Amazon gains millions of active shoppers daily. If you want to take advantage of the platform for your business, you must gain a full understanding of the fulfillment methods and shipping services currently available on Amazon.
Amazon sellers are free to choose how they will handle their shipping and logistics. If you are an Amazon seller, you should know the different fulfillment methods offered by the platform and decide what works for your business.
- FBM or Fulfilled by Merchant
- FBA or Fulfilled by Amazon
- SFP or Seller Fulfilled Prime
Although FBA is growing in popularity among Amazon merchants, having a combination of fulfillment methods is crucial to give you more control over shipping.
The COVID-19 pandemic just showed us why relying solely on FBA is a mistake sellers cannot afford to commit. Amazon's delivery services were put to the test with the surge in demand. Amazon sellers selling non-essential goods who only relied on FBA had their business put on hold by month-long delays.
You don’t want to be caught unprepared when the next unprecedented event hits. Now is the best time to try out Amazon fulfillment options other than FBA.
In this article, we will discuss in detail how Amazon FBM and SFP work.
Understanding Amazon FBM
In Amazon’s FBM program, you are responsible for fulfilling your products. You handle everything, from product listing and storage to packing, shipping, and customer service.
How Does Amazon FBM Work?
If you want to be a successful seller in Amazon’s FBM program, you need to understand how it works. Here are the three things you need to do.
List your products on Amazon.
After creating a seller account on Amazon, the next thing you need to do is to start listing your products. When adding your products to the platform, make sure your listings have accurate information and product description. Doing this will increase your conversion rate.
Keep track of your inventory.
If you have access to multiple fulfillment centers, it would be strategic to distribute your inventory over several locations. Doing this cuts down your shipping costs and average shipping zone. If you are still starting with your business, a small storage center or even your home can be a temporary storage solution.
Fulfill orders and ship on time.
After receiving an order notification, ship the product according to the delivery time frame dictated by the customer. They will see an estimated delivery time upon checkout, so they will have an idea when their item will arrive. To set realistic expectations for your customer, you can adjust your shipping and transit time.
You can purchase your shipping labels on your own or through Amazon. Regardless of what you choose, do not forget to provide e-commerce order tracking for the customer. To avoid shipping delays, partner with the best online shipping services provider.
Finally, always make sure to keep your Amazon seller account up-to-date, particularly the instructions for returning FBM orders. Upon accepting a return request from a buyer, the buyer will receive a return label with the return address you provided for your business.
When Should You Use Amazon FBM?
If you sell products exclusive to your brand or products with lower profit margins, Amazon FBM is the suitable product fulfillment option for you.
In particular, FBM is better for you when you are selling
- exclusive products, which customers buy less frequently;
- products in small quantities to cut down shipping charges;
- products with low profit margins to save on storage fees you’d incur in the FBA program;
If you’re in a specific situation where FBM turns out to be cheaper than FBA, then go for FBM, by all means.
Advantages of FBM
You have total control over your business.
The FBM program gives you a better insight into how things work in your business. Fulfilling all the shipping and inventory requirements by yourself can give you valuable experience from which your business can profit in the long run.
You have direct customer interaction.
In FBM, you will be the one dealing with your customers rather than Amazon doing it for you. We know it may seem more like a hassle than an advantage, but it's actually beneficial for your business.
By gaining experience in being your own customer support, you will better understand your consumers’ needs as you deal with them firsthand, whether their feedback is good or bad! Handling negative feedback can give you valuable insights into your business's performance so that you can make adjustments for the better.
You have the freedom to run your business however you want.
Self-fulfilling your merchandise gives you better control over your inventory levels, as well as a better opportunity to expand. Growing your e-commerce business will be smooth-sailing when paying FBA fees and shipping to fulfillment centers are the least of your worries.
You have the opportunity to sell offline.
