Amazon is very serious about customer service; therefore, it provides its Sellers with two fulfillment strategies to meet their customer needs: Amazon FBA and FBM.
Selling on the biggest eCommerce platform in the world can be overwhelming if – as a Seller or Vendor – you don’t have enough information on how to ship your products in a way that both you and your customers are completely satisfied.
As mentioned in one of our recent posts for Parcelhub.com.uk, one of the most exciting events for any shopper is receiving a long-waited product. So, if you want to make a good first impression on your customers, be sure to have the right fulfillment program for your business.
What Is Amazon FBA?
The FBA (Fulfillment By Amazon) Program is a well-oiled machine that makes fulfillment smooth and easy for sellers. It’s not a perfect machine, but it takes a lot of the hassle out of selling.
In order to expand its Premium Shipping capabilities, this year, Amazon invested more than $15 billion not only in infrastructure but also in tools and services to cater to its sellers’ and loyal shopper’s needs.
These are some of the perks of using FBA as your fulfillment option:
Perk #1 – Ratings
When you let Amazon take care of fulfillment, you don’t have to worry about meeting all their requirements. The bottom line is, if you make a mistake, you’ll get slapped hard.
If Amazon makes a mistake, they’ll take care of it and the most you’ll need to do is follow up to make sure the customer is happy so you don’t get a bad review or negative feedback.
Perk #2 – Fulfillment Convenience
You won’t be able to manage stock as easily, but FBA takes almost everything involved in order fulfillment off your plate.
You should still be vigilant about complaints and make an effort to encourage positive reviews and feedback, but FBA means that you can focus on this and other growth strategies rather than the mundane aspects of fulfillment.
Moreover, FBA gives you the option to do multi-channel fulfillment so that you don’t have to worry about shipping for your own online store, in addition to many other sales channels you might have running.
Perk #3 – Buy Box Boost
Fulfillment isn’t the only factor that Amazon takes into consideration when awarding the Buy Box. It’s naturally an important one, though, because it helps Amazon make more money. As an FBA seller, you can have a higher price than another seller using FBM and still win the Buy Box.
Perk #4 – Lower Cost
Because Amazon is so huge, they have great third-party arrangements for whatever shipping they can’t handle themselves. This means lower rates than what you could probably find on your own.
Perk # 5 – Access to Prime with FBA
Prime is huge. Amazon customers are loyal to the marketplace because of the fast and hassle-free shipping it provides.
FBA gives you instant access to Prime versus all the strict requirements for applying to get seller-fulfilled Prime.
Before we get into the new fees that will take effect in 2020, let’s take a quick look at the fees that changed the way Amazon had been handling storage fees in the past.
These changes also affected storage fees for the Multi-Channel Fulfillment program.
2019 Long-Term Storage Changes
On February 15th, 2019, Fulfillment by Amazon introduced the following storage changes:
Amazon eliminated long-term storage fees for units that have been in a fulfillment center for 181 to 365 days. The last long-term storage fee charge for inventory in a fulfillment center for 181 to 365 days was January 15th, 2019.
Minimum Long-Term Storage
In 2019, Amazon reduced the minimum long-term storage fee on units that had been in a fulfillment center for more than 365 days from $0.50 per unit to $0.15 per unit. The last charge at $0.50 per unit was January 15, 2019.
These changes also affected storage fees for the Multi-Channel Fulfillment program.
Monthly Inventory Storage
Amazon introduced separate monthly storage fees for dangerous goods that require special handling and hazardous materials (hazmat) storage. This change was first reflected in April 2019 charges for storage that occurred in March 2019.
Now, here’s what 2020 lies ahead…
2020 US FBA, Referral, and Storage Fees Changes
On February 18th, 2020, Amazon will apply a moderate increase – of about 3% – in fulfillment fees; however, referral fees will be lower than in 2019, and an FBA New Selection Program will be launched as well.
2020 US FBA Fulfillment Fees
Here’s a comparison chart of some of the changes in FBA fulfillment fees, that will take effect on February 18, 2020:
Amazon will also eliminate the $0.40 per-unit surcharge for clothing items.
