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Amazon FBM – What Is It and How Does it Work?

Many Amazon sellers use FBA, you may even be one of them, but there is an alternative method of selling and fulfilment on Amazon, which may also be right for you. It’s called Amazon FBM (Fulfilment by Merchant) and simply involves you, the seller, managing all aspects of your Amazon business yourself including storage, shipping and customer service.

Part of ensuring your success on Amazon is understanding how to get your Amazon business set up and working correctly for you, making it as efficient and streamlined as possible.

Amazon

This is why so many Amazon sellers use Amazon FBA (Fulfilment by Amazon) to store and ship their orders. It frees up their time and resources so that they can concentrate on researching, sourcing and marketing their products.

FBM is often overlooked by Amazon sellers who think, why would you deal with all of these things yourself when you could have Amazon doing it for you with their FBA service?

That’s a good question, but there’s more to Amazon FBM than you might realise. Let’s start from the beginning.

What is Amazon FBM?

Amazon FBM requires you to list your products on Amazon, store your own stock, pack and ship orders and deal with all customer service enquiries yourself or through another third party. So, Amazon is simply your listing venue, and everything else is done by you.

You create your FBM listing in exactly the same way as you would create a regular Amazon product listing, and in the Fulfilment Channel section, select ‘I will ship the item myself’ (Merchant Fulfilment).

It is sometimes referred to as Amazon MFN (Merchant Fulfilled Network).

Round-Up: Amazon FBM is a self-fulfilment option typically used by Amazon newbies rather than more established sellers. Mostly this is because it’s the only initial option available at start-up with FBA requiring more time to set up.

When Should You Use Amazon FBM?

Anyone can decide to take the Amazon FBM route, but running an Amazon business is never going to be a ‘one size fits all’ scenario. FBM will only be suitable for some Amazon sellers, not all.

Generally, Amazon FBM should be considered if you sell:

  • Exclusive products with low sales frequency
  • Small volume products
  • Low-profit products
  • Hard to ship products (e.g. oversized or fragile)

Also, consider Amazon FBM if you have:

  • A third-party fulfilment service (other than Amazon) already in place that is cheaper than Amazon FBA.
  • Handmade products in your inventory. Many handmade sellers like to use FBM to ensure the order arrives as intended.

Round-Up: Choose Amazon FBM if you are a newbie, have small volume or exclusive products, hard to ship products or handmade items.

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What Are the Advantages of Using Amazon FBM?

Surprisingly, bearing in mind you will need to do all of the work, there are plenty of advantages to using Amazon FBM. This is true, mainly if you are new to selling on Amazon or only have a minimal inventory.

1. Understand How Your Amazon Business Works

Sometimes it’s good to control your business yourself rather than putting everything in the hands of a third party. This is important if you are a start-up as it helps you understand how your business works, lets you put better strategies and practices in place and ensures you have a sense of control.

By managing your inventory, profits, customer service and admin, you’ll have a clear overall view of how your business runs, making it easy to make better decisions.

2. Freedom to Easily Expand Your Amazon Business

By fulfilling all orders yourself, you’ll have full control over your stock levels at all times. You can quickly increase your stock when required without the worry of extra shipping fees and increased storage costs from Amazon FBA.

3. Avoid Strict FBA Requirements

While Amazon FBA can take away many of the tasks and processes involved in the running of your Amazon business, you will have to adhere to its strict rules and regulations. You’ll have no such issues with Amazon FBM as your standards are your own. All you need to do is concentrate on shipping orders promptly to keep your reputation intact.

4. Yield Greater Profits

Of course, this is not a given, however, with no FBA fees payable, if you have calculated your other costs correctly and have negotiated the best prices for your stock and shipping requirements, your profit margins should be better. You’ll save on fulfilment and storage fees compared with using FBA, mainly if you are selling large products with low-profit margins.

5. Direct Interaction with Your Customers to Build Your Brand

As an Amazon FBM seller, you will be required to provide customer service rather than have Amazon do it for you. This may sound like it will require tremendous effort (and some headaches) for you, but actually, it’s advantageous.

You’ll get a better understanding of your customer requirements and deal firsthand with all feedback, good and bad! This interaction, even when negative, allows you to gain valuable insights into the performance of your business as a whole and ensure your brand becomes known for the right reasons.

