Watch On-Demand Webinar: Amazon SFP - How To Sell and Win in 2023
In June 2023, Amazon announced they would reopen enrollment for their Seller Fulfilled Prime (SFP) program. Like most things in the Amazon world, the news was received with mixed reactions by sellers. For those familiar with the Amazon ecosystem, they know that this program is challenging. Many feel the list of requirements is daunting and that Amazon holds them to higher standards than the ones it sets for its in-house Fulfilled By Amazon (FBA) logistics network.
Most people are familiar with the requirements that Amazon expects sellers to meet, but far fewer are aware of the roadblocks that make success hard to achieve. An even smaller number are aware of the strategies they can deploy to meet Amazon’s criteria and surpass them. We’ve outlined all of that and more in our Ultimate Guide:
- We start by helping you understand what the program actually is.
- We then examine how the issues FBA is facing make SFP relevant for sellers. With the headwinds confronting FBA, customers are getting their deliveries slower, and costs are rising for sellers.
- As Amazon continues to face business pressures in its eCommerce division, the problems with FBA are only likely to increase for sellers, making diversification of order fulfillment operations beyond it essential.
- We then explore why Amazon, despite its skepticism, is reinstating the program.
- Despite the daunting SFP requirements, the reward can be immense – we highlight the value success in the program can deliver to your business.
- However, SFP success is not easy, and many sellers find the program extremely challenging – we do a deep dive into the most common stumbling blocks that trip up even experienced Amazon merchants.
- Finally, we give you an essential cheat sheet needed to start selling and winning on Amazon Seller Fulfilled Prime!
What is Seller Fulfilled Prime?
Why is SFP More Relevant Now Than Ever Before For Sellers?
- The “Prime Effect”: Everybody Wants Fast Shipping
- FBA Deliveries Become Slower, And Customers Feel The Pain
- Amazon Prime Is Expensive, But Is It Worth It?
- Why Are FBA Deliveries Late? – Severe Staffing Problems Create Prime “Snail Zones”
- FBA Challenges Increasing
FBA – Expensive, Difficult To Manage, Full of Tricky Issues
- Inventory Threshold Restrictions
- Margins Erode Further Amid Peak Season Surcharges
- Storage Fees Rise as Amazon Runs Out of Space
- Demand Forecasting Crucial as Removal and Disposal Fees Surge
- Why Can Amazon Raise Prices, But FBA Sellers Can’t?
- It’s All Likely To Get Worse With Amazon’s Cost Cuts
- Business Pressures in Amazon’s eCommerce Division
- Aggressive Cost-Cutting Likely To Slow FBA Even Further
- What Can You Do As A Seller? – Diversify Beyond FBA
- Sellers Have Traditionally Relied on FBA
- Seller Fulfilled Prime – The Essential Alternative Strategy to FBA
Why is Amazon Reopening SFP? – It’s The Government!
What Are The Seller Fulfilled Prime Requirements?
What Competitive Advantage Does SFP Provide Your Business?
Why is Succeeding at Amazon SFP hard?
- Nationwide 2-Day Delivery Forces Most Sellers to Use Expensive Air Shipping
- Amazon Expects Delivery in 2 Calendar Days, While Carriers Operate on Business Days
- The Misleading Pageviews Metric
- The Juggling Act Between Cut-off Times, Economical Shipping, and Meeting SLAs
- Operational Excellence Needed
- Challenging to Staff And Operate Warehouses on Weekends
- Arranging for Carrier Pickups on Weekends
- Managing Weekend Operations Can Overwhelm Sellers
- Unnecessary Surcharges From Amazon Buy Shipping
What is Seller Fulfilled Prime?
Before we do a deep dive, it’s essential to understand – what is Seller Fulfilled Prime?
For those unfamiliar, Amazon Seller Fulfilled Prime is a program that enables sellers to pick, pack and ship their orders on their own – using either an in-house logistics operation, a traditional 3rd party logistics provider (3PL), or order fulfillment networks. SFP can provide sellers with many benefits, such as:
- Tight control over their inventory
- Ownership of their logistics and order fulfillment operations
- Freedom from the high fees associated with Amazon FBA
- The ability to provide unique experiences for customers, such as custom packaging
- The ability to meet the consumer expectation for free and fast shipping even on slow-moving, seasonal, larger-sized, and heavier SKUs
While all these are great, the biggest one for any seller is that the program allows your product listings on the Amazon Marketplace to feature the coveted Prime badge. With around 148 million subscribers in the United States, Amazon’s loyalty program has a great promise for the end customer – pay $139 (plus taxes) annually, and Amazon will deliver you stuff for free in under two days.
The program has far more profound implications for sellers – their ranking on Amazon search results and ability to feature in the “Buy Box” is heavily and positively influenced by ensuring their products are Prime eligible. It’s also no secret that most shoppers on Amazon toggle the filter when browsing the store just to see products that qualify for Prime. All this means that an Amazon merchant’s survival, let alone success, largely depends on ensuring each SKU is Prime-eligible.
