Amazon FBM (abbreviation for Fulfillment by Merchant and, in some cases, also called MFN by Merchant Fulfillment Network), is one of the two options for logistics management that Amazon offers to sellers who use a Seller Central account. This concept refers to the process in which the company is responsible for sending the sold products to customers, as well as storing them beforehand.
Do not confuse this term with Amazon FBA, which refers to logistics in which the seller delivers the goods to Amazon to be stored and then sent directly to customers. At The WOW patio (specialized Amazon Account Management agency) we have an article where we explain the differences in more detail, you can find it here.
What is Amazon FBM / MFN?
When the company uses an FBM logistics (also called MFN in many cases), the entire logistics process after the sale is managed by itself.
If a Fulfilled by Merchant or FBM management is chosen, the seller is responsible for controlling their stock, storage, and distribution of the products (although this last one could also do it through a third party). In short, the company will not have Amazon for storage or shipping.
FBM in individual plan vs FBM in professional plan
The type of Amazon plan that the company has with respect to the seller account does not affect whether or not it opts for FBM logistics management. The only thing to keep in mind when choosing one plan or another is the freedom to configure the type of shipping.
With the individual plan, the company will not be able to select the shipping it wants, but will have to adapt to Amazon’s fixed shipping rates. Unlike this, with the professional plan the company can select the logistics company that suits them best and create shipping templates for each product as they see fit. You can find more information on this topic later.
How Amazon FBM works
The aspects to be considered when choosing Amazon FBM, MFN or Fulfillment by Merchant logistics are the following:
1. Amazon Seller Account
Although it sounds obvious, the company will need to have an Amazon Seller account to be able to start selling on the marketplace.
2. Listing or product sheet
Subsequently, the products will have to be loaded into the catalog with all the information (resulting in a listing or product sheet that the user will see when browsing Amazon). This is done from the “Seller Central catalog” tab. Sellers have the option to create a new product listing from scratch or add an existing one to their catalog as long as they have permission from the owners of that brand (read the article on the Amazon Brand Registry).
A question that may arise for the company at this point is, can I combine both logistics management options (FBM and FBA) in my catalog? The answer is yes. The company can sell its products in either way, so if Amazon’s own logistics (FBA) is used, it will also be convenient to define an alternative own logistics option so that, if Amazon runs out of stock at some point, potential sales will not be lost.
In addition, and very important, the time that the company itself needs to prepare the shipment and deliver it to the customer must be defined. As already mentioned, Amazon has delivery times that are different from those of the traditional market and, in the case of FBM logistics management, the company itself must offer the time it needs to prepare the shipment, taking into account that Amazon will then add the time it takes to get the product to the customer.
3. Inventory Management with Amazon FBM / MFN
Having good inventory management is essential because the more efficient the administration of this is, the better the results will be on Amazon. Amazon itself evaluates the performance of companies that use their own logistics (MFN or FBM), which can directly affect sales levels.
It is recommended to correctly define stock on Amazon when using the Fulfilled by Merchant (FBM) logistics to avoid complications regarding orders. For example, if a customer makes a purchase and there are not actually those units of product available.
4. Shipping Templates
Configure the shipping templates to match the logistics time capabilities of the company in preparing the package and the time it takes the logistics company to deliver it to the customer.
Amazon allows sellers who choose their own logistics (FBM or MFN) to configure the called shipping templates, define the cost that will be passed on to the customer when purchasing a product based on the geographic area in which it is located, weight, product dimensions, etc.
As shipping options, the company will also be able to establish the days it is operational at the shipping level.
Once the general configuration is established, the company links the shipping templates to the products. This is one of the most important steps as a seller through the Fulfilled by Merchant (FBM) logistics as from this moment, every time a purchase is received, it will include the previously defined configuration.
With reference to the latter, the company can choose to only sell in a certain region, if it excludes some, or even if it wants to make international shipments.
DID YOU KNOW THIS? Some companies use FBM (or Fulfillment by Merchant) logistics in order to gain greater profitability thanks to shipping. The company can increase the price of shipping to gain the difference between what it has cost them and what the customer will pay.
However, it is important to consider the role of the referral fee, as the lower the total price (including logistics), the lower it will be. If you have taken any of our trainings, you will know how to reduce the impact of the referral fee with Amazon FBM / MFN logistics.