6. No Long Term Storage Fees

If you have a slow-selling product and you are using FBA, Amazon may charge extra storage fees to hold your products that sit for long periods in its warehouses. As you will hold your own stock as an FBM seller, this will not be an issue.

7. Consistent Sales and Shipping

During the recent COVID-19 pandemic, some Amazon FBA sellers were disadvantaged for several months because Amazon stopped all shipping via FBA for goods that were deemed non-essential.

FBM sellers, however, were able to continue with sales and ship without issue because the fulfilment of orders was entirely under their control. Should a similar situation occur, Amazon FBM sellers’ businesses will be largely unaffected.

What Are the Disadvantages of Amazon FBM?

Look, it would be great if there were no disadvantages to becoming a Fulfilled by Merchant Amazon seller, but as with every concept, there will always be some disadvantages too.

1. Picking, Packing and Shipping is Time-Consuming

Dealing with your own fulfilment is without a doubt going to eat into your time. You’ll need to be super hands-on and be prepared to dedicate many hours every week to your Amazon business.

2. Prepare to Commit More Time to the Day to Day Running of Your Amazon Business

This could be seen as a disadvantage or an advantage. On the one hand, spending time in your business is good because you get to really understand its workings which ultimately can be the key to your success.

On the other hand, you could find yourself getting bogged down with general admin, customer service issues and other tasks that can take you away from growing your Amazon business.

3. Shipping Fees May Be Higher

In theory, Amazon sellers who choose FBM and pick, pack and ship their own orders should have lower costs than those who use Amazon FBA.

However, while your storage costs may be more economical when you choose Amazon FBM, your shipping fees could spiral if you don’t negotiate a good deal with your preferred carrier.

4. Customer Service is Your Responsibility

As an FBA seller, you have the advantage of using Amazon’s customer service department, and they will deal with any queries, returns and refunds. There’s no such help with FBM. It will all be down to you.

5. Ineligibility for Amazon Prime

Unfortunately, FBM sellers are not eligible for the Amazon Prime badge. Prime is directly linked to helping you achieve higher organic rankings and so could potentially be a significant disadvantage for you unless you qualify for the alternative, Seller Fulfilled Prime.

This is a program you must apply to join, and current applications are closed although you can add your name to a waiting list.

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How Much Does Amazon FBM cost?

Here’s the nitty-gritty and you might be pleasantly surprised.

As a Pro FBM Amazon seller, the subscription fee is $39.99 per month.

If you are not a pro seller, but an individual seller, there is no subscription fee, but you will incur a $0.99 fee for every unit you sell. So, if you’re selling more than 40 units per month, you should switch to the Pro package to remain cost-effective.

Amazon also takes a referral fee. This is because you are a seller on their marketplace, so they consider that they have referred customers to you.

The referral fee is a percentage of your total sales price. In most product categories, this is 15%, but it does vary from 6% to 45%, so you must check ahead depending on the product you are selling. Full seller fees can be viewed on the Amazon website.

You’ll also need to consider your shipping fees. Remember, it’s your responsibility to pack orders and ship them to your customers, and on-time. You should factor in not only the actual packaging and shipping fees but also your time spent picking, packing and shipping the order.

Round-Up: Take your average monthly sales and compare final costs as an individual seller and as a pro seller. Choose the most cost-effective option based on your monthly transactions, referral fees and shipping costs.

Can Amazon FBM Be Used With Amazon FBA?

Yes! What many Amazon sellers don’t realise is that FBM and FBA can be used simultaneously. The main advantage of this is that you’ll get the benefit of twice the exposure.

Doubling up is particularly beneficial if you have a large inventory containing a range of products with lots of different price points and profit margins.

Round-Up: Split your inventory between FBA and FBM. So, your fast-selling products with high margins can be fulfilled by FBA, and your lower margin, slower selling products can be fulfilled by FBM. Everyone’s a winner.

Which is Better – Amazon FBM or Amazon FBA?

That’s a tricky one! This will always depend on many factors based around your individual Amazon business, but here are a few pointers:

Choose FBA When:

  • You have a fast turnover
  • Your items are small and lightweight
  • You have a decent profit margin
  • You have a large inventory but no storage facility
  • You can’t fulfil orders
  • You don’t have time for efficient customer service

Choose FBM When:

  • You have a slow turnover
  • Your items are large or heavy
  • You have a decent storage facility or small inventory
  • You have some staff or can deal with fulfilment efficiently yourself
  • You can deal with customer enquiries effectively

Final Thoughts

Amazon FBM does have a lot of benefits even though it might seem like hard work! The control factor especially is an aspect of your Amazon business that shouldn’t be overlooked, and FBM gives you precisely that.