Seller Fulfilled Prime offers sellers the best of both worlds – the Prime badge and autonomy over order fulfillment. However, it isn’t all smooth sailing, and sellers have tended to shy away from the program because of its exacting standards. However, there are indications that the present time is a good one to begin seriously considering enrolling in the program.
SFP - More Relevant Now Than Ever Before For Sellers
Several reasons have combined to make Seller Fulfilled Prime more relevant than ever before to sellers, some of Amazon’s own making and others that are not as palatable to the company:
The “Prime Effect”: Everybody Wants Fast Shipping
When Amazon first introduced Prime in 2005, it announced that it would ship customer orders over $35 for free in 2 days. At the time, people in the industry thought that the company had lost the plot and that this strategy would surely fail. It took competitors over a decade to offer free 2-day shipping – retailers like eBay and Walmart introduced their competing services only in 2017.
However, when Prime moved from its 2-day timeline to free 1-day shipping in 2019, Walmart and BestBuy responded almost immediately, offering customers the same experience. That captures just how much Amazon has raised the bar and redefined customer expectations – the Prime effect means that all of us expect everything delivered in under two days for free.
The stakes are high for eCommerce merchants across every channel – it does not matter whether you serve customers through a Shopify storefront, eBay, Amazon, or Walmart – you have to meet the consumer expectation for fast order fulfillment.
Shipping is no longer a back-office operation; it has become the defining element of the customer experience.
The company that created the Prime Effect is arguably the most customer-obsessed organization in the world. For years, Amazon has focused relentlessly on creating value for its customers – often at the expense of sellers on its platforms. At every turn, the company has weaponized the size of its customer base and the network effects of its marketplace model to squeeze sellers while delighting customers.
People, regulators, and governments aiming to call out the company on some of these practices have been met with a frequent refrain, “As long as the end customer is happy, how does it matter?” But why are customers so happy with Amazon, and how does the company have so many of them (most of whom are Prime members)? The most important reason is Amazon’s ability to ship products in under two days, nearly always on time.
A few years ago, people would laugh at you if you suggested that FBA was missing delivery timelines or that Prime was not consistently two days or faster. However, recent developments indicate that the end customer is also beginning to suffer. A decline in the customer experience is worrying for both sellers and Amazon itself. After all, if Amazon fails to deliver FBA orders quickly and accurately, the company breaks the promise at the heart of all its success.
FBA Deliveries Become Slower, And Customers Feel The Pain
Amazon Prime Is Expensive, But Is It Worth It?
While everyone pays $139 (plus taxes) for their Prime membership, the service is not uniform across all customers. In a story that Vox published, the publication explains how research conducted by a former Amazon employee revealed that an astonishing 1/3rd of the counties in Washington State had a delivery time as high as five business days on Prime qualifying orders. For many customers, an issue with Prime is no longer a rarity – it is increasingly common. We (just like the rest of you) were busy shopping this Prime Day! Here’s an example of our experience with the slow Amazon Prime:
For a checkout on Wednesday, the latest it should take a Prime order is Friday – however, Amazon commits to delivery only as later as Monday of the coming week! When angry customers in some of these “slow zones” ask Amazon why they’re missing their promise of delivering every Prime qualifying order in 2 days or less, the company says that the clock does not start ticking from when the customer places their order, but when the shipment goes out the door from their warehouse:
While Amazon may make the Terms of Service around Prime hard to understand, the fine print explanation is little consolation for frustrated customers. After all, you still pay full price on products despite shelling out $139 upfront as a Prime member; you’ve paid that only for free and fast shipping. Is Amazon Prime even worth it if most orders take longer than two days to fulfill?
Worst of all, Prime has no recourse for customers who receive delayed orders. Amazon says it may reimburse customers the shipping fees of delayed orders. But what does it look like for Prime orders with no shipping charges? Customers on social media have various stories – after calling Amazon customer support, some got a free month of Prime. Others report getting a discount on Prime membership or gift cards to redeem on future purchases.
The real question is – what has led Prime to this scenario, where certain regions of the country get their orders much more slowly than others?
Why Are FBA Deliveries Late? - Severe Staffing Problems Create Prime “Snail Zones”
Amazon worked aggressively during the pandemic, nearly doubling the footprint of its logistics network. According to the company, hiring staff to work in their warehouses was one of the biggest challenges they worked through to make the expansion possible. With staff in the warehouse now expecting to be paid $19 / hr, this is no longer a minimum wage occupation.
While no one operating warehouses find staffing them easy, Amazon faces a uniquely challenging set of circumstances. Another Vox story reports that the company is at risk of exhausting the entire available labor pool for warehouse staff in the US by 2024. With nearly every major retailer, including Walmart and Target, getting into the e-commerce order fulfillment game, workers are no longer constrained by the wages Amazon may offer them – they are free to pick from any employer who can provide them a better wage and benefits. Vox mentions that the company is most at risk of running out of people to hire in some areas of the country – Phoenix, Arizona; California; Memphis, Tennessee; and Wilmington, