If you’re an Amazon seller, finding the right way to optimize your business model can be a challenge.
The goal is always the same: optimize your supply chain as efficiently as possible.
Amazon sellers can build this model based on two modes of shipping and storing products: FBM (Fulfillment by Merchant) or FBA (Fulfillment by Amazon). The problem here is that many sellers rely solely on FBA, and are missing out on other fulfillment methods that allow for more control over shipping.
What is Amazon FBM, and How Does It Work?
Amazon FBM, or Fulfillment By Merchant, allows sellers to ship straight to customers from their facility. In this model, sellers are responsible for inventory management, product preparation, returns management, and customer service.
Sellers can also ship to customers from third-party logistics (3PL) facilities. This concept is similar to FBA, except that the warehouse, inventory management, returns management, and customer service are handled by a company other than Amazon. Sellers are still responsible for storage and fulfillment costs.
Are you seeing where we’re going with this?
With a 3PL facility, all of the headaches that normally come with shipping products to customers are delegated to another facility.
FBM Pros and Cons
Amazon’s Seller Fulfilled Prime Program: Amazon has launched anew program that allows third-party vendors to enroll their products in the PrimeProgram while filling orders. This is a little challenging, since Amazon will need merchants to demonstrate their ability to meet higher shipping standards in order to enroll products in the Seller Fulfilled Prime program. However, it can have extremely beneficial impacts on your business, when done properly.
More Inventory Control: When selling products with FBM, you have complete control over your inventory. With direct access to your inventory, you can deal with issues like erroneous delivery and product quality without the delays that come with going through Amazon. It’s essentially the same benefit of FBA, with much more flexibility.
Selling Hazardous Materials: You may be barred from selling products that appear on Amazon's hazardous material (Hazmat) list, which might include everything from flammable beauty products (nail varnish, fragrances, and aerosols, for example) to corrosive compounds. One of the main reasons Amazon bans the sale of hazardous products, aside from the fact that holding these items in their fulfillment centers can be risky, is because many courier firms, such as FedEx and UPS, can only carry such items via ground.
Sell FBA and FBM on Amazon at the Same Time: When Amazon’s inventory is running low, you can still sell the product as FBM! This puts the power ultimately in your hands, so that when your FBA is out of inventory, your FBM lives on - and your product is always available. Another way to think about this is to calculate the total costs of FBA. When you add the expense of sending products from your 3PL to Amazon, it might be almost the same cost to do FBM from your3PL.
2 Day Shipping: Check if you can get good 2-day shipping rates with your 3PL carrier. Then, you can promote your products with that fast-shipping time, which sells almost as good as FBA!
Best Options for 2Day Shipping: It is important to note that USPS offers no services with guaranteed2-day delivery. So any parcels with hard 2-day delivery requirements work best through FedEx 2 Day or UPS 2nd Day as they do offer more precise delivery time frames.
Advantages of Using 3PL for FBM Fulfillment
For many firms, outsourcing fulfillment to a third-party logistics provider is a useful third alternative. Taking on Amazon order fulfillment obligations can be more difficult than you may anticipate, and quite stressful to say the least. Working with a third-party logistics provider can help you maintain FBM flexibility while freeing up time and attention to focus on other aspects of your company.
After receiving orders, a good 3PL can keep your inventory at a warehouse, package and prepare things for distribution, and send off items to parcel carriers in a timely manner. Instead of a one-size-fits-all app, operations like these can design custom-fit fulfillment tactics for Amazon orders.