Click here for more information about the new changes for 2020 in FBA fees.
2020 US Referral Fees
Each year, Amazon reviews its referral fees to ensure they reflect the changing industry dynamics and costs, as well as to respond to the feedback they receive from Sellers, all with the intention of helping you grow your business on Amazon.
Here’s a list with the changes in referral fees, effective February 18th, 2020:
- Shoes, Handbags & Sunglasses – A reduced percentage from 18% to 15% for purchases above $75.00.
- Outdoor Furniture – Amazon will consolidate outdoor furniture products into the Furniture category, reducing the referral fee percentage from 15% to 10% on any portion of the total sales price above $200.00.
- Personal Care Appliances – A reduced percentage from 15% to 8% for items with a total sales price of $10.00 or less.
- Activewear – This is now consolidated into the Clothing & Accessories category, with a percentage of 17%.
- Ring Accessories – This is now consolidated into the Amazon Device Accessories category, with a percentage of 45%.
- Amazon Business – Amazon will eliminate the “tiered fee structure” and apply one referral fee rate per category regardless of price. Products above $1,000.00 will be charged the same rate that currently applies to products $1,000.00 or less in each category.
What Are The “Referral Fee Discounts”?
Amazon offers you time-bound referral fee discounts to help you grow your business. These discounts, which can take up to 70% off your referral fees, enable you to add new selection, provide competitive prices, and increase your availability of popular Prime-eligible products.
This is how it works:
- These referral fee discounts are applied at the time an order is placed for any eligible items sold during the promotion.
- Referral fee discounts show up as a separate line item in your Transaction Details.
- Seller Fulfilled Prime. Receive a 60% discount when a non-Prime ASIN is added to Seller Fulfilled Prime. Learn more.
- Price competitively on Popular Products. Receive up to a 70% discount off your referral fees when you lower your price. Learn more.
2020 Monthly Inventory Storage Fees
From January to September 2020, monthly inventory storage fees will increase by $0.06 per cubic foot for standard-size items.
For storage that occurs in March 2020, the first change will be reflected in April 2020.
Summary of “Small and Light” Changes for Long-Term Storage in 2020
In a nutshell, these changes will take effect on February 18, 2020:
- Amazon will consolidate order handling, pick & pack, and weight handling fees into a single per-unit fee by weight.
2. A new $0.10 per unit fee will be charged in the optional FBA Label Service.
3. For Small and Light units that have been in a fulfillment center for 181 to 365 days, no fees will be charged.
4. Amazon will discontinue Small and Light-specific long-term storage fee rates.
5. Effective February 15, 2020, all standard FBA storage fees will apply to Small and Light, which will reduce the per-unit fee from $0.50 to $0.15.
How to Set Up FBA – For Beginners
Step 1: Create an Amazon Seller Account
Basically, before you can set up FBA, you need to create an Amazon Seller Account.
Read the “Before Your Register” section on the webpage for information about the two types of Amazon Seller accounts, Professional and Individual.
- Professional Account. It gives you the opportunity to sell an unlimited number of products with a monthly subscription fee of $39.99. (This is the best choice if you plan to sell more than 40 items a month.)
- Individual Account. It has no monthly subscription fee, but a $0.99 fee per item sold. (This is the best choice if you have fewer products.)
Log in or create a new Amazon account, then:
- Provide your Business Name and Address
- Acknowledge the Seller Agreement
- Provide your Mobile or Telephone Number
- Provide your preferred Billing Method / Bank Deposit Information – a Chargeable Credit Card for Professional Account
- Provide your Tax Information for a Professional Account
- Chose a Display Name for your Business – the name buyers see next to the item you’re selling
- Verify your Identity through a Phone Call or Text Message
Step 2: How to List Your Items on Amazon
Now that you have an account, you need to list the items you want to sell.
- To add your first product, you want to go to “Inventory” at the top of your screen and click “Add a Product”.
- Once you click “Add a Product”, you will be prompted to search for your product. You can search by barcode or product name.
