Many ecommerce sellers have a love-hate relationship with Amazon. While you can make good money using the platform, you’re regularly reminded who controls the purse strings.
In the early days of COVID-19, Amazon partially suspended Fulfillment by Amazon (FBA) shipments from sellers to prioritize shipping medical supplies, household stable, and high-demand products. There may have been good intentions behind the move, but it hurt a lot of sellers.
This came just a few months after the ecommerce platform raised the fees it charges companies for warehousing and shipping their goods. Now, Amazon is putting quantity limits on product shipments from third-party sellers. Amazon says quantity limits will ensure FBA sellers have enough space for their products.
FBA can be a great tool and create an efficient delivery channel, but it shouldn’t be the only way you’re taking care of your customers. The rules can change at any time and they won’t always be in your favor.
What is Merchant Fulfilled (FBM) vs Fulfillment by Amazon (FBA)?
When you’re using Fulfillment by Amazon (FBA), you send your bulk products, and Amazon stores them in its fulfillment centers. When you sell an item, Amazon takes care of the pick, pack, and ship process so you don’t have to deal with it.
Merchant Fulfilled, also known as Fulfillment by Merchant (FBM), is when you handle all of the logistics before and after the sale. You store the inventory, manage it, pick, pack, and ship it. Remember:
FBA = You sell it. Amazon ships it.
FBM = You sell it. You ship it.
There are pros and cons to each way of doing business.
Why Merchant Fulfilled Is Your Safety Net this Holiday Season
Retailers bank on the holiday season to bring in the year. In the current economic climate, it could be a make or break situation for many devastated during the coronavirus pandemic. For some retailers, it can represent as much as 60% of total sales for the year. While holiday sales are always important, this year they are critical to success.
Yet, as we’ve discussed, Amazon can change the rules at any time. That’s what happened last year during the holiday season when the ecommerce giant suddenly suspended access for sellers to FedEx’s ground-delivery network and forced them to go elsewhere – at higher rates – to fulfill orders.
The Benefits of FBM
While there are some disadvantages to FBM, such as having products that are ineligible for the Prime Buy-Box and the possibility of longer shipping time, FBM lets you take total control of your inventory and ensure it’s handled the way you want at the profit margins you need.
If you have tight management of your supply chain and costs, you can lower your expenses. You’ll also pay lower overall fees to Amazon.
Many products shipped by Amazon come in Amazon boxes with little or no branding inside or out. FBM lets you package and ship products the way you want. This can help brand your business or products.
And, if you’re selling on more channels besides Amazon, you’re in the storage, pick, pack, and ship business already. It will be easier to manage everything under one roof.
Create a Merchant-fulfilled Model With a WMS
Setting up a FBM model with Amazon is fairly easy. It’s the default setting for new sellers. If you’re doing FBA, you can switch easily for new SKUs.
Outside of Amazon, the heart of a merchant fulfilled strategy is a robust Warehouse Management System (WMS),like SkuVault. With SkuVault, you can connect all your sales channels, organize warehouses, and manage inventory efficiently.
Every sales channel is tracked and in-sync. Robust reporting lets you track your supply chain, forecasting, ordering, and reordering so you don’t run out of stock at a crucial time like the holiday season.
Complete visibility into the entire inventory life cycle allows you to make better data-driven decisions and create a better warehouse workflow overall.
Create a Merchant-fulfilled Model With an IMS
Strategic inventory management is the unsung hero of 2023. Retailers who relied on FBA were unable to fulfill orders. Those who managed inventory internally were able to adapt and meet the demand head on.
Simplify Multichannel Retail Operations
Now more than ever it is critical to have an efficient merchant-fulfilled strategy. The right inventory management system, such as Skubana, will make the transition smoother.
Your solution should easily integrate with partners, points of sale, warehouses and 3PLs. Connections to essential partners should be native or via app Store. If an existing connection is unavailable, a custom integration may be required. Confirm your new inventory management system tool has an open API, and work with your partners to get referrals.
The elimination of waste is a core aspect of successful business management. Inventory management software automates vital, time-consuming tasks so you can focus on growth.
You will see operational costs lowered, and time saved by automating mundane activities. From order routing and inventory transfer to issuing purchase orders and replenishment.
Flexibility to Explore New Opportunities
This Q4, shoppers expect to find their favorite products on multiple shopping channels. Nine out of ten shoppers use marketplaces during their purchase journey. This Q4 will be no different.
Recent sales figures show marketplaces everywhere benefitting from an increase in online shopping. Walmart’s digital sales almost doubled YoY while Target’s nearly tripled.
So what does this have to do with a merchant-fulfillment strategy? A good inventory management solution gives you the flexibility to explore new channels.
Unified inventory data across your entire multichannel ecosystem improves efficiency and unlocks opportunity.
With the right IMS you can adapt your multichannel fulfillment operations when and where required. Knowing where your inventory sits at all times lets you maximize your warehouse footprint. A strategic warehouse plan lowers shipping times, improves customer experience and boosts lifetime value. Creating an internal strategy ensures you’re in control of your delivery experience, no matter where your customers shops.
Improve Your Supplier Relationships
An effective inventory management syncs incoming orders to available inventory. This helps maintain accurate inventory levels and prevents stockouts. It also avoids souring relationships with your suppliers and manufacturers.
If a product suddenly goes out of stock, not only are you losing customers, you could also be accruing third-party fees. In a rush to get restocked you might put unnecessary pressure on your vendor network.
Real-time data is critical to an inventory management strategy. Static spreadsheets and periodic inventory counts slow your business down. An IMS will alert you the second inventory needs to be transferred or safety stock is running low. It will generate documentation for work orders, shipping, and invoicing. It will also provide insight into the health of your business so you can make better decisions.
An IMS can track pricing, minimum order quantities, and production lead times across your suppliers network. Leveraging real-time tracking, an IMS will dynamically adjust inventory reorder points to keep warehouses stocked and demand met.
Better Preparation for Q4 and Beyond
Historically, inventory management relied on manual documentation processes and complex spreadsheets. These outdated systems cannot support the hyperfast growth of today’s multichannel brands. As we approach the busiest Q4 in history, brands can no longer rely on these legacy methods. They need an IMS.
Current demand fluctuations require infrastructure that will keep your business shock-proof and resilient. Through automation and data-powered software, brands can streamline their supply chain and stay in control of their commerce operations. The right inventory and warehouse management together will position you to meet the demand of what’s predicted to be the greatest Q4 ever.
Common Questions About Merchant Fulfilled and FBA
Can I do both merchant-fulfilled and FBA sales at the same time?
Yes, you can. You can list products separately depending on which way you want to sell which items. If you want to sell the same product with some being FBA and others being FBM, you can create a new SKU for the products you want to fulfill differently.
How do I keep both merchant-fulfilled and FBA inventory in sync?
Keeping all your inventory in-sync across every sales platform, channel, and marketplace can be tricky unless you’re using the right inventory and warehouse management system. SkuVault and Skubana keep every sales channel in sync at all times. This cuts down on oversells, which is one of the fastest ways to get penalized by Amazon.
This year’s holiday season is too important to put at risk. Consider bringing your orders in-house to have more control of your peak season sales. Whatever fulfillment model you decide to handle your orders, make sure you have a combined inventory and warehouse management set of solutions to help you operate efficiently and effectively.