5. Coordinating Pickup, Packaging, and Shipping for MFN Orders
Once a customer makes a sale, the shipping process begins. If the company is going to manage the shipping internally, it must ensure that it has the capacity to pick up, package, and ship orders to customers efficiently.
The types of packaging that can be used are:
- Paper or bubble envelopes
- Material such as bubble wrap or air fillers.
6. Customer Service and Good Shipping Performance
Providing good customer service is important when it comes to succeeding as a seller in an Amazon FBM or MFN logistics.
It may be obvious that those orders in which sellers respond within 24 hours receive far fewer negative comments than those that take more than a day to respond (a metric to be taken very seriously).
The essence of this type of own logistics (Amazon Fulfillment by Merchant) is that the company takes care of everything. From how the customer will return the product, how to act if it arrives defective, reaching an agreement with the customer, etc.
In addition, parameters such as not having order cancellations or delays, as well as managing returns well, will help the company’s Amazon account status to be hardly affected by this.
7. Costs of Own Logistics (FBM)
This is the last step in understanding how this type of logistics works. The costs that the company that chooses it may incur are:
- The plan that the company has (individual or professional)
- The referral fee
- Shipping management expenses (packaging, labeling, shipping…)
Seller Fulfilled Prime
Many companies relate that they can only make Prime shipments if they use Amazon logistics (FBA). However, it is possible to have the Prime service when the seller uses their own logistics.
Seller Fulfilled Prime when using Amazon FBM / MFN
Amazon has a program called the “Seller Fulfilled Prime Program.” This program allows companies to ship to Amazon Prime customers directly from their warehouse.
Being Prime has certain obligations, and the company is committed to managing orders with carriers that offer this service without any additional charge to the customer.
The main advantage and what makes many customers buy this option is the speed of delivery. This can also be an advantage for the company as, if it has this feature, its product will have more chances of being purchased over others that are not Prime. In addition, the possibility of winning the Buy Box is greater and Amazon is in charge of post-sales service with the customer.
Requirements to join Seller Fulfilled Prime
Being a Prime seller is not an option in the Seller Central catalog, but Amazon decides, taking into account the performance of the account, to give this characteristic to the company. The requirements that must be met in order to access it are:
- Have an Amazon Seller Central account with the Professional plan
- Have a national warehouse from where to manage orders
- Send more than 99% of orders on time
- Obtain a cancellation rate of less than 0.5%
- Use Amazon’s buy shipping services for at least 98% of orders
- Deliver orders with Amazon carriers of the seller-managed Prime service
- The company (the seller) must accept Amazon’s return policy
- Allow Amazon to handle all customer service inquiries.
If the company meets these requirements and also passes the trial period where Amazon verifies that this is true, it can become a Prime seller. For this, it will be required to have the inventory in its own warehouse as well as processing orders and purchasing shipping labels with authorized carriers.
The shipping process will be carried out on the same day as the purchase of the product and the carriers will be responsible for picking up and sending this order.
More information on the official program page.
Advantages and disadvantages of Fulfillment by Merchant
|Advantages of Amazon FBM||Disadvantages of Amazon FBM|
|More control over your stock and costs||Greater workload in logistics tasks|
|Possibility of creating brand awareness through own packaging||Higher packaging costs and responsibility for the condition of the product upon arrival|
|Ability to choose a carrier based on the desired level of service||The company must be responsible for customer service related to shipping|
|Possibility of making immediate sales since the company does not have to wait for its products to reach Amazon’s logistic centers||Greater difficulty in gaining the trust of the customer when choosing a seller (users may trust sellers who use Amazon’s logistics)|
|The company may avoid the cost of sending stock to Amazon‘s logistic centers||In general, the cost of shipping managed by Amazon will be lower than if the company manages it itself due to economies of scale|
When to choose FBM instead of Amazon logistics
Each case will be different and should be carefully analyzed before making a decision. However, in general terms, it can be said that using or not using an FBM logistics can apply when:
- When products are bulky and heavy → FBM
- When products are fragile → FBA
- When the company has just started its activity and does not know what its sales volume will be → FBM
- When there is a lot of stock rotation → FBA
- When the company is not used to dealing with courier companies → FBA
- When the product is sold in different distribution channels and there is no excessive stock → FBM
At The WOW patio, we help you decide and analyze which logistics method is best suited to your company and how to get the most out of Amazon FBM.