It is clear that Amazon’s Prime membership program has been a huge hit. It is estimated that Prime subscribers spend an average of $1,300 per year while non-Prime members spend $700 per year on Amazon. Until recently, if you wanted your ecommerce business to benefit from the Prime program, you had to participate in Amazon’s Fulfillment by Amazon (FBA) program. However, Amazon has a new program called Seller Fulfilled Prime (SFP) that lets you expand your participation in the Prime program without using Amazon’s fulfillment centers. With Seller Fulfilled Prime you can use your own fulfillment capabilities and choose the products you’d like to offer with the benefits of Prime.
A Summary of The Seller Fulfilled Prime Program
Seller Fulfilled Prime allows you to list your products as Prime-eligible and handle the fulfillment yourself. You can display the Prime badge on the products that you enroll in the SFP program thereby giving your products greater visibility and discoverability on Amazon. This is because Prime members tend to search for and purchase products that are Prime-eligible over products that are not prime eligible.
What’s more, your customer service volume will decrease because Amazon handles all customer service duties under the SFP program.
There is currently no fee to enroll in Seller Fulfilled Prime. However, by agreeing to participate in SFP, you’ll need to offer Prime members free two-day shipping and all customers nationwide free standard shipping. What’s more, you’ll need to provide free return shipping in accordance with Amazon’s return policies. This can become pretty costly, so you’ll really need to do your math on each product before including it in the program.
Once you’re enrolled and you start shipping orders, you’ll need to buy shipping through Amazon’s Buy Shipping Services. This can be done either through the Buy Shipping tool on your Manage Orders page or through the Merchant Fulfillment API. This helps Amazon ensure that Amazon customers can track their packages and receive them on time. The shipping rates that Amazon is offering through the Buy Shipping Services are not great so if you already have good negotiated rates through UPS or FedEx you can configure your account to use your own negotiated rates.
Seller Fulfilled Prime vs. Fulfillment by Amazon
With Fulfillment by Amazon (FBA), Amazon takes care of the order fulfillment once you’ve sold an item through Amazon. This means Amazon houses your products and does all the picking, packing and shipping of your orders. Through FBA, your products become eligible for Amazon Prime’s free two-day shipping program. You will be able to enjoy many benefits through FBA including increased visibility and sales.
Seller Fulfilled Prime (SPF)
With Seller Fulfilled Prime, products you sell on Amazon are still eligible for Prime free two-day shipping, but you become responsible to fulfill your orders, not Amazon.
Some of the benefits of the Seller Fulfilled Prime program include:
- Control Over Your Inventory – you house your inventory yourself and you don’t need to send it to Amazon fulfillment centers.
- You Can Limit Your Participation to Regional SFP Only – You can use the Ship by Region feature, where items flagged as Prime-eligible will only become available for Prime shipping to customers whose registered shipping address is in close proximity to you.
- You Can Avoid Cost of Sending Your Products to Amazon – Since you’re doing all the fulfillment, there is no need to incur the cost of sending your products to Amazon fulfillment centers (like you would have to do in the FBA program).
- You Avoid Paying Storage and Fulfillment Fees to Amazon – You won’t pay Amazon the storage and fulfillment fees you would if you were using FBA.
- You Avoid Long-Term Storage Fees – As described in the point above, since you’re housing everything you won’t get hit with long-term storage fees that Amazon charges twice per year on products sitting in their warehouse for longer than six months.
The Types of Items That Are Ideal for SFP
While you can include almost any item you want, the types of items that are best suited to sell through SFP include:
- Bulky items that would cost too much to ship and store at a fulfillment center.
- Items such as hazardous material that are ineligible or unsuitable for FBA.
- Country-specific items like electric plug adaptors and language content such as books.
Getting Started With SFP
To participate in SFP, you will need to satisfy performance requirements during a trial period to demonstrate that you can meet customers’ service expectations. After successfully completing the trial, you’ll be automatically enrolled in the program.
Amazon’s eligibility requirements for Premium Shipping are:
- Have a Professional Seller account (basic accounts don’t qualify).
- Achieve an on-time delivery rate of at least 92 percent for Premium Shipping orders.
- Provide a valid tracking ID for at least 94 percent of Premium Shipping orders.
- Maintain a cancellation rate of less than 1.5 percent for Premium Shipping orders.
If you meet the Premium Shipping eligibility requirements, you will be able to enroll in SFP and start the SFP trial. To complete the program, you’ll need to ship a minimum of 200 Prime trial orders within the following guidelines:
- Achieve an on-time shipment rate of at least 99 percent.
- Use the Buy Shipping Services for at least 95 percent of your SFP orders.