- Once you select your product, you’ll be taken to a screen to enter important product information. There are three main things you must enter:
The price you want to sell your item for – what you feel comfortable selling your item at, but consider the competition as
What condition your item is in – be as honest and descriptive as you can. All you are required to enter is a selection from the dropdown:
A good description will help you sell more.
To set up FBA, make sure you select :
“I want Amazon to ship and provide customer service for my items if they sell.”
This is essentially the “I want to use FBA option”.
You’ll be redirected to a registration screen where you’ll need to accept Amazon’s terms of service.
Tip: You can also check out Amazon product listing optimization best practices and learn more about what an Amazon ASIN number is.
Step 3: How to Convert Your Items to Fulfillment by Amazon Items
You may be asking yourself…
“Why do I need to convert my items to FBA items if I just selected them to be fulfilled by Amazon?”
When you set up FBA, you are given the option to use Amazon FBA, but you aren’t forced to do so for every item you sell.
You may want to ship them yourself. There are also some items that can’t be shipped through Amazon FBA. In this case, go into your account and manually select the allowed items that you want to fulfill through Amazon FBA.
- Go to the “Inventory” tab on your Seller Central account.
- Click “Manage Inventory” and “Actions” to reveal the dropdown to select “Change to Fulfilled by Amazon”.
- During processing, your listings will be temporarily unavailable on Amazon.com until your inventory has been received at Amazon’s fulfillment centers.
- Once you change your inventory to Fulfilled by Amazon, you’ll be asked about two preferences:
Inventory Tools to Monitor Your Long-Term Storage
You can use the Inventory Age and Inventory Health reports to identify which ASINs in your inventory would be subject to the long-term storage fee on the next inventory cleanup date. For each ASIN, you can see your inventory by the amount of time it has been in an Amazon fulfillment center:
- 0 to 90 days
- 91 to 180 days
- 181 to 270 days
- 271 to 365 days
- 365+ days
FBA Label Service
You can have Amazon put a sticker label on your items instead of you doing it yourself.
In 2020, Amazon will charge 30 cents per unit to have them label your items. For FBA Small and Light, the per-unit fee will be $0.10.
However, you may still consider printing your own stickers or talking to your manufacturer about labeling your products if you want to keep better margins.
Stickerless, Commingled Inventory
This means that Amazon will not distinguish your inventory with other sellers’ inventory of the same type of units.
If someone orders from you, Amazon might ship a matching unit that is actually from a different seller but in a warehouse close to the customer. This is done to provide faster shipping for better customer service.
(If you’re choosing commingled inventory, please be aware of the risks. If another seller sells counterfeit products, they could be shipped in lieu of your authentic products before Amazon notices, giving you a bad reputation.)
In addition, note that this option will not work for private label products.
- Once you select your options, you’ll be prompted to either “Convert Only” or “Convert & Send Inventory”.
- Convert & Send Inventory if you are sending inventory for all your products. If not, select “Convert Only”.
- Your item should now appear in your “Amazon-Fulfilled Inventory” under the “Manage FBA Inventory” option in your main “Inventory” tab in Seller Central.
Step 4: How to Create an Amazon FBA Shipping Plan
When you “Convert & Send Inventory” or add another item, you will be prompted to create a shipping plan.
Prepare your Ship from address – where your inventory is now – and note whether you are sending individual products or several items packed in boxes – “Case-packed products”.
- Use “Case-packed products” if you’re sending a box with all the same exact type of item in it; otherwise, use “Individual products”.
- Once you set up a shipping plan, you will be prompted to add the items that you want to send to Amazon warehouses.
- You can also add more items to the same shipment, selecting “Add to an existing shipping plan” rather than “Create a new shipping plan”.
Step 5: How to Ship Your Products to Amazon for FBA
So now that you have all your items in your shipping plan, it’s time to finally ship your items. Navigate to “Inventory” then “Manage FBA Shipments” and then click “Continue with shipping plan”.
- Enter the number of units you’re sending, then select whether you need Amazon to prep and/or label them.
- Arrange for an Amazon pick-up based on what you’re sending.
