Seller Fulfilled Prime- The Breakdown
When business owners sell products on Amazon, there are two major shipping options to choose from. Sellers can opt to ship using Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM). Fulfillment by Amazon leaves Amazon in charge of shipping a seller’s products, while Fulfillment by Merchant leaves the responsibility of shipping to the seller. Both options boast certain advantages while also having some drawbacks. FBA allows sellers to display the Amazon shipping guarantee on their product listings, building trust with customers. While FBM gives sellers full control over the shipping process of their goods. In 2015, Amazon introduced a new feature that essentially combines these two options: Seller Fulfilled Prime.
Seller Fulfilled Prime allows Amazon sellers to ship to domestic Prime members from their own warehouse or using a verified 3rd party logistics company. Using the program, sellers can partner with Amazon Prime while still running their own shipping operations. Here we’ll break down the pros and cons of Seller Fulfilled Prime and evaluate if it’s worth implementing for your business.
A major pro of Seller Fulfilled Prime is that sellers can advertise Prime shipping on their product listings. Typically, when merchants ship from their own warehouses on Amazon using FBM, shipping can take anywhere from a couple days to several weeks depending on the availability of the item and external factors that affect the process. Shipping can also get costly for the consumer depending on the product and where it’s coming from. Amazon has revolutionized the delivery process with Prime shipping, and this has taken the world by storm. According to a 2022 survey, the top 2 main reasons consumers shop at Amazon are the low shipping prices and fast delivery. Prime shipping guarantees customers either 2-day or 1-day free shipping. This has a huge appeal for consumers who are looking to get their products fast. The fact that prime shipping is always free for Prime members is also a huge plus for buyers.
With Seller Fulfilled Prime, Amazon sellers can display the famous Prime shipping designation on their listings while still shipping from their own warehouses. But because they are advertising Prime shipping, sellers using SFP must maintain the standards of Prime, and this can be difficult. Sellers who want in on SFP must commit to fulfilling orders with 1 or 2-day delivery and to providing free shipping for Prime members. To be eligible for the program, businesses must be able to ship 99% of their orders on time and be able to follow through on 1 or 2-day delivery promises. Thus with SFP, sellers do get to use the Prime designation for their listings but would have to in turn meet quite challenging standards to maintain this status.
On a related note, a significant drawback of the Seller Fulfilled Prime program is that it is very difficult for a company to be eligible. The program often has a wait list to apply, and even when sellers can apply, there is a long list of requirements. Sellers must have a nearly perfect shipping record, and an order cancellation rate of less than .5%. Additionally, to be eligible sellers must agree to use Amazon Buy Shipping Services for nearly all orders, deliver orders using Seller Fulfilled Prime carriers, and allow Amazon to respond to all customer service inquiries. Thus, when joining the SFP program, sellers must meet very high standards and agree to a lot of Amazon involvement in the shipping process.
An advantage of SFP is sellers gain exclusive access to Prime members on the platform. The feature allows sellers to designate their product pages as “Prime listings”. This means Prime members will be able to find your products when searching using the Amazon Prime filter on the sidebar of the site. Many Amazon shoppers will only buy products that are designated as “Amazon Prime”. Thus, using SFP will give sellers exposure to a larger demographic of buyers.
The shipping program also increases brand exposure by giving your products a greater chance to become the Amazon “Featured Offer”. When your offer is “featured” on Amazon, it becomes the default buying option when a customer clicks “Add to Basket”. This will not only increase exposure but also sales and conversions for your company.
Control Over Inventory
A major appeal of Seller Fulfilled Prime is that sellers have complete control over their inventory. Business owners either use their own warehouses or a 3rd party of their choosing to ship products with this program. Having control over your inventory is useful for many reasons. If a last-minute change needs to be made to a product, the seller will still have access to the inventory and time to make the change. Additionally, sellers will also not have to wait for their products to be shipped to an Amazon warehouse to restock their inventory. This will make it easier for your inventory to be fully stocked, which is especially important during holidays and busy buying seasons. By using their own warehouses, sellers also will be able to implement their own standards for staff and storing inventory.
Fees & Costs
Another advantage of using SFP is that sellers can avoid the variety of fees that come with shipping using Amazon warehouses. Amazon is notorious for being unpredictable with their storage fees, and this is a problem many sellers deal with when using Fulfillment by Amazon as their shipping choice. With SFP, this is no longer an issue for sellers as they are storing their own goods. There are also additional fees that come with using FBA such as fulfillment fees and freight costs when shipping your goods to an Amazon warehouse. Thus, SFP is good for providing more predictability and control regarding what your shipping costs and fees will be. However, this does not necessarily mean sellers will save money with the program.
With SFP, sellers have to pay for shipping. This can be so costly that it can actually cause businesses to lose money. With other shipping options like Fulfillment by Amazon, sellers pay fees but avoid paying the actual costs of shipping and handling. Taking on these costs can be overwhelming for a business that is not a conglomerate like Amazon. When deciding whether or not to pursue SFP, it is important to consider how large your business is and if you can afford shipping costs while still reaping a profit.
Returns & Refunds
Lastly, Seller Fulfilled Prime does allow business owners to have some increased control over returns and refunds. With SFP, sellers avoid the issue of having to file a claim with Amazon when a customer requests a refund. But with the program, sellers must still agree to using Amazon’s return policy. SFP sellers have more control over issues such as delayed shipping, broken items, or missing items, and can detect what went wrong in the shipping process if these things occur. But this also means the seller has greater responsibility and must then deal with customers directly if there is an issue.
All in all, there are different pros and cons to using Seller Fulfilled Prime for your business. The program is relatively new and is a unique way for Amazon sellers to gain access to the Prime designation, while shipping from their own warehouses. With SFP, because sellers have more control over shipping, they also have a lot more responsibility and potentially more costs. When determining whether or not Seller Fulfilled Prime is right for your brand it is important to consider the size and scope of your business, and your profit margin. When deciding how you want to ship on Amazon, make sure you consider all the options and choose the program that makes the most sense for your business. Good luck!