After selecting the product, finding a supplier and placing an order for production, the next thing we need to solve is the problem related to logistics. Once the order is placed, what kind of logistics and distribution method should we use to deliver the product to consumers in the destination country? Generally speaking, the Amazon platform supports two logistics and distribution methods: FBA and FBM.
What is FBM
FBM stands for Fulled By Merchant, which means that the merchant delivers the goods by himself. That is to say, once the order is placed, the seller directly delivers the goods to the foreign buyer in China. This delivery mode can reduce the risk of inventory pressure, the operation procedures are relatively simple and convenient, and the cost is much lower than Amazon Logistics Service (Fulled By Amazon, FBA). It is a way that does not occupy working capital and has a healthier cash flow. Most of the sellers who adopt the multi-SKU distribution model mentioned above will adopt this FBM self-delivery model.
The self-delivery model also has many disadvantages. Although the self-delivery is controlled by the seller, since the product does not have the Prime blue logo exclusive to Amazon delivery, the exposure and conversion rate on Amazon will plummet, and it cannot be accepted by most buyers; and because it is shipped from China, the buyer has a long waiting time to get the product, often waiting for about two weeks (if the seller uses overseas warehouses to ship by themselves, the timeliness problem can be solved); in addition, Amazon Prime members can buy FBA products for free, but they still need to pay postage for self-delivery products. The above factors lead to the fact that the order volume of self-delivery products is not ideal in most cases, so sellers who do boutique explosive models basically do not choose to adopt the FBM self-delivery model.
In addition, the self-delivery model will also bring some account risks. For example, some logistics and distribution assessment indicators must be met by self-delivery sellers, otherwise there will be a risk of account suspension. Let’s first understand the hard assessment indicators of Amazon operators for the logistics of self-delivery sellers and some details that sellers must pay attention to. We can log in to the Amazon seller platform and view the three hard indicator requirements for FBM self-delivery sellers in “Performance → Account Status”.
Indicator 1: Late Shipment Rate
The Late Shipment Rate (LSR) is the percentage of all orders confirmed for delivery after the estimated delivery time within 10 or 30 days. LSR only applies to seller-fulfilled orders. It is very important to confirm the delivery of orders before the estimated delivery date so that buyers can view the logistics status of their shipped orders online. Delays in confirming the delivery of orders may lead to an increase in claims, negative feedback, and buyer contacts, and have a negative impact on the buyer experience. Amazon policy stipulates that self-fulfilled sellers need to maintain an LSR below 4% to sell products on Amazon. An LSR above 4% may result in account deactivation.
Indicator 2: Pre-delivery Cancellation Rate
The Cancel Rate (CR) is the percentage of all orders canceled by sellers within a given 7-day period. CR only applies to seller-fulfilled orders. This metric includes all orders canceled by the seller, but does not include orders that buyers request to cancel using the order cancellation option in their Amazon account and pending orders that buyers cancel directly on Amazon. Amazon policy requires self-shipping sellers to maintain a CR below 2.5% to sell products on Amazon. A CR above 2.5% may result in account deactivation.
Indicator 3: Order Defect Rate
The Order Defect Rate (ODR) is the main metric for measuring a seller’s ability to provide an excellent buyer experience. ODR is the percentage of all orders with defects in a given 60-day period. An order is defective if there is negative feedback, an Amazon transaction guarantee claim (not rejected), or a credit card chargeback. Amazon policy requires self-shipping sellers to maintain an ODR below 1% to sell products on Amazon; an ODR above 1% may result in account deactivation.
For self-shipping sellers, if none of the above indicators are met, or one or more of them are not met, there is a risk of causing the product page to be reviewed or the account to be deactivated. It can be said that these three indicators are like the “Sword of Damocles” hanging over the heads of FBM self-delivery sellers. If you feel that there are too many limitations to the self-delivery model, then you should choose the FBA logistics distribution model.
To sum up, although Amazon FBM self-delivery sellers have a healthier cash flow than FBA sellers and avoid the risk of inventory pressure, it is actually a huge challenge to do self-delivery under Amazon’s strict platform policy! Think about it, there may be thousands of orders of goods that need to be purchased and packaged in a day, and they have to be sent to thousands of different overseas addresses. In case the wrong goods are sent, or the wrong address is sent, or the order tracking number is filled in incorrectly, under the strict Amazon platform policy, these situations may bring a large number of complaints, which will lead to the store being closed by Amazon.