- After you approve your shipment, you can purchase shipping from Amazon. You should know how much your package weighs, though. You can either put it on a bathroom scale or just estimate the weight based on the items inside the package. Amazon may give you trouble, however, if the weight is very different from your estimate.
- Print out your labels and stick them on your package and it’s ready to go!
What is Amazon FBM?
Amazon Fulfillment by Merchant (FBM) refers to the system where sellers – a.k.a. merchants – fulfill customer orders themselves.
This program allows you to better protect your brand, and to become profitable on Amazon even if you don’t sell a lot, as long as you can manage fulfillment efficiently enough to satisfy the Amazon customer.
It also gives you some freedom when you sell big and/or heavy items – including cheap items in bulk, but remember: you need to have a great seller rating to make it.
Fulfilling orders yourself keeps you in control of the entire process. This can be a great advantage, as long as you can maintain quality control to a degree that you rarely make mistakes, and can keep customers happy even when you do.
FBM is great only if you can keep a great seller rating so you can get on top of the search results and have a fair shot at the Buy Box.
Here’s why FBM could be the best option for your Amazon business:
#1 – Lower Costs
If you sell big or heavy items, you can ship them for less than what Amazon would charge you. This can save your margins, especially when you don’t sell very many of that particular product.
FBA also involves a complex fee structure that can be difficult to wrap your head around. This includes higher fees for long-term storage, which can become a real headache when you’re just starting to figure out sales on a particular product. You are likely to spend more on either shipping experimental quantities or having too much stock. This is a non-issue with Amazon FBM.
#2 – Inventory Convenience
Amazon FBM allows you to more easily manage inventory and stock levels and quality.
This comes in very handy, especially when dealing with returns and replacements. Also:
- You can see the exact damage on a returned product, for instance, and will most likely know exactly how it happened.
- There’s no need to rely on Amazon to check items for you – which is not always reliable – or to spend to remove items and have them shipped to you so you can look at them yourself.
- You will also have the product on hand to make partial replacements – like when only one out of a 3-pack is defective – rather than having only the option of sending out a whole new 3-pack and taking the perfectly good other two items as a loss.
#3 – Branding Protection
If you worry about commingling products with other sellers, FBM is a great way to keep your items separate.
This helps you maintain control over what customers get and avoid issues that are due to the inferior product being shipped out and their repercussions.
#4 – Better Customer Service
Amazon does put the customer first, but because it’s so huge, it really lacks the personal touch. It is also far removed from your specific product, and there’s really no substitute for intimate knowledge of an item.
#5 – Start Selling Immediately
With FBM, you can start selling as soon as your product is listed. There’s no need to wait because you will simply ship once an order comes in.
For cheaper items that don’t usually make the Amazon $25 add-on minimum, FBA can hinder you because customers won’t buy the item if they can’t get shipping benefits. FBM gives you the ability to ship these items out regardless, and customers will likely place orders more because of this.
But hang on a minute…
Why Not Get the Best of Both Worlds?
Amazon FBM forces you to be more involved in customer satisfaction, which is not at all a bad thing. Even with FBA, you really need to be involved in customer service because, at the end of the day, customers will always point the finger at you if something is wrong with their order.
FBM allows you more flexibility to experiment with different items, or simply sell whatever is available to you for a lower price.
In other words, you can freely do retail arbitrage without worrying about a long-term commitment to any specific product.
If it doesn’t sell, you can most likely return it and move on to something else.
There’s no reason to have to choose between Amazon FBA and FBM if you see advantages in both fulfillment options. You can very well fulfill yourself where it makes sense, and use FBA to take care of other orders. Using the FBA calculator will help you get a better idea of which option is more feasible for you for each of your products. Then you can separate them out and have your cake while eating it, too.
And, if you are planning on expanding your business to other countries, take a look into our post on Selling on Amazon FBA in Australia. This comprehensive guide will also help you understand the scope of the Amazon FBA Program.
Contact AMZ Advisers to receive more information about FBA and FBM, and start building a successful business on Amazon.