As an FBM seller, your reputation is ultimately your responsibility and critical to your success. With this in mind, you must ship all orders on time. To help you do so, Amazon offers a ‘Buy Shipping’ feature which includes tracking and will help ensure your fulfilment process is smooth and reliable.

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eBay vs Amazon: The Complete Comparison

As established brands, most online shoppers are familiar with eBay and Amazon. Still, there was a period, around 10 years ago, when the question of “Where should I sell – eBay or Amazon?” wouldn’t even have been considered.

Why? Well, because quite honestly, eBay would probably have won, hands-down at that time! For years, eBay was the most recognised place to sell online.

eBay

This was not only for second-hand goods, which is where it all started, but it was the perfect starting point for small businesses who wanted to launch quickly, with minimal start-up costs and a ready-made, devoted audience, accessible 24/7.

Then Amazon, initially known only for being the place to go for books, videos, computer software and CDs began diversifying further until the present day. They now stock products from A to Z as their logo suggests!

So, you can understand why for ecommerce entrepreneurs, it might be challenging to decide whether to sell on eBay or sell on Amazon.

As you would expect, there are arguments for both venues hence the debate. While they may appear to be in colossal competition – and they are to a large extent – for sellers, there are fundamental differences that should be taken into account.

So, on which of these two impressive ecommerce monsters should you choose to sell your products? Selling on Amazon versus eBay is an important decision.

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Here are some questions we will attempt to address in this article:

  • What’s the difference between eBay and Amazon?
  • Is Amazon better than eBay for selling?
  • What are the seller fees for each marketplace?
  • What are the communities that each marketplace has?
  • Is Amazon more competitive for sellers?
  • Are buyers loyal to eBay or Amazon?
  • Can you make more money selling on eBay or Amazon?
  • What can I sell on eBay and Amazon?
  • Is it easier to sell on eBay or Amazon?
  • Do buyers trust eBay or Amazon sellers more?
  • The Pros And Cons of Selling on eBay
  • The Pros And Cons of Selling on Amazon

What’s the Difference Between eBay and Amazon?

First things first! Let’s look at the main differences between eBay and Amazon. Unlike Amazon, eBay facilitates only third-party sellers. In other words, eBay does not have its own products.

Products from individual sellers or businesses are listed through either the auction format or fixed-price format, so the good news is, you will never compete with eBay themselves as they simply provide the marketplace!

Amazon does include third party merchants, often private label sellers, alongside the sale of products from their own range – Amazon Essentials, which you may find yourself competing with.

Here there is no auction facility, so all available products are sold at a fixed price, just like a standard retail site.

1. Is Amazon More Competitive For Sellers?

Not necessarily! Although Amazon has their own brand and eBay don’t so eBay in this respect is slightly less competitive. You will encounter competition on both platforms – this is a natural part of being in business.

Some sellers will offer low pricing to attract buyers and sell in volume, others will price higher, basing their sales on quality rather than quantity – this is always going to happen wherever you sell.

What’s important is that you don’t enter a ‘race to the bottom’ on either site!

2. Are Buyers Loyal to eBay or Amazon, or Do They Buy From Both?

Well, eBay and Amazon audiences do differ as you might expect. There’s no denying that eBay and Amazon both have a massive reach, but significantly each platform reaches a different type of audience!

Both have an international presence.

Amazon has 14 marketplaces worldwide; eBay has 23 global sites. Both receive vast numbers of visitors. Amazon gets more than 197 million visitors worldwide each month. This equates to more than 2.3 billion visitors over 12 months.

eBay has over 180 million active buyers and about 2 billion daily transactions yet more than half of eBay’s annual sales revenue comes from its 60 million buyers outside of the United States, setting it apart from Amazon in global reach.

But, in terms of demographics, Amazon buyers tend to be wealthier. Research reveals the average Amazon shopper is between 45 and 54 years old, married, with children and has a college education.

The eBay demographic consists of 57% males which you may find surprising, and 43% females. Of these 35 to 49-year-olds make up the largest group at 32%. However, these figures though mean nothing if you do not know your buyer persona!

