Amazon’s FBA Program Isn’t the Only Solution: Seller Fulfilled Prime Can Save You Money and Time

The Allure of Amazon

Selling through Amazon opens up a world of potential buyers. The Amazon marketplace is the 800 pound gorilla in eCommerce. With the online retail giant even opening up brick and mortar “4 Star” stores in test cities, there’s no doubt Amazon isn’t going away.

Since the introduction of Prime, buyers have learned to expect fast delivery and other benefits. In a world of empowering the consumer, sellers have to keep up.

How Prime Works

A large portion of the products Amazon sells qualify for free 2-day shipping through Prime. More and more,  consumers ditch the standard purchase in lieu of the telltale blue logo when making their purchases. Of course Prime membership comes with other benefits like unlimited movies, low-priced grocery delivery and more. However, the program’s main draw continues to be free 2-day shipping on eligible items to addresses in the lower-48 of the U.S.

In the earlier days of Prime, sellers wanting that attractive-to-buyers logo on listings had to use Fulfillment by Amazon (FBA). The huge fulfillment network that stores, picks, packs, and ships products sold on Amazon.com and other online channels was the only solution.

Your Options to FBA

Then in 2015, Amazon introduced its Seller Fulfilled Prime (SFP) Program. Qualified suppliers could handle their own fulfillment (outside FBA), yet still retain Prime status. This increased options for suppliers who may be disenchanted with FBA’s high storage rates and other limitations.

So, the good news is that you don’t have to use FBA. About half of sellers still do because it saves them the hassle of arranging it on their own; just because Amazon is a great sales channel doesn’t necessarily make it a great fulfillment strategy. In fact, it may be a poor choice for companies that want to manage the brand experience and preserve margin.

What This Looks Like in the Real World

Picture a multi-channel marketer who stores products offered direct to consumers via the company’s own website. These sales comprise 80% of the profit, with just 20% of its volume.

This company also offers private label solutions for retailers. This makes up 20% of the profit and 70% of its volume.

Finally, the business carries branded inventory that moves through Amazon.com through FBA. These orders offer no profit, but make up 10% of volume.

The overhead costs eliminate any margin the company hoped to have. They continue to offer the products because they feel like they have to be there for consumers.

Welcome to a New World

The gap that used to exist between FBA and no Prime logo on your products is now filled by Seller Fulfilled Prime. Now your order will arrive on your customer’s door step in two days or less with no additional shipping costs, and you don’t have to play in the FBA sandbox.

Now, companies can utilize the new SFP option without having to jump through the FBA hoops. Designed for sellers with a proven track record of delivering the goods on time, SFP allows marketplace sellers to “flag” their listings as being eligible for Prime two-day free delivery.

The distinction once reserved for products being shipped from an Amazon warehouse is now available to more sellers.

How Does Seller Fulfilled Prime Work?

It all starts with an application. You fill it out and wait for Amazon’s approval. Once your business receives that nod that you can be an SFP seller, you can begin to fulfill orders on your own, or work with a trusted third-party eCommerce fulfillment expert like EPI Marketing Services to manage the process.

Before enrolling in SFP, companies must complete a trial period to show they’re able to meet the requirements for Prime fulfillment standards and customer satisfaction. During this trial period, the Prime badge will not be displayed on items; once you successfully complete the trial period, Amazon will automatically enroll you into in SFP. Once this happens, your offers will display the Prime badge to customers.

Here are the specifics about eligibility for Premium Shipping status directly from Amazon Seller Central:

The SFP trial period lasts between 5 and 90 days depending on when you satisfy the above performance requirements. If you fail to fulfill the above requirements for 200 eligible Prime trial orders within 90 days, the trial period will reset automatically and you can try again. (In order to display the Prime badge and Guaranteed Delivery date to customers, you must also maintain Premium Shipping eligibility.)

Additional Criteria for Amazon’s Seller Fulfilled Prime

Sellers must also meet the following criteria to participate in SFP:

Good standing. You must have a Professional Selling Account that is active and in good standing.

Customer service. Once approved for Seller Fulfilled Prime, sellers have to maintain the other conveniences of the Prime program that customers are accustomed to, including:

• Use Customer Service by Amazon.
• Auto-authorize returns, regardless of whether the buyer is a Prime member. (This may present additional costs in terms of return rates and processing costs.)
• Purchase shipping labels through the Manage Orders page or the Merchant Fulfillment API section of Amazon Marketplace Web Service.

“Should I Join the SFP Race?”

As you assess the viability of SFP for specific shippers, you’ll want to consider actual numbers to determine whether the program will be more cost effective.

Here are three key points to consider:

Existing Fulfillment Capabilities. Companies with their own storage and fulfillment solution already in place are best positioned to immediately take advantage of SFP.  Maybe it’s a warehouse facility with staff experienced in processing orders. It could also be a trusted vendor partner committed to a Service Level Agreement (SLA) that meets the Amazon Premium Shipping requirements.

Product Assortment. Seller Fulfilled Prime makes a lot of sense for brands with:

• Heavy or over-sized products, which otherwise would have to first be shipped to an Amazon Fulfillment Center (with additional fees) then out to the customer.
• Products with slower turns, since Amazon penalizes sellers for having inventory in their fulfillment centers longer than six months. Maybe you have seasonal products that don’t move quickly during the year, but are very popular in the summer.

Control. As a seller, do you want to have more control and connection to your buyers? Amazon FBA may offer operational simplicity for sellers, but it also creates a divide. A very lenient product return policy under the Prime program means companies are often left out of the communication channel for items that have been refunded but never returned.

Not Able to DIY? Find Your Partner to Fulfill Amazon Prime Orders

If you’re looking for a trusted partner to handle the logistics of your SFP program, be sure to put these key points on your criteria list:

Look for a provider with a centrally-located distribution center and can meet the demands of 2-day shipping to many different geographic points.

Seek out a business partner with deep expertise in business-to-consumer (B2C) fulfillment. Today’s buyers want their stuff when they want it and where they want it. Don’t risk customer service problems and shipping delays by working with a partner that’s not well versed in this area.

Find a provider that offers late-day order cutoffs for same day shipping.

Find a partner with the technology to handle your orders, the logistics of shipping and can offer additional services as you scale – like kitting and website architecture.

 

Amazon photo by Christian Wiediger on Unsplash
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