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Fulfilment by Amazon (FBA) is a great way of selling your products through Amazon. Not only will Amazon store your products at their warehouses, they will provide 24/7 customer service and they will also dispatch your orders and deal with returns.
You may ask yourself what the benefits of using Fulfilment by Merchant (FBM) over Fulfilment by Amazon (FBA) are then. In this article, we will cover why in some circumstances it’s maybe more beneficial to use FBM over FBA.
What is Fulfilment by Merchant (FBM)
If you sell your products by FBM, you’re responsible for shipping out orders to customers, also providing customer service including dealing with returns and the stock is held at your location (home, office, warehouse etc.) not at Amazon’s warehouses.
What are the Advantages of FBM?
Avoid FBA Charges – Greater Margins & No Surprise Costs
If you’re a FBA seller, you will incur a range of fees such as FBA packaging fees, monthly storage fees, returns processing, long-term storage fees, and stock removal fees. These fees can add up and reduce your profit margins. You may find that you can use another fulfilment warehouses to process your orders and therefore cut down on these costs. With FBM, you will still however have to pay Amazon the referral fees and closing fees.
Provide a More Personal Customer Service
If you’re selling through FBM, you will have more control over the service that you provide to your customers. If they have queries, you’ll be able to offer great customer advice and help them with their buying decisions, which allows you to stand out from other FBA sellers. You will also gain a better understanding of your customer’s requirements, this is especially useful if you sell more custom made products.
When you dispatch orders, you will also be able to provide a more personalised service. You may want to include a handwritten note thanking them for their order or you may even want to use your own branded boxes when you send your products off.
Selling Hazmat Products
If you’re selling products which appear on Amazon’s hazardous material (Hazmat) list, these can range from anything from beauty products (nail varnish, perfumes, and aerosols etc.) which are flammable to corrosive substances, you may be restricted in selling these through FBA.
One of the main reasons Amazon restricts selling hazmat products apart from it can be dangerous storing these items in their fulfilment centres is many courier services such as FedEx and UPS are unable to ship such items by air, only by ground.
Even if you’re already selling a product through FBA, Amazon could later on flag it as potentially hazmat, your product will then have to go through a thorough hazmat review. If you’re unable to prove it is not a ‘Dangerous Good’ it could eventually be destroyed.
Usually competition in such categories are also lower so it makes sense to sell these products through FBM.
Low Turnover Products (Avoid Long Term Storage Fees)
If you sell low turnover products i.e. niche products that may take more than a few months to sell, you may get hit by long term storage fees (if you inventory is older than 6 and 12 months). As a FBM seller, you won’t need to worry about these charges or having to raise stock removal requests to escape these fees which occur twice a year in February and August.
During Q4 (Run-Up to Christmas)
In order to sell through FBA during the Christmas period, Amazon imposes a deadline as to when you can send your inventory into their fulfilment centres by. This deadline is normally the first few days in December, if your FBA shipment arrives later than this date, the fulfilment centre may not open them until the New Year and your products will not be available for sale.
Q4 is one of the busiest periods, if you’re unable to ship your products by the deadline, your best bet would be to sell them through FBM otherwise you could miss out during the most lucrative period of the year.
High-End Products (Avoid Scammers)
If you sell high end items such as electronics through FBA there is a higher risk of getting scammed. A customer for example may return an exact non-working copy of a laptop they bought and Amazon may refund the fake return.
If you want greater control over the return process, FBM is the way to go, so you don’t lose out to potential scammers.
When a Popular Product Runs Out of Stock (Act Quicker Than Your FBA Competitors)
For popular products, they can temporarily go out of stock especially during busy times of the year like Christmas. If you’re shipping products into your fulfilment centre, there can be delays and there’s no guarantee as to when your shipment will be checked in and opened by the fulfilment centre.
If a good ranking product on Amazon does go out of stock, it might be best to sell it through FBM instead of FBA. This way, you can act quicker than other FBA sellers and it may allow you to increase your selling prices as there’s no other competition.