7 Things You Need to Know About Seller Fulfilled Prime

Transcription

1 7 Things You Need to Know About Seller Fulfilled Prime

2 table of contents 01 INTRODUCTION 02 WHAT IS SFP? HOW IS IT DIFFERENT FROM FBA? WHAT ARE THE REQUIREMENTS FOR SFP ELIGIBILITY? WHAT DOES THE SFP TRIAL PERIOD ENTAIL? WHAT ARE SFP S SHIPPING AND DELIVERY TIME REQUIREMENTS? WHAT ARE THE BENEFITS OF SFP? WHAT SHOULD SELLERS CONSIDER BEFORE JOINING SFP? IS SFP RIGHT FOR ME? SUMMARY

3 introduction For many Amazon retailers, obtaining Prime seller AMAZON PRIME MEMBERSHIP GROWTH status is considered central to boosting sales and gaining a competitive edge on America s largest online marketplace. Armed with the Prime badge, online retailers can tap into the coveted group of Prime buyers who, according to a recent Morgan Stanley survey, spend more than 4.6 times than non-prime members. Moreover, the Prime audience is increasingly growing year-over-year with 63% of Prime members saying they have no plans to cancel their membership in the near future (Consumer Intelligence Research Partners, 2017). With an estimated 80 million prime members, it s no wonder online retailers seek to obtain Prime seller status. * ** 01

4 It used to be that the only way to become a Prime seller was to participate in Fulfillment by Amazon (FBA) program where sellers are required to store their inventory in Amazon s warehouses and have Although Seller Fulfilled Prime can be a great program for many retailers, helping them boost their Amazon sales significantly, it may not necessarily be a good fit for others. Amazon handle their order fulfillment. But today, online retailers can also become Prime sellers by participating in Seller Fulfilled Prime (SFP), a fulfillment program that enables sellers to be Prime while In this e-book, we ll answer 7 common questions about Seller Fulfilled Prime to help you decide whether the program is right for your business. handling their own storage and fulfillment. With Seller Fulfilled Prime, retailers can maintain greater control over their inventory, orders and shipping, and greater cost control by handling their own fulfillment. Moreover, since the primary benefit of SFP is enabling retailers to sell products as Prime, SFP dramatically improves a seller s chances of winning the coveted Buy Box. 02

5 Prime buyers, according to a recent Morgan Stanley survey, spend more than 4.6 times than non-prime members. 03

6 what is SFP? how is it different from FBA? Seller Fulfilled Prime (SFP) is a fulfillment program that was introduced in 2015 by Amazon. It was created specifically for retailers and brands who have their own fulfillment centers or 3PLs (Third Party Logistics provider) but do not want to participate in Amazon s FBA program in order for their listings to be Prime eligible. With Seller Fulfilled Prime, sellers can offer their products as Prime yet still use their own fulfillment facilities to store, process and ship their orders. The biggest difference between SFP and Amazon s FBA program is that FBA requires sellers to store their inventory in Amazon s fulfillment centers. For businesses who do not have their own warehouse or fulfillment capabilities, FBA can be a convenient & cost-effective solution. FBA offers significant flexibility, since sellers are not required to sign a minimum monthly contract with Amazon or commit to a specific duration of time or minimum usage. With FBA, all inventory in Amazon s fulfillment centers is automatically designated as Prime. With SFP, sellers can decide which listings they would like to offer as Prime and for which regions of the country. FBA s numerous benefits include instant scalability (you don t have to worry about hiring more personnel as you get busier), convenience (your warehousing, fulfillment, customer service related to delivery and returns will be taken care of by Amazon) and automatic designation as a Prime seller. The downside of FBA is that its fees can start to add up and sellers lose some autonomy in their branding and order fulfillment. For instance, FBA s Inbound fees can quickly become quite costly. In order to meet its two-day delivery guarantee, Amazon requires FBA sellers to send their inventory to various geographically distributed fulfillment centers designated by Amazon. Sellers are responsible for the costs of shipping their inventory to each Amazon fulfillment center which can add additional up-front expenses. Other FBA fees include oversize fees, long-term storage fees, restocking fees for returns and more. FBA fees are non-negotiable, whereas some 3PLs are open to negotiating their rates for storage, pick and pack, and their other fees. FBA sellers also have less brand control since Amazon uses its own branded packaging. With SFP, sellers can maintain greater control of their branding, packaging and better manage their fulfillment costs. 04

