If you have become a seller on Amazon already, then you may have realized the major potential for profit and growth that is available on the Amazon marketplace. It can be a great resource for companies looking to build reliable income without all of the major hassle that comes with starting a business.
Most of the current businesses that sell on the Amazon Platform use something known as Amazon’s Fulfillment by Amazon option for both storing and shipping their products to customers. Using this option means that sellers store items in the Amazon warehouses, and those same items are shipped by Amazon at a later date directly from the Amazon warehouse. This is an incredibly low stress option for a high-stress business. However, Amazon FBA is not the only option available for sellers.
For sellers who want to fulfill their own orders, they can simply use Amazon’s Fulfillment by Merchant (FBM). In this article, you will learn everything you need to know about selling on the Amazon platform and selling with Amazon’s Merchant Fulfilled Network.
Selling on Amazon
Whether you are just beginning the adventure of selling merchandise or are simply looking to expand a business that you already have, selling on Amazon can help boost your success either way. More than half of the current sellers on the Amazon platform began their first business experience on the Amazon platform.
Amazon sellers who are successful have unlimited earning potential, and they could bring home a six-figure profit within their first year. While this extremely lucrative opportunity might sound too good to be true, most Amazon sellers also spend less than 30 hours each working work on their Amazon business.
Of course, no single experience selling on Amazon’s massive marketplace is the same. So, while you can certainly follow these instructions, your journey will be unique in its own right. Each of the following steps will outline the various decisions that you will need to make as you determine the type of business you will run.
Step 1: Choose the Right Marketplace
There are 14 global marketplaces on Amazon that you can choose to sell on. The following are the current marketplaces that Amazon has up and running:
- Saudi Arabia
- United Kingdom
- United States
There are no guidelines or restrictions dictating which of these marketplaces you can or cannot sell on. However, there are some things that you might want to consider before making your final choice on which marketplace you land on.
Sellers who live in the United States should absolutely sell products in the United States marketplace. The marketplace for the United States is absolutely the largest, most user-friendly, and most widely visited marketplace on the Amazon platform as a whole.
If you are a seller who lives in the UK, on the other hand, then you will likely be best to choose to sell on the UK marketplace. This is the second largest marketplace on the Amazon platform and most sellers are extremely successful in this marketplace. The UK marketplace currently includes UK, Germany, France, Spain, Italy, and the Netherlands.
Sellers who reside outside of the US or the UK are best served to sell on the US marketplace. Even if you choose to also run an Amazon business on another marketplace, the large market available on the US platform is really hard to compete with.
Step 2: Choose your Business Model
If you want your business to be successful, then you should have a well-thought out business plan written down before you ever get started. Within your business plan, you will determine the type of business model that your business will function based on. While Amazon actually works well for multiple types of business models, the one that you choose is going to largely depend on your own understanding of your business at this time.
There are several business models that are currently more popular than others on the Amazon platform. We will outline each of them to help you determine if any of these are a good fit for your business.
- Private Label: Private label business purchase manufactured products in bulk in order to sell those products under their own business name. Almost 75% of Amazon sellers choose this as their business model because it is the easiest form of business to conduct for beginner sellers on Amazon’s huge marketplace.
- Wholesale: On the contrary, selling via the wholesale business model involves purchasing branded products from an already established company in bulk amounts in order to resell them on amazon. A little over a quarter of the Amazon sellers use this business model in order to run their Amazon business.
- Reselling: Some Amazon business sellers purchase discounted items at various locations (retail stores, big box stores, discount stores, or even online auctions) to sell on the Amazon platform. Many of the people who use this business model are also using other business models at the same time on their Amazon store.
- Dropshipping: While not wildly popular, it is an interesting concept. A dropshipper markets another manufacturer or supplier’s products for them. When a purchase is made, the dropshipper will purchase the product and have the product shipped directly to the buyer.
