers just like Amazon) and potentially quicker shipping times if they have multiple warehouses and can ship from whatever warehouse is closest to the customer. Plus, you don’t have to deal with storage or fulfillment, saving you a ton of time.
The Transportation Intermediaries Association (TIA) is a good place to find legit 3PL companies since they require members to abide by a strict code of ethics. You can also use a site like 3PL Finder to search for companies that meet your specific requirements.
When vetting a 3PL company, find out how long they’ve been in business, whether they can meet your storage needs, what their average turnaround times are, what kind of technology they use and obviously what their rates are. Pay attention to how quickly and professionally they communicate with you.
It’s always a good idea to have a backup plan, especially when it comes to something as crucial as order fulfillment. Amazon makes that super easy since you can quickly and easily switch between FBA and FBM. Whether you set up your own fulfillment process or use a 3PL company for FBM, you’ll be reducing future risks to your business and potentially saving money.
About the Author
Gennifer is the Marketing Manager at ByteStand, where she lives and breathes customer service education while sipping coffee in her pajamas.
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