Most sellers know the benefits of using Fulfillment by Amazon (FBA) instead of fulfilling their own orders. Some may have a setup whereby they are 100% reliant on using FBA to support their Amazon and even website sales.
However, with all the focus on FBA, we miss the benefits that fulfilling your own orders (known as Amazon Fulfilled by Merchant or Amazon FBM) can have and the fact that being dependent on one fulfillment solution could put a business at risk.
Having an Inventory Backup Plan
Amazon businesses need to always have a backup solution or contingency plan should FBA no longer be an option. For example, FBA may be experiencing a backlog and delays in receiving goods or temporarily suspended. With the current pandemic we are dealing with globally, Amazon has paused all FBA shipments on non-essential items. This is a prime example of why businesses need to have another fulfillment method in place.
Amazon businesses need to always have a backup solution or contingency plan should FBA no longer be an option.
What is Amazon Fulfilled by Merchant (FBM)?
For those unfamiliar with this fulfillment method, it is when a business fulfills its own orders. The seller will add in their own stock levels into Seller Central and when a buyer places an order it goes straight to the seller. The seller will then need to prep the shipment and send it directly to the buyer. In addition, the seller would manage any customer queries relating to the order and handle any returns.
The Pros of Using Amazon FBM
FBM has its benefits with sellers maintaining full control over their ordering and shipping process. FBM is often used by sellers that have:
large, heavy bulky items that take up lots of storage space or that cost a lot to ship
items that might have shipping restrictions set by Amazon
low margin products
items with limited inventory available
Using FBM means that you don’t have the cost of shipping inventory to the Amazon fulfillment centers. Depending on the volume and weight of the shipment, this can be quite a significant cost. This is why many businesses with heavy, bulky items prefer to manage this themselves to save on shipping costs and also they may have their own logistics network that knows how to handle their products better than Amazon.
It also means that you don’t have to pay any storage fees and worry about having your inventory locked away at Amazon, which means you can’t sell that stock to other retailers and could be missing out on other sales. Remember, with FBA you are only paid for the goods once sold. You still own that inventory while it sits and collects dust at Amazon. This is particularly the case when you have limited inventory.
For those items that are at a low retail price point and have minimal margin, paying the FBA costs may not make economical sense and FBM might be the only possible solution.
The Downsides of Using Amazon FBM
While there are several benefits to FBM, there is a key reason why many Amazon businesses avoid it. The real downside of using FBM is that your products will not be eligible for Prime shipping and the shipping time may be longer, which can slow down demand. However, the impact on demand depends on the competition and how many other options are available on Amazon with a Prime badge. While Seller Fulfilled Prime is an option for some sellers, it is not available to all sellers. Seller Fulfilled Prime is a program that allows sellers to ship FBM and their products are Prime-eligible.
In addition, you of course need to ensure you have the correct setup to be able to handle direct-to-customer orders and manage the cost to have an infrastructure to manage this.
Amazon introduced the Fulfillment Insight Dashboard in November 2021 to help FBM sellers close their delivery promise gaps. The marketplace found that many of these merchants overestimate the time it takes to fulfill and deliver orders, causing customers to bypass their products. The dashboard will display your specific delivery promise gap and provide recommendations and tools for setting more accurate handling and transit times.
Be Aware of Amazon’s Strict Performance Metrics
Amazon has strict guidelines that businesses need to follow when fulfilling their own orders. If you don’t follow the guidelines, you risk losing your selling privileges or even worse, your account being suspended. Maintaining your seller health and feedback rating is essential. You must also correctly handle buyer-initiated order cancelation requests or your cancelation rate metric will suffer.
When shipping FBM orders, ensure that inventory levels are kept up to date to avoid canceling any customer orders due to not having the stock. Be sure to ship the item within the time frame provided by Amazon and provide a tracking number where possible. In addition, it's important to respond to all customer queries within 24 hours regardless of weekends, and be able to manage return requests within 24 hours as well.
2024 update: Amazon announced changes to the on-time delivery rate and handling requirements for seller-fulfilled orders.
Tip: As of May 25, 2021, sellers can set a faster default handling time of one business day on seller fulfilled standard shipping orders. Amazon previously had a default handling time of two business days. If you feel Amazon’s shipping window is too tight for some products, you can extend it to allow you longer to prep the order.
Using Two Fulfillment Methods
Brands using both FBA and FBM have been less impacted in the past when Amazon FBA has experienced delays in receiving goods or has temporarily paused the ability to create shipments. While some sellers had enough weeks of cover to not be affected, others found themselves out of stock on key products. When FBA stock dried up, they were able to switch to FBM and fulfill orders directly to the customers, avoiding any sales impact and ensuring the customer could still purchase their products on Amazon.
Therefore, if you have a business currently working with one fulfillment method (in this case FBA) you might want to explore Amazon Fulfilled by Merchant as a backup option.
Originally published on April 1, 2020, updated August 1, 2024
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.
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