- Handmade: While Amazon does not have the same power as other retailers selling homemade items, there are some sellers who use the Amazon platform to do so. There are only around 6% of Amazon sellers who are marketing their handmade items on the platform and they even have a special section on Amazon.
In addition, plenty of other sellers also utilize the digital method of selling on the Amazon platform. In fact, Kindle Direct Publishing is one of the many ways that authors are starting to self publish their books these days.
Step 3: Choosing Your Fulfillment Method
As an Amazon seller, there are only two options for methods through which you can fulfill an order that is placed. We briefly mentioned both of these methods before, but they are Amazon FBA and Amazon FBM.
- Fulfillment by Amazon (FBA) : This method for selling products on Amazon means that the seller sends their product to be stored directly in an Amazon warehouse. When an order is placed, Amazon will actually pull the product from storage in the warehouse and ship the item for the seller. Usually, these products are guaranteed 2-day Amazon Prime shipping, and Amazon will handle any customer support issues that come up for these types of orders fulfilled through FBA.
- Fulfillment by Merchant (FBM): When a seller chooses FBM, they are agreeing that they will manage all of the storage of products, shipping, and even customer support issues on their own. In other words, the merchant fulfills the needs of the customer.
More often than not, Amazon sellers choose FBA as their method for fulfilling orders. As you can imagine, storage can sometimes be overwhelming especially in large volume. Additionally, the shipping and customer support is a great way to work smarter rather than harder as a seller on the Amazon platform.
Some sellers choose to use both FBA and FBM depending on the product. We will go into more detail about which option is best for you later in this article.
Step 4: Setup Your Amazon Seller Account
Now that you have built the basics of your business plan, it is time to begin the fun part. Actually building your brand on the platform which you are going to sell! You simply need to follow a few quick steps to set up the business side of things on Amazon.
By now, you should have already come up with a clever name for your business. However, it is highly recommended that you keep your name as generic as possible in case you decide to expand. Your categories in the future.
Luckily, selling on Amazon does not require a corporation or even an LLC if you do not want to do all that paperwork. Instead, you can use your personal tax ID to sell on Amazon as a sole proprietorship. You should always check the laws within your living area to be sure that there is no paperwork necessary within the boundaries in which you live.
Create Your Account
Creating your account with Amazon is really a simple experience. There are very few steps in order to do this properly.
- Gather the necessary information to start your account
- Basic Business Information (The business’ name, physical address, and contact information)
- Business Email Address
- Credit Card Number
- Phone Number
- Federal and State Tax Identification Number
- Register for an Account: sellercentral.amazon.com
- Choose between professional seller or individual seller
- Complete all registration information
Voila! You have completed all the steps needed to register for your Amazon seller account.
Step 5: List Your First Product
It should not take long for Amazon to approve your seller account. Once you are approved, you can begin selling products pretty easily on the Amazon platform.
There are two easy ways to build a product listing: sell a product based on an existing listing or create an entirely new listing.
If you are selling a product that already exists on the Amazon catalog, then it is preferable that you simply find that existing listing and select the button that says “Sell on Amazon.” This will allow you to use the existing listing with your particular information.
From here, you can detail the price you charge, the condition of the item, the number of items you have and your method of fulfillment.
If there has never been a product listed in Amazon’s catalog that is the same as yours then you must create a new listing. You can do this in seller central and it will allow you to enter all of the necessary details in the listing. Amazon will have to approve this, so this process is slightly longer than existing listings.
Step 6: Get and Fulfill the Orders
When you make a sale on the Amazon platform, the real fun begins. Now it is time to fulfill your orders and send your products out into the world. You selected your method of fulfillment when you list an item on Amazon. So, you will need to make sure that you do your part to fulfill the orders that are sold on your business.
Key Differences in FBA and FBM
There are three major differences in FBA and FBM: storage, shipping, and customer service. Unfortunately, there is really no right or wrong answer about which one is best. This will ultimately boil down to your own ability and willingness to put time and money into your business. As well as your capacity to store and sell products for the demanding Amazon platform.