Determining this will allow you to identify whether your audience is already active in these marketplaces and which marketplace they use predominantly. What’s also interesting is that some buyers are indeed loyal to one platform or another!

Some will shop only on Amazon and never dream of buying from an eBay seller, others are eBay die-hards and believe that products on Amazon are likely to be more expensive! So, from a sellers point of view, is this true?

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3. Can You Make More Money Selling on eBay or Amazon?

If you are selling a product on eBay for a fixed price of £10 and your profit margin is 30%, you’ll make £3.00 per sale. You’ll need to sell in large volumes to make a decent amount from this one product.

If you choose eBay and list at auction, you are also at the mercy of your bidders, and you may not achieve the £10 price you hoped for. On the other hand, you may receive a final price of more than £10! Not so on Amazon!

Here you will always list at a fixed price and so will always know where you stand with your profit and will always sell at £10. This is why the fixed price model offered by both platforms provides some security and allows you to predict and keep track of your sales and profit. Then there are the fees to take into consideration.

Generally, eBay charges a flat 10% selling fee (this varies per category), but this does not include payment processing fees via PayPal. These are typically an additional 2.9% + 20p. Amazon charges a typical 15% commission which includes payment processing fees as well. However, there will be additional fees to pay if you use their FBA service.

The thing is, your listed price, which will determine how much money you make, must take into account many factors, including:

The quality of your product. If your product is high quality and superior to your competitors and you ensure you get this across in your listings, the likelihood is that you can command a higher price – and achieve that price.

Your competition. If you have little or no competition and your product is popular you will make more sales – this stands to reason!

The uniqueness of your product. If your product is rare, is in demand, has a fantastic USP or stands out for whatever reason, you will make more sales!

Your brand awareness. If you have an excellent reputation on one or the other of the sites, you will be able to command a higher price for your product because you’ll already have the trust of your customers. Alongside this, Amazon is great for selling your own branded products, and your business will thrive there if that is the route you take.

All these points apply to both eBay and Amazon. You may choose to price your products differently between sites, but ultimately, the amount of money you make will depend on your product, your branding, your profit margins and how well you list!

4. What Can I Sell On eBay and Amazon?

When it comes to categories available on Amazon and eBay, there are similarities. Most noticeably, eBay does not have as many restrictions in place as Amazon. Of Amazon’s 40 categories, 23 are unrestricted, and 12 require permission to sell.

These are known as ‘gated categories’. The other five have some restrictions depending on the type of product. This is simply to stop counterfeits in some instances.

Other categories are season restricted – for example, toys and games over the Christmas period mainly to avoid an influx of sub-standard products.

On eBay, rather than restricted categories, there are lists of restricted products. Before you decide which platform to sell on you should check that your product or category is not restricted, prohibited or gated, but there is a massive range of potential categories and products for you to choose from.

5. Is it Easier To Sell On eBay or Amazon?

eBay is quicker and less complicated when it comes to listing your products and indeed selling and receiving payments. You can list in a matter of minutes, choose your listing format, and once your product sells, your eBay buyers money will go directly into your PayPal account where you can then manually withdraw it when you need to.

Amazon also takes payments for you, but holds them for 14 days, before transferring directly to your bank account. It’s a lengthy listing process, although still straight-forward. Ease of sale will also depend on your product!

Generally, quality products that appeal to a mass market, such as new clothing, baby products, health and beauty items, nutritional supplements, fitness products and toys, are popular on Amazon.

On eBay, sellers can list used, unique, or unusual items alongside cheaper versions of products that might sell for low margins but in high volumes.

The real difference comes down to the fact that Amazon has the added advantage of their FBA service, taking all the hassle of storage, packing and posting out of your hands saving you a considerable amount of time and effort. Of course, extra fees are involved.

6. Do Buyers Trust eBay or Amazon Sellers More?

eBay, unfortunately, built a reputation for hosting scammers a few years back and in some respects, this has stuck a little.  The number of overseas sellers on eBay also does little to encourage peace of mind. However, “trust” on eBay has improved massively over the years because eBay now protects buyers if items don’t arrive. Amazon is harsher on sellers should you fall foul of their rules and regulations. Suspensions regularly occur, and so from a buyers perspective, this is where more trust has been built. Buyers know that should a questionable seller be touting products on Amazon, they will likely be dealt with quickly.  This, alongside their easy returns and refunds guarantee, puts them a step ahead of eBay.