This is a guest post from Michael Krakaris of Deliverr, an eCommerce fulfillment solution.
Sticking with FBA or moving to FBM might have been a question at the back of your mind since first selling on Amazon. However, amid the current coronavirus pandemic and Amazon FBA’s COVID-19 restrictions, this question has suddenly become more urgent.
We’ve seen a lot of sellers struggle with the recent FBA restrictions, which thankfully show some signs of lifting soon. But if you’re thinking of switching, this guide outlines the key steps for shifting from FBA to FBM without affecting your delivery speeds or customer experience.
What is Amazon Fulfilled by Merchant (FBM)?
Before looking at how to shift from FBA to FBM, let’s first cover the basics of FBM and what merchants need to do.
FBM (Fulfillment By Merchant) is the FBA alternative, where you’re responsible for fulfilling Amazon orders. This includes:
- Storing stock in a warehouse or appropriate facility.
- Picking and packaging items using your own staff and materials.
- Shipping products to customers.
- Handling customer service queries, including returns and exchanges.
FBM has become popular in recent weeks because of the COVID-19 restrictions that FBA has in place. These include restrictions of inbound shipments and outbound deliveries of all non-essential items.
How does FBM differ from FBA?
On the face of it, FBM differs completely from FBA; you become responsible for doing everything that Amazon previously did for you.
However, it doesn’t have to be different at all.
Sellers fulfilling by merchant can use an outsourced FBM partner to provide an FBA-like service and handle the storage, picking, packing, and shipping of items. The only differences are who you ship your products to, who you pay for the service, and currently, the ability to stock and ship non-essential items within 2-days.
Tip:Use Deliverr's fulfillment cost calculator to compare outsourced fulfillment costs against your FBA fees.
How to shift from FBA to FBM
Moving from FBA to FBM to overcome Amazon’s temporary restrictions might sound like a lot of hassle, but it’s easier than you think. Here’s how.
Moving current stock
The first step in shifting from FBA to FBM is deciding what to do with inventory currently held in FBA warehouses. You have three options:
1. Continue using FBA to deplete your stocks
This is the easiest option, but it doesn’t overcome the current FBA restrictions. And if FBA is slowing your delivery dates down, it could also negatively impact your sales over the coming weeks.
2. Remove your inventory from FBA
This may seem like the most logical option, especially if supply chain issues have slowed down your inventory replenishment. However, it costs money and time.
Remember to account for Amazon’s inventory removal fees. For standard sized items up to 2lbs, removal fees range from $0.25 to $0.35 per unit. For items above 2lbs, it’s $0.40 per unit plus an additional $0.20/lb above the first 2lbs.
It’s also a more complicated process than just pausing Amazon FBA fulfillment or leaving it in FBA to deplete itself. You’ll need to create a removal order, place the removal order, and monitor the removal.
Normally, it takes 10 to 14 working days to process a removal, but even during normal times, it could take up to 30+ days. Right now, with limited operations, we cannot be sure removal orders are being processed as quickly as possible.
3. Stop fulfilling via FBA until restrictions are removed, then resume or deplete stocks
If you want to stop using FBA for the meantime, but would use it again in the future, we recommend leaving your items with FBA then resuming or depleting once things are back to normal.
This is the alternative option, but you must remember to keep an eye on long-term storage fees and products with expiration dates.
None of these options are without their considerations or fees. It’s best to calculate the cheapest and quickest option for your business, taking into account the specific costs for your products vs. the cost of not doing anything.
Switching to in-house fulfillment
If you’re switching to in-house FBM, you must create internal fulfillment processes. This includes having your own facilities, processes, and more.
You’ll need to invest in your own warehouse and operations facilities. Think about what your needs are for storage space, lifting equipment, packaging materials, inventory software, and customer service channels.
You’ll also need to establish your own internal processes for downloading orders, picking items, packaging orders, handling customer service queries, and processing returns. Having these in place will help ensure nothing slips through the cracks, and will help reduce errors.
In-house fulfillment means you’ll have to build up your own partnerships with shipping carriers, insurance providers, and various customer service teams.
Key Performance Indicators (KPIs)
Finally, you’ll need to establish and meet your own KPIs to ensure you’re delivering items quickly enough to satisfy customer demand and meet Amazon’s seller standards.