Essentially, with Amazon FBA, all that the seller has to do is market and manage their online store. Amazon does pretty much everything else. However, an FBM seller is doing all of the work from marketing to storage and even customer service. The two options are truly night and day.
Storage is one of the main reasons that many sellers choose to use Amazon FBA as opposed to FBM. Storage can quickly become an issue for an Amazon seller who is successful and does not want their product taking over their living space. Of course, storage space with an Amazon warehouse is not cheap and comes at a bit of a cost.
Shipping is another reason that many sellers really like FBA. Shipping costs are typically (although not always) cheaper through FBA as opposed to FBM. However, there is an Amazon FBM calculator that can be used to compare the costs between the two options for fulfilling a certain product.
Customer Service is the last convenience that is offered through Amazon FBA. Instead of dealing with customer questions, concerns, and complaints on your own, Amazon will handle those when you use FBA. This can save your time in the long run, they will even manage your ratings on certain purchases to help maintain your rank on the platform.
There are various scenarios that make each of these options preferable for different reasons. Obviously, someone who has the cheaper option of FBM should choose that, but if a seller is often to busy to ship things in a timely manner, then FBA is the more preferred choice in that event.
The Ups and Downs of Amazon Fulfillment by Merchant
There are good things and bad things about all of the different decisions you have to make in business. So, before we dive into the details of how to fulfill your Amazon orders yourself, we will discuss the ups and downs of doing so on the Amazon platform.
Amazon sellers who choose FBM as a method of fulfillment have larger profit margins and earn more revenue on average than FBA sellers. In general, it is also cheaper to start your business with FBM than with FBA. This is because the fees associated with Amazon FBA are much larger than the fees associated with FBM.
Most sellers who choose FBM are also able to start their Amazon business much more quickly than the FBA sellers. When you can start your business more quickly, you can also see your profits much more quickly from your initial investment.
The sellers who choose FBM are more invested in their business than FBA sellers. They are more aware of the competition which makes them a better business in general due to the understanding they have about how the business works in general. Also, they have no trouble fulfilling orders during the busy times (or even during a crisis like COVID-19). These sellers who are on FBM fulfillment are not at the mercy of Amazon to deliver their goods which is important for many of them.
On the other hand, FBM sellers spend a lot more hours working on their business than FBA sellers do. FBA sellers have very little time that is required to spend on the business, and the time that they do spend is not wasted on shipping errands or product sorting.
FBM costs can actually be more expensive when compared to the costs of FBA fees. When you add up the costs of shipping and materials as well as labor and time you are spending quite a bit more money to ship products versus when Amazon ships them for you. If you want to see it for yourself, use Amazon’s FBA calculator to see how the cost compares in the long run.
Lastly, FBM sellers have to handle all of the customer service for their products and sales on their own. This can be an upside or a downside, but generally speaking it is usually time wasted that could be spent on more productive business needs.
When does FBM Make More Sense than FBA?
Although there are pros and cons to both sides of the fulfillment spectrum, there are a few scenarios when it makes more sense to sell on FBM than it does on FBA. Of course, any time that having Amazon fulfill it for you makes more sense, then using FBA is going to be preferable.
Products That Are Not Suited for FBA
If you are selling products that are hard to handle, such as an oversized product, then FBA probably does not make much sense for your business. Not only are the fees to store these large products more money, but these sometimes tend to sell slower than other products. Further, there may be special considerations for the care of the product while in storage. All of these are important factors to consider with special products on the Amazon platform.
FBM Saves You Money
If you have looked into the Amazon FBM calculator and determined that when comparing Amazon FBA vs FBM you are saving money with FBM, then FBM is clearly the choice. Anytime that saving money is an option, you can increase profits and that is smart.
If your business model involves dropshipping, then you cannot choose FBA as your fulfillment method. These products are being shipped directly from a manufacturer and you cannot physically supply them until the product has been purchased and shipped.
