Seller Fulfilled Prime vs Fulfillment By Amazon (SFP vs FBA)
Whether you’re a retailer or you consider yourself a simple online seller, you understand that Amazon is a critical component of your business plan. Even major retailers know this. Of course, it’s become even more important to be part of Amazon’s Prime world.
In fact, the digital marketplace’s Prime offering plays an integral role in day-to-day operations of brands and sellers big and small. With more than 100 million Prime members shelling out about $1400 each year (and growing) compared to about $600 per year by non-members, you can see the clear future. Prime.
You can access this world through two programs: Fulfillment By Amazon (FBA) and Seller Fulfilled Prime (SFP). And while they each grant you entry to this growing niche of buyers, they are quite different.
Each option has pros and cons depending on your business size, profitability and future plans. Here are a few ways FBA and SFP differ.
Fulfillment Operations
The first and most noticeable difference you’ll find is how your items are fulfilled.
As you’ll likely deduce, Fulfillment By Amazon means the marketplace behemoth completely fulfills your. You send a portion of your inventory to Amazon’s fulfillment centers, where it’s stored until a customer decides to buy it. Amazon then picks, packs and ships the items to your customers, while you sit back and profit. They take care of it all.
On the other side of the coin, Seller Fulfilled Prime puts fulfillment in your hands. Customers buy through Amazon Prime, then your company ships the items directly with no intervention from Amazon. You have access to the Amazon Prime brand name and you follow their shipping rules, but it’s up to you to pick, pack and ship to your customers.
This means you have to decide whether you want to pay for shipping or pay for storage.
With SFP you have to pay for shipping. This can drastically eat away at your margins and possibly result in a negative sale if you’re not careful.
Shipping adds another logistical layer as well. Shipping information must be purchased through Amazon’s Buy Shipping Tool, which means you have to log in to Amazon just to generate and print shipping labels. You can also partner with a third-party that integrates with the Amazon Buy API to automate this process.
As you can imagine, when Amazon handles it all in the FBA world, you’re still paying in some way. That’s through storage and other fees. It’s up to you to decide which holds a better return on investment (ROI) for your business.
Your Fees
The goal of many online sellers is to simply put items up for sale and rake in the profits. However, that’s not always the case thanks to FBA’s fees. Since it’s Amazon’s world, much like a mall landlord, they’re able to change fees at any time. Rate structures and policies are updated yearly — and sometimes even more frequently. If you fail to stay on top of the latest inventory storage fees, those costs will quickly eat into your profit.
It’s great that Amazon handles everything for you; you can expect them to ask for something in return.
SFP users avoid these fees, but pay for things like shipping (above) and storage (below).
Storage and Inventory
The storage of your inventory is another area that highlights the differences between these two Prime programs.
Fulfillment By Amazon is a compelling proposition for retailers selling strictly on Amazon. However, many others choose to sell on as many sales channels as possible. Multichannel customers are more profitable and offer a diverse selling portfolio.
With Seller Fulfilled Prime, you’ll need your own warehouse to control inventory and fulfillment. That comes at its own price to acquire, maintain and staff. Plus, as an SFP member, you’re required to ship Prime orders same-day. Is your warehouse streamlined to process orders at high efficiency?
Inventory control certainly ties in with the storage issues, too. With FBA, after you’ve sent your inventory to Amazon’s fulfillment warehouses, it’s gone. “No kidding, Captain Obvious.” Think about this though: this means you’ll be limited when running promotions on other marketplaces or your own website. You may even have to recall inventory from Amazon or be prepared to pay for the marketplace’s multichannel fulfillment services.
It’s also important to note that Amazon charges penalty fees for inventory stored in a fulfillment center for longer than six months.
The difference when it comes to SFP is that you have complete control over your stock — no split inventory between Amazon’s warehouses and your own. This plays a big part when you sell on multiple sales channels or have a brick-and-mortar location.
Customer Returns
When Amazon fulfills your inventory through FBA, they handle returns for you and provide their experienced and top tier customer service. Smaller businesses will benefit from the time and resources this can save.
On the other hand, with SFP, you and your company handle all returns. You’ll need to have your own dialed-in returns and customer service departments.
The difference also comes down to control. Amazon sends FBA members a general box of returned goods. With SFP, you can easily identify exactly which returned item ties to which order, greatly reducing the risk of potential customer fraud.
Keep in mind, however, that Amazon requires SFP sellers to abide by the same rules that apply to orders fulfilled by the marketplace itself. That means items are automatically authorized for return at the seller’s expense, without the seller being contacted first.
What’s Best for Your Business?
Obviously SFP and FBA each have certain advantages and disadvantages. They will appeal to different businesses with different aspirations.
Two final thoughts may help clear things up a bit more.
To start with, keep in mind that becoming eligible for the SFP program comes with its own set of strict requirements. You will still have inventory to update, shipment notifications to watch and invoices to maintain.
Also, sellers that benefit most from Seller Fulfilled Prime tend to spread their inventory across multiple channels instead of selling solely on Amazon. Many sellers won’t necessarily see big savings. They may even see their fulfillment costs increase slightly. But having the ability to sell more at higher volumes across multiple channels can make up for any costs you see with SFP.
If you’re working with a solution like ChannelAdvisor, you’re ahead of the game. EPI’s eCommEdge integrates with ChannelAdvisor, and we see great results for clients.
Dog in a box photo by Erda Estremera on Unsplash
Shipping/mail photo by Markus Spiske on Unsplash
Coins photo by Michael Longmire on Unsplash