Switching to outsourced fulfillment
If you’re switching to outsourced FBM, you’ll need to find an outsourced fulfillment provider to partner with. Essential criteria to look for includes:
- Fast shipping - a Prime-like service that includes 1-day and 2-day deliveries.
- Multi-channel integration - integration with your other sales channels, including eBay and Shopify, or your multi-channel management tool.
- Warehouses - multiple warehouses across the country to achieve 2-day shipping speeds.
- Low costs - all-inclusive pricing with no added costs, long-term contracts, or hidden fees.
When you’ve found the right FBM solution for your Amazon business, you’ll need to ship new stock to their warehouses.
Maintaining your shipping speeds and Prime badge
It’s crucial to retain your shipping speeds and Prime badge when shifting from Amazon FBA to Amazon FBM. Failure to do so can result in lost customers, lower search result ranking, and negative customer reviews.
FBM sellers can qualify for Amazon Prime through Seller Fulfilled Prime (SFP). This requires meeting the following criteria:
- Have fulfilled over 20 Premium Shipping orders over the past 30 days;
- Have an on-time delivery rate of >96% (99% during the trial);
- Maintain a cancellation rate of <1%;
- Add tracking ID to >84% of orders;
- Maintain a 4.5+ feedback rating over a 30-day rolling period.
Once qualified, you must fulfill orders within 2-days at no additional charge to Prime customers.
If you are unable to meet these requirements yourself in-house, use an FBM fulfillment provider who can meet them for you.
Setting up Amazon
When you’re ready to begin fulfilling orders by your FBM method, you can create new secondary FBM SKUs for your products through the Amazon Add Product tool.
How outsourced fulfillment services can help
Outsourcing fulfillment means you can execute FBM orders without needing your own warehouse, contracts, and staff. Outsourced fulfillment services like Deliverr can help you quickly move from FBA to FBM without affecting delivery speeds or customer experience.
They do this through:
1. Easy onboarding
They integrate with your Amazon account and other sales channels directly through your inventory and order management system.
2. Fast deliveries
Some services, such as Deliverr, offer 1-day and 2-day delivery speeds in order to help keep your conversions high. Depending on your account metrics, you could opt for premium shipping, or continued Seller Fulfilled Prime while keeping your customers happy. We’ll go more into why this is so important in the next section.
Many eCommerce fulfillment services operate multiple warehouses across the country, increasing their resilience against COVID-19 and overcoming the existing problems you’re facing with Amazon FBA.
An example would be Deliverr’s current COVID-19 service levels here.
Why maintaining fast deliveries is vital
You may be tempted to trade 2-day deliveries in favor of waiting it out until things get better, or simplifying Amazon FBM by just having one warehouse. However, even in a crisis, offering 2-day delivery is important for your business and your customers.
We’ve seen merchants get 900% sales increases and hit $1.9M ARR thanks to offering 2-day delivery options.
Today’s consumer expects fast shipping and the sellers who offer it reach more shoppers. It’s more than just a case of being competitive, providing 2-day delivery is a necessity for eCommerce businesses in 2020.
Getting fast shipping badges on your listings, such as the Amazon Prime badge, means you’ll gain search prominence when shoppers filter for these fast tags. Marketplaces have also been trying to shift shopper focus from price to service, and search results often reflect this bias toward fast fulfillment.
Win the Buy Box
Buy Box algorithms across marketplaces rank speedy fulfillment and customer satisfaction when considering which listing should get the top spot, and fast shipping badges are a great indicator that a listing promises both.
We’ve seen this firsthand when a Deliverr merchant landed the buy box after enabling 2-day delivery on their listings.
Moving your Amazon fulfillment from FBA to FBM is a significant consideration for your business. In the current environment, Amazon FBM can be a more reliable option for maintaining fast shipping speeds of non-essential items and introducing new product lines to Amazon. This may change, but we don’t know when.
We hope that this guide makes the switch easier and helps you to maintain a healthy Amazon business throughout the pandemic and into the future. Stay safe and stay active.
About the author
Michael Krakaris is one of Forbes’ 30 Under 30 and the co-founder of Deliverr. Deliverr provides fast and affordable fulfillment for your Shopify, Walmart, Amazon, eBay, and Wish stores, helping to boost sales through programs like 2-day delivery for Shopify, Walmart 2-day delivery, eBay Fast ‘N’ Free, and Wish Express.