7 what are the requirements for SFP eligibility? To be eligible for SFP, you will first need to have a Professional Selling account and qualify to offer Premium Shipping (non-standard shipping). Premium Shipping enables sellers to offer expedited shipping options, such as Same-Day and Two-Day shipping, to their Prime customers. Fast Shipping options are the cornerstone of Amazon s Prime program as Prime members expect quick and reliable delivery as one of the main benefits of Prime membership. To be eligible and maintain eligibility for Premium shipping, sellers must meet the following performance requirements: On-time delivery rate: Must have an on-time shipping rate of at least 99% for Premium shipping orders. Valid tracking rate: Must have valid tracking IDs for at least 94% of Premium shipping orders. Seller-initiated cancel rate: Must have 1% sellerinitiated cancellation rate for Premium shipping orders. (common reasons why sellers cancel are stock-outs, defective products, etc.) In addition to fulfilling the requirement for Premium Shipping, Amazon sellers must also satisfy the following: Offer two-day shipping to Prime members through Premium shipping. Offer free standard shipping to Prime and non-prime members nationwide. Offer free return shipping. Purchase shipping labels through Amazon Buy Shipping services for at least 95% of your Prime orders. Allow Amazon to handle all your order-related customer service issues. Comply with Amazon s returns policy (recently Amazon modified its Prime return policy to include auto-authorized returns) 05

8 If you already have a good shipping and performance track record, chances are you have already been invited to participate in the program. For those who have not yet been invited, you will need to go through a trial period to prove that you can adhere to Amazon s strict shipping and performance requirements. tip: Sellers who are using 3PLs or other 3rd party fulfillment facilities need to make sure that these fulfillment centers understand the requirements of Prime and can adhere to Amazon s strict shipping rules. It is a good idea to find a 3PL or fulfillment center that has considerable experience with fulfilling Amazon prime orders as they are more likely to have processes and infrastructure already in place. 06

9 what does the SFP trial period entail? Amazon requires that all sellers who have not been automatically approved for Seller Fulfilled Prime go through a rigorous trial period. The trial period lasts up to 90 days and the seller has to fulfill 50 Prime orders with near perfect metrics during that period. Sellers will be measured on how well they meet all of the Seller Fulfilled Program requirements. If the seller falls below the minimum requirements, they will not receive the Prime badge. Sellers will not receive the Prime badge until after the trial period is over and they have proven that they can meet Amazon s expectations. The trial period lasts up to 90 days and the seller has to fulfill 50 prime orders with new perfect metrics during that period To begin your SFP trial period, simply follow Amazon s period directions: Seller Fulfilled Prime trial period How to start the trial 1. Register: Go to the Seller Fulfilled Prime main page and sign up to start your trial. 2. Enable Prime shipping in your Prime trial shipping template: Visit Configure Shipping Settings for steps on how to enable listings for Prime shipping and how to select regions where you would like to offer Prime delivery. Review Prime Shipping Requirements. 3. Enroll items in Seller Fulfilled Prime: Assign SKUs to your Prime shipping template. Note: During the trial period, all SKUs assigned to a Prime shipping template will count as Prime trial orders, regardless of the buyer s location. All Prime trial orders will contribute toward the trial period performance requirements described below. 4. Fulfill Prime trial orders: Identify Prime trial orders according to the Prime badge displayed on the Manage Orders page in Seller Central and the isprime identifier in Order Reports. Fulfill these orders according to the requirements listed on the How to process Seller Fulfilled Prime orders page. Once you are approved for Seller Fulfilled Prime, the listings you ve designated as Prime will automatically display the Prime badge. If you are unable to complete your trial period or didn t get approved by Amazon after the trial period ends, you can try again with no penalty. The trial period is lengthy but it simply ensures that you are ready to guarantee the delivery time and rates Prime members are accustomed to receiving. 07