- Maintain a cancellation rate of less than 1 percent.
Once you pass the trial, you’ll be enrolled in SFP. To continue to participate in SFP, you’ll need to agree to the following terms:
- Continue to buy all shipping labels for orders with a Prime item via Amazon’s Buy Shipping Services.
- Automatically direct all post-order customer service inquiries to Amazon.
- Adhere to Amazon’s returns policy.
- Offer free two-day shipping for Prime Members and free standard shipping for other buyers.
The Nuts and Bolts of the SFP Program
Shipping Label requirements
As mentioned above, you will need to purchase all of your shipping labels for orders containing a Prime item through the Buy Shipping Services.
Amazon will handle all post-order contacts and customer service issues regarding Prime items. This means that Amazon will have sole discretion in determining all customer service decisions including granting returns, refunds and adjustments, which can get pretty expensive so watch out. All of these concessions will be charged to your seller account.
When you participate in SFP, all the items you include in the program will need to be delivered within Amazon’s delivery guarantee guidelines. If you miss the delivery guarantee, Amazon Customer Service may provide full shipping cost refunds when contacted by customers regarding a late delivery of any Prime item. The cost of that refund will be charged to your seller account.
Customer Returns Requirements and Policies
If you want to participate in SFP, you’ll need to adhere to Amazon’s refund policy. What’s more, Amazon Customer Service will have the discretion to make case-by-case exceptions to the return policies, including accepting returns for Prime items past the stated return time frames. As the return policy dictates, you as the seller will have to pay for return shipping costs in all cases except if:
- The buyer makes an accidental order.
- The buyer finds a cheaper price elsewhere.
- The buyer no longer needs or wants the item.
Except for some rare occasions, you as the seller will be responsible for the return shipping cost of any SFP items that buyers return.
The Buy Shipping Program
When you participate in SFP, you will need to buy shipping labels through the Buy Shipping Program. Amazon’s Buy Shipping program lets you perform the following tasks:
- Buy shipping labels individually or in bulk.
- Ship and confirm your orders.
- Track your shipments.
You can buy shipping labels from UPS and FedEx at discounted rates and buy all domestic USPS shipping at USPS Commercial Plus prices. As mentioned above, if you have good negotiated rates with either UPS or Fedex, you can elect to use your own negotiated rates instead of paying the discounted rates that Amazon charges.
The Buy Shipping Program lets you buy shipping either from within your seller account or through a Merchant Fulfillment API. The Merchant Fulfillment API lets you use either third-party shipping tools or your own tool.
As of this writing, the following third-party shipping integrators have already adopted the Merchant Fulfillment API for fulfilling your Prime orders:
- M2E Pro
- SolidShip by Solid Commerce
Confirm Shipment and Track Shipment Status
One of the benefits of using the Buy Shipping Program is that orders shipped through Buy Shipping do not require a separate shipping confirmation. Amazon automatically uploads tracking for all orders.
Prevent A-to-z Guarantee Claims
One huge benefit is that you can avoid a lot of A-to-z Guarantee claims. Amazon will fund the A-to-z Guarantee claim if an order is shipped via the Buy Shipping Program and a buyer files a claim stating they did not receive the order. What’s more, you won’t even receive a notification on your Manage returns page nor will your Order Defect Rate be affected.
Order Cutoff Times
One of the potentially expensive aspects of SFP are the shipping requirements. Regardless of the shipping speed selected by a customer, Prime orders are required to be shipped on the same day the order is received, as long as the customer places the order before your cutoff time. Cutoff times are usually 2:00 p.m. local time Monday through Friday. Orders received after the cutoff time will need to be shipped by the next business day. In other words, all Seller Fulfilled Prime orders will have a two-business day promise, which means orders placed after the cutoff time on Friday will need to arrive by Wednesday.
The Amazon Seller Fulfilled Prime program offers a tremendous opportunity to expand your business. The SPF program has a lot of benefits and can really help increase your sales. The main benefit is that the SPF program allows you to list your products as Prime-eligible while allowing you to handle the fulfillment yourself. While the program has its benefits, it can be extremely costly as well. Amazon discussion boards are filled with stories from merchants that are either extremely happy with the program or merchants that have lost a lot of money by participating in the program. The program is really dependent on the specific product you decide to offer so make sure to do your homework and really plan accordingly before you participate.
Business Consulting Services: If you’re a small business owner looking to start or improve an online business then let me show you how to benefit from my experience. I have helped several online resellers grow their businesses by developing an online strategy to sell on Amazon, eBay or any other marketplace. Call me at 310-574-2541 or email me at Pez@Pezlogic.com for a complimentary business review.