It will be easier for you to maintain your shop online and offline when you keep to only one inventory. Since you're storing your inventory in your chosen warehouse, you have complete control of the merchandise to run an offline retail store as well. You get all of this with no worries about any extra shipping and delivery charges.
Your profit margins increase.
Without paying additional FBA fees, you can widen your profit margins. You can now also afford to reduce your warehousing expenses and shipment charges.
You won’t suffer a profit loss due to changes in Amazon policies.
The pricing and policies for Amazon’s fulfillment often change. They also impose long-term storage fees for inventories that have been in Amazon's fulfillment centers for a long time. With FBM, this will not be a problem.
You don’t have to adhere to stringent FBA requirements.
Although opting for Amazon FBA will mean many of your duties and responsibilities will be taken out of your plate, it also means that you will be asked to strictly comply with Amazon’s rules and regulations. In FBM, you only have to play by your own rules. You won’t have any issues, and your reputation as a seller will remain spotless as long as you ship orders on time.
Your sales and shipping don’t stop.
Many sellers who relied solely on Amazon FBA learned a valuable lesson during the COVID-19 pandemic. With the surge in demand and the postponed shipping of non-essential items, many Amazon FBA sellers were put into a difficult financial situation for several months.
On the other hand, FBM sellers did not have such a problem because their logistics were firmly in their control. It was business as usual for them as they continued to sell and ship their products without a hitch. If you want to avoid a similar scenario, take advantage of the freedom to find reliable shipping services near you to handle your logistics needs.
Disadvantages of Amazon FBM
We have already tackled the many advantages a seller can get when choosing Amazon FBM. However, as with everything, there will always be some disadvantages.
You must do the hard labour.
Choosing FBM means the responsibility of picking, packing, and shipping falls to you. Needless to say, those tasks are going to take up time you could use for other things. If you can’t spare extra hours to be more involved in your business’ fulfillment process, then this option might not be for you.
You have less time for growing your business.
Although dedicating more hours to your business is good, spending more time on fulfillment and less on your Amazon marketing strategy could be a disadvantage.
You have to pay higher shipping fees.
As discussed previously, Amazon sellers who chose FMB and do the logistics themselves should save more than those who opted for Amazon FBA. However, dealing with the wrong shipping services provider can jeopardize your shipping budget.
You have to deal with angry customers.
Without Amazon’s customer service, you have to deal with your angry customers, including returns, queries, and refunds. It could be an advantage for a better understanding of your customer. However, if you don’t have a lot of time on your hands, this could be a problem.
You have no access to Amazon Prime.
If you didn't opt for Amazon FBA, you could be eligible for the Amazon Prime badge. This badge could help you reach a higher organic ranking. However, if you qualify for the alternative, SFP, you will enjoy the same access Amazon FBA sellers have.
Amazon FBM Fees
In Amazon’s FBM program, you have to pay a fee for each item sold. These fees are as follows:
When you list your products on Amazon, each sale you make is considered a referral. Check out Amazon's referral fee schedule to view the fees for each product type.
Monthly subscription fees
When you subscribe to Amazon’s Pro FBM service, the additional fees imposed on a sold product are waived for you. The catch, however, is that you have to spend $39.99 for a monthly subscription.
Per-item selling fee
Every time you have an item sold on Amazon, you are charged $0.99. This can be waived when you're subscribed to Amazon's Pro FBM service.
Partnering with third-party logistics providers to handle Amazon FBM requires a fee for storage and fulfillment.
Can a Seller Use Both Amazon FBM and Amazon FBA?
Yes! If you have a wide range of products with varying profit margins, it would be best for you to leverage both FBA and FBM.
Products with good margins and high selling volumes should remain with FBA, while those with lower margins and low selling frequencies should be with FBM.
Through Amazon SFP, you can fulfill orders independently or with a third-party fulfillment provider and then ship them to your customers within two days through Amazon Prime shipping.
Do not confuse this with the Amazon FBA, in which Amazon handles all the shipping and logistics processes. With SFP, you can have a Prime Badge on your listing while maintaining full control over your inventory's fulfillment and storage, similar to how Amazon FBM works.
