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What is the FBM model?
FBM (short for Fulfillment by Merchant ) is a sales model in which the merchant is responsible for the entire sales process, including warehousing, packaging, shipping of goods, and handling complaints and returns.
How does the FBM model sales work?
- Storage – The Seller must provide a storage area in which to store its goods.
- Finding a shipping partner – In the FBM model, the seller does not have the option of using shipping companies under the contracts that Amazon has. It is necessary to negotiate the terms of cooperation individually or use different carriers.
- Product sales – Once the product is sold, the seller is responsible for processing and handling shipping.
- Handling Complaints and Returns – The Seller is also responsible for handling any returns and complaints related to the entire order process.
What are the advantages of the FBM model?
- More control – Sellers in the FBM model have more control over their products and have access to them at all times. They also don’t incur the costs associated with potential pickup from Amazon warehouses for goods they want to withdraw from the sale.
- Lower costs on some goods – Amazon’s FBA model makes fees dependent on the size of the goods in question. Therefore, the FBM model may be more beneficial for larger or heavier goods that sell on a low margin.
What are the disadvantages of the FBM model?
- No room for errors – Amazon takes a very strict approach to customer service. Repeated errors or delays in shipments can result in a temporary suspension of the account or even a complete lockout. While providing the right level of service will be simpler for a small number of shipments, a seller with a large number of shipments has a lot more room for error.
- High storage and handling costs – The FBM model requires the seller to maintain storage and handling space. This issue can be problematic when sales spikes or declines are difficult to predict. In the former case, the seller may need to increase warehouse space and costly product transportation. In the case of declining sales, the cost of maintaining space can significantly impact the profitability of the business.
What are the costs of the FBM model?
Although in this model the seller is responsible for every aspect of product management, Amazon does charge fees associated with using the platform. The “Professional” plan is a fixed monthly fee, independent of how many goods are sold. It is also possible to choose a payment system for each product purchased from us on Amazon.