In this article:
- The current Amazon FBA climate and changes
- Exploring the benefits of adapting the Fulfillment by Merchant (FBM) model
- Step by step guide to make the switch from FBA to FBM
In the wake of COVID-19, businesses have been scrambling to re-strategize in order to keep afloat. From brick and mortar stores to eCommerce giants, almost every business has been affected by the pandemic in one way or another, and many have had to re-prioritize their existing business models. In the past few weeks, Amazon (USA and Europe) made the decision to temporarily suspend all non-essential inbound shipments to their warehouse, leaving many FBA (Fulfillment by Amazon) merchants in the lurch. This temporary suspension will remain in place until further notice. Until then, there are a number of ways FBA sellers can keep their businesses running including re-categorizing qualifying products as essential goods, selling essential products through their FBA account, and continuing to sell core business products by making the switch to FBM. In this article, we'll explore the latter.
Switch to Fulfillment by Merchant (FBM)
The main difference between FBA and FBM is that with FBA, you're paying a premium fee for Amazon to fulfill your products for you and ship it to your customers. You package up your products on your own or through an Amazon prep service and ship it to Amazon's warehouse, then they do the rest. With FBM, you're either fulfilling on your own or through a third party logistics provider (3PL). Through the FBA program, you also get great exposure through Amazon Prime listings, generally offering 1-day free shipping to Prime members. However, since the new suspensions have rolled out and demand for essential items have increased, the tables have turned. Prime shipments are taking up to a month to arrive, and FBM sellers with quick turnaround time on shipping through their own or through a fulfillment centre are gaining a competitive edge over their FBA counterparts.
Through FBM, sellers are able to get full control over stock and fulfillment, and save on Amazon fees. Switching to FBM will improve customer retention, as you'll be mitigating against extended transit times and stock shortages due to not being able to get new stock into Amazon warehouses.
Switching to FBM through a 3PL
If you've never used a third party logistics provider (3PL) before, now is arguably the best time for Amazon sellers to look into one. 3PL's are businesses that provide a variety of shipping, fulfillment and warehousing solutions at competitive rates. They're built for flexibility and scalability, and usually work with well-known shipping carriers in order to get packages shipped out in a timely manner, with full tracking and lower shipping costs. Businesses that use 3PL's are generally looking to save costs on shipping, want to improve efficiencies in their supply chain, need a company to scale with, or just want to hand off all their shipping and fulfillment to an expert.
For Amazon sellers looking for a short or long-term solution to fulfill and ship products, a 3PL is your best bet. There are rarely any long-term contracts with a 3PL, so you're never locked in if you choose to switch your account back to FBA again. The bonus is that you can enjoy a completely hands-off approach if shipping and fulfillment isn't your forte. Make sure to work with a 3PL with Amazon integration capabilities and that meet compliance standards. Then, all you have to do is get your inventory into their fulfillment centre and have your orders automatically picked, packed, and shipped out to your customers as orders come in. You get complete visibility over the process, and your customers enjoy full tracking.
Here are some more benefits of using a 3PL to fulfill your FBM orders:
- Complete control of your inventory and fulfillment experience.
- Protection from the Amazon COVID-19 temporary suspension and ability to sell your non-essential products
- Maintain branding using your strategy, customization, and a better end-customer experience
- Better profit margins, especially on larger products, or inexpensive products with narrow margins
- Easier to introduce new or innovative products, and better management of inventory by reducing or cutting out slow-moving or low volume products
- Flexibility of short-term renewable contracts allowing you to switch back to FBA if and when you want to
- No registration, approval wait time, or trial period
- Multichannel fulfillment through a 3PL allows you to explore selling on multiple platforms and streamline your fulfillment easily
How to Make the Switch?
On your Seller Central Account, check the Restock Inventory page to see the list of products currently available to sell. You may see all the products that do not fall under the non-essential products are not listed for sale. Amazon has announced that it would consider expanding the list of essential items, but for now, we're not sure when this will happen.
Here's how to make the switch:
- Click on the Manage FBA Inventory page under your Seller Central Account.
- Identify each product that you want to switch to FBM mode, then click on the down arrow → Edit → click Change to Fulfilled by Merchant → click on Convert on the next page to confirm. Repeat this for each product that you want to sell, using the FBM method as an alternative to FBA.
Before making the switch, it's important that you have enough inventory as well as a shipping and fulfillment plan in place, whether you're planning to ship and fulfill on your own, or through a 3PL. If you're fulfilling and shipping on your own, the shipping labels for your orders will automatically be created by Amazon when someone purchases a product. You can then print them out and stick them to your orders before shipping them out. If you're using a third party, this part will be done for you.
While the COVID-19 situation is temporary, making the switch to FBM in the meantime can help you stay afloat and get you prepared for possibly longer suspensions. Adapting new strategies and channeling your energies in the right direction can help you to achieve success in the long run.
If you've been affected by the FBA restrictions and looking for a FBM model to adapt to, check out eShipper Amazon FBM page, or Facebook Live session I conducted with eShipper and OFX, or reach out to eShipper at email@example.com to get a customized FBM solution.
Blair Forrest is the founder and Amazon Growth Manager at AMZ Prep Canada. He helps SME to fortune 1000 brands sell on Amazons Marketplaces across the globe. AMZ offers full-suite account solutions for businesses looking to scale their products on Amazon.