How to qualify for SFP
On February 1, 2021, Amazon updated the requirements for new SFP applications. If you are considering this shipping option, this is your best chance to work on getting your numbers up!
Qualifying for SFP requires that you meet the requirements of Amazon’s premium shipping program.
Below are the updated eligibility requirements for Premium Shipping:
- Delivery Speed targets for one- and two-day delivery promises must be met.
- The seller must ship six days a week, including either a Saturday or a Sunday.
- Standard-sized Prime products must be available for nationwide delivery.
After passing the eligibility requirements, you are now required to go through a trial period in the SFP program. During this period, you must fulfill the following requirements on at least 50 Amazon Prime orders.
- On-time shipment rate — not less than 99% for Prime orders
- Use of Buy Shipping services — not less than 98% of Prime orders
- Cancellation rate — not more than 0.5%
When you complete the trial period, you will be auto-enrolled in SFP. Note that you must meet the requirements for 7 continuous days.
- Sell at least 200 orders every 3 months.
- On-time delivery rate must not be less than 87% for Prime orders.
Terms and policies
To maintain your SFP status, you must adhere to the terms and policies laid out below.
- Purchase all shipping labels for Prime items through Amazon’s Buy Shipping services.
- Direct all service inquiries post-shipping to Amazon.
- Provide Prime shipping benefits.
- Adhere to Amazon’s return policy.
Advantages of Amazon SFP
You have increased exposure to Prime members.
When you are eligible for SFP, you get the same treatment Amazon FBA sellers do. It means your products will be more visible to Amazon Prime members, increasing your conversion and sales.
You have firm control over your inventory.
Like in FBM, your inventory is fully in your hands in SFP because you can ship your merchandise from a third-party warehouse of your choosing. If you offer seasonal products or you sell on multiple channels, this setup will be beneficial for you.
You can control your long-term storage fees.
With Amazon's skyrocketing sales, the demand for warehouse space has also increased. It means if you choose to be an FBA seller, you will pay for the increasing cost to store products. Both FBM and SFP give sellers full control over warehousing, which can be a big money-saver.
Your products are more flexible.
You cannot do last-minute modifications to your items when you opt for FBA. However, with SPF, you maintain your inventory at your own warehouse, making your products more accessible and flexible.
Disadvantages of Amazon SFP
Maintaining your SFP status takes strict adherence to Amazon standards.
Failing to meet Amazon's SFP requirements will result in the removal of your Prime eligibility. With the recent changes to SFP, expect more stringent standards that most sellers might find challenging to follow.
Storage and shipping costs are on you.
Yes, you may have dodged paying FBA and Amazon storage fees. However, you don’t get to keep the money. In SFP, you will still have to bear the cost of warehousing, employee wages, and, of course, shipping.
You have to handle the returns.
In the FBA program, Amazon deals with return requests, and the customer sends the product back to Amazon. However, when you are in the SFP program, it will be your responsibility. If you don’t have an established standard operating procedure, this could be very challenging for you.
Let Stallion Express Take Care of Your Amazon FBM and SFP Shipping
Both Amazon FBM and SFB are great alternatives to Amazon FBA. However, you should carefully review your options based on cost and opportunity analyses.
The best fulfillment method for your business depends on three things: what you are selling, where you are selling, and how you want your shop to operate. Both Amazon FBM and SFP guarantee the prompt shipping of your products, but they are not the only options. Look into all options and pick the fulfillment strategy that will best meet the needs and demands of your business, whether it’s FBA, FBM or SFP.
Stallion Express offers the best and most reliable shipping services for your Amazon logistics needs. Check out Stallion Express shipping and mailing service near you or drop your packages at our drop-and-go locations. Our company will be responsible for processing your orders and doing the hard labour for you.
If you want to know more about our services in Canada, contact us today at 877-863-7447!