10 what are SFP s shipping and delivery time requirements? One of the challenges of deciding whether you should be an SFP seller is understanding the potential shipping costs you will incur. As an SFP seller, you must offer free Two-Day shipping to Prime members, but unlike FBA, you can offer Prime delivery on a regional basis instead of nationwide. When you join the SFP program, you will be required to create specific SFP shipping templates. In these SFP shipping templates, you can select the regions you want your listings to display the Prime badge and where you can guarantee two-day delivery. For instance, if your distribution center is in NY, you can limit Prime delivery to areas near your distribution center to ensure a two-day delivery. SELLER FULFILLED PRIME SHIPPING REQUIREMENTS Shipping Prime Non-Prime Method Customers Customers Two-Day Prime Urban areas Free Seller-set rates (2 Business Days) Standard Urban Free Free (3-5 Business Days) Standard Rural Free Free (7-14 Business Days) Standard Remote regions not eligible for Prime Shipping Seller-set rates Seller-set rates (7-14 Business Days) 08

11 With SFP, you lose some control of your shipping costs. SFP sellers are free to select any of the major carries and use their own negotiated carrier rates. However, Amazon will only allow you to select the carriers & their service levels that can guarantee delivery of a Prime order within two days based on customer s location. For example, although USPS is supported by Amazon, it is often not available for Two-Day Prime shipping since it may not be able to guarantee two-day delivery to a specific location. Therefore, sellers may be surprised when they discover USPS is disabled as a carrier choice and are left with options that might be costlier than anticipated. On the plus side, SFP sellers can access some of Amazon s negotiated rates, such as USPS Commercial rates, which can potentially reduce shipping costs. SFP sellers also need to be aware that there is a cut-off time for accepting Prime orders each day. The cut-off time for a Prime order is 2:00 pm, seller s local time. If a seller has multiple warehouses, they can choose the Eastern-most location as the cut-off time. If a Prime order is Two-Day shipping and comes in before 2:00 pm, then it needs to be shipped out on the same business day before midnight. If the order comes after 2:00 pm, then the order can be shipped out on the next business day after midnight. SFP CUT-OFF TIMES Day Ordered (before cutoff) Monday Tuesday Wednesday Thursday Friday Saturday Sunday Delivery Day to customer Wednesday Thursday Friday The following Monday The following Tuesday The following Wednesday The following Wednesday As of today, the cut-off time is set by Amazon for 2:00 pm and cannot be customized by sellers. tip: To avoid being caught off guard when it comes to shipping costs, it s good practice to be conservative when calculating your shipping cost and assume the higher rate. Amazon selects carriers that have the highest probability of being able to deliver an item on time and often that is the more costly shipping service. 09

12 what are the benefits of SFP? Seller Fulfilled Prime offers many benefits but it also has a few risks in terms of potentially higher costs. So why do so many sellers want to participate in Seller Fulfilled Prime? First and foremost, participation in SFP provides sellers with access to the millions of Prime buyers who shop more frequently, spend more money than non-prime buyers and prefer to buy from Prime sellers. Amazon shoppers have grown to view the Prime badge as a symbol of excellence and have developed greater confidence in Prime sellers, certainly in the area of delivery. According to Amazon, SFP sellers can see an average sale increase of at least 50% on their Prime listings when they join the program. That s not too shabby. facilities can forgo paying the fees associated with FBA, such as fees for storage, pick & pack, and handling. FBA sellers may sometimes experience delays for Amazon fulfillment centers to unload and process their inventory, thus leading to a loss of sales, especially during the busy holiday season. SFP sellers, on the other hand, can select fulfillment centers who can process their inventory with little to no delay. By having greater governance over their inventory and fulfillment operations, SFP sellers can also expand their online presence by selling on other online channels. The ability to use the same fulfillment facilities to ship your Amazon SFP orders as well as orders from other online channels can help streamline sellers fulfillment operations and potential costs. Secondly, SFP enables Prime sellers to have better control of their inventory, fulfillment operations and costs associated with both. Online retailers and brands who already have their own warehouse(s) or fulfillment 10

13 SFP sellers have a better control of their branding and customer experience. Depending on their fulfillment center, SFP sellers can request customized packaging that reflects their brand and their company. You can use your own box, your own packing slips, your own packaging material etc. Additionally, as a result of adhering to the strict Prime metric requirements, SFP sellers can also experience better product discoverability and ranking on Amazon s search results and have a better chance of winning the Buy Box. 11

14 what should sellers consider before joining SFP? Before joining SFP, sellers should weigh the operational costs of handling their own fulfillment & shipping vs. the gains of growing their sales by being able to list and sell more products as Prime. Below are a number of factors to consider when evaluating the potential costs of SFP: 3 Fulfillment centers that work with Prime Having a fulfillment center that has the labor, technology and resources to fulfill Prime orders in the allotted time is absolutely critical. If you do not follow the Prime shipping requirements, you can easily have your Prime status revoked. Make sure you use a distribution center that can commit to following Amazon s strict shipping rules. 1 Shipping zones Sellers must decide what zones they are willing or able to ship to in order to comply with Prime s two-day delivery requirements. If you have a fulfillment center on the West Coast, you will need to decide if you want to offer your products as Prime across the nation or confined to areas near your fulfillment center. There are many factors that go into this decision such as profit margins, price points and your business model.. 2 Add or change fulfillment locations If you decide to offer Prime to both coasts, you may want to add a fulfillment facility or 3PL on the opposite coast or use a distribution facility to a more central place in the US to cover all states. You will need to do a cost analysis to see whether adding a new distribution facility, moving your distribution center or simply shipping across the multiple zones is more beneficial for your business. 4 Fulfillment strategy It is important to have a cohesive fulfillment strategy as your business grows and you add online channels to your fulfillment infrastructure. Your logistics partners should be able to work with an inventory management system that can not only handle Prime orders but orders from multiple online channels. 5 Amazon s return policy Amazon has recently changed its SFP returns policy to include automatic returns. What that means for SFP sellers is that they need to auto authorize returns regardless whether buyer is a Prime member or not. Amazon s customer service will handle all customers inquires specific to SFP returns which saves sellers time but also removes the sellers ability to offer an alternative to returns. 12

15 is SFP right for me? That depends. If you are a smaller seller or your warehouse operations cannot support the fulfillment metrics required to maintain Prime status, then FBA may work better for you. Seller Fulfilled Prime can be a great option for retailers and brands who want to handle their own warehousing and fulfillment but still want their Amazon products listed as Prime. In addition, since SFP sellers can control their packaging, businesses that sell items that require special handling like breakable or perishable products could benefit from SFP. Likewise, companies that rely on customized packaging for branding consistency can continue their branding strategy using SFP. SFP also works well with online retailers that sell items that are slow moving or seasonal (you can avoid FBA s long-term storage penalty fee with SFP), and large and heavy such as furniture (FBA charges shipping to their warehouses and storage fees based on size and weight). Retailers that offer high priced items with high margins may also want to consider SFP, as the high margins may provide enough cushion to offset the delivery rates. 13

16 summary Seller Fulfilled Prime is an excellent program for online retailers selling on Amazon and can be potentially lucrative. However, it s important to make sure you do a thorough analysis before taking the plunge. When considering if SFP is right for you, it is important to consider the following questions: With SFP, sellers have the dual benefit of accessing the coveted Prime audience and having the freedom to sell on other marketplaces. If you decide to become an SFP seller as part of a multi-channel ecommerce strategy, consider using an application, such as Solid Commerce, that integrates with both Amazon FBA and SFP as well as your other online channels. 1 Can your existing warehouse operations meet the stringent fulfillment requirements for turnaround? 2 What will be the impact to your choice of carriers and shipping costs when you move to SFP? 3 How much value will you get by making all/most of your inventory Prime eligible? 4 How will moving to SFP impact your geographic customer reach and what is your strategy around how many regions you want to cover with SFP? 5 What will be the true costs of free returns to your business? 6 How will I manage my inventory, orders and fulfillment across channels? Will my existing systems be sufficient? 14

17 About Solid Commerce Solid Commerce is the industry s most comprehensive multi-channel ecommerce solution that combines listings, inventory, order and shipping functionality in one platform. Created by ecommerce sellers for ecommerce sellers, Solid Commerce offers online retailers the ability to streamline their ecommerce operations, reduce inefficiencies, and increase sales on multiple online channels including Amazon, Walmart, ebay, Jet, Shopify, BigCommerce and more. To learn how Solid Commerce can help your online retail business grow and get a live demo, contact our team of ecommerce experts at sales@solidcommerce.com or call us at. 15