Your Products are Handmade
If your product is handmade, then It is less likely that you will want to use FBA to fulfill your orders. Not only do handmade products tend to require personalization, but most of these sellers like to package the products themselves.
Best Practices for Amazon FBM Sellers
There are some serious thoughts to consider when you decide to sell as an FBM seller on Amazon. But if you are going to take on this massive responsibility, then you should do it with the understanding that you are going to do it well.
“Buy Shipping” Feature on Amazon
One of the main concerns for shipping items on your own is that your process is not nearly as streamlined as Amazon’s process is. One way that you can still fulfill your own orders, and have Amazon shipping guarantee is to purchase your shipping straight through the Amazon company instead of completely on your own.
Amazon can send you a label to print and will automatically generate a shipped email to send to the customer. This is a great way to save time and money if you are going to continue to fulfill your orders on your own.
Give Customers a Tracking Number
One of the many reasons that customers continue to shop through Amazon time and time again is that they love the fast shipping. There is nothing like trustworthy shipping to make the 2020 shopper return to your website. For this reason, Amazon actually requires sellers to provide a tracking number to their customers.
Again, one of the many reasons that people love Amazon is that they have a reputation for timeliness. Whatever your product, it is important that you fulfill the order in a timely fashion in order to remain on Amazon’s good list. If you have guaranteed Prime or Premium shipping, then it is even more important that your products ship in a timely manner.
Build a Return Policy
We already mentioned that you should have some clear plans for your business before you ever begin. If you choose to be an FBM seller, then you will need to have a clearly laid out policy for returns. You must also process these returns on your own.
This means that you need to include instructions for returning items in your packaging. You will also need a valid address for return for the customers to send returned items to.
Read and Comply with Amazon Policies
Amazon has a reputation for excellence because they have built a successful business through policies and clear expectations. While it is easy to become an Amazon seller, it is not necessarily easy to be successful. Success comes to those who are able to follow the clearly defined guidelines laid out by Amazon as a company.
From shipping, to customer service, and even the pictures included with your item listing, Amazon has rules and regulations for all of these things. No matter what, be sure that you are always in compliance with each of these guidelines before you begin selling an item. After all, Amazon is your lifeline when it comes to selling on this powerful platform.
Can I include a business card or receipt when shipping with FBM?
Including a business card in the packaging of your products is not recommended as it violates Amazon’s rules for shipping. This could actually cause you to lose your account with Amazon which is not a risk you should be willing to take. You can, however, include a receipt for the items purchased in your package.
Can I sell FBM if I usually sell FBA?
Yes, you will simply need to create a new listing. If you want to sell a product FBM, then you simply create a listing on Amazon Seller Central and select FBM when prompted to select your fulfillment preferences.
How can I use Amazon shipping rates for FBM?
Amazon’s shipping rates are generally much lower than typical shipping rates. You can use their rates when choosing to fulfill your own merchandise by purchasing your shipping through Amazon Seller Central. When notified of a purchase by a customer, select “purchase shipping” and you will get Amazon’s rates when shipping your item to your customer.
Is Amazon FBM a scam?
No, Amazon FBM is a legitimate method for selling various products on the Amazon platform. There is no way to get rich quick on Amazon, but using FBM is a good way to enlarge your profit margins. However, there are definitely downsides to choosing to fulfill your own orders and perform all customer service requests. However, that does not make this method of selling on Amazon a scam in any sense of the word.
Whether you sell on Amazon to build your business or to begin a new adventure, it can be an extremely lucrative choice. Amazon FBM is a valid choice for many different reasons for sellers on the Amazon platform. Whether you are selling handmade goods or simply like to have your hands-on approach to your business maintained, FBM might be a good choice for your particular business on Amazon.
We do recommend that you visit the Amazon FBA calculator with each new listing. You do not have to exclusively sell on Amazon FBM or FBA. You can choose a different fulfillment method based on your needs for a particular product. Make the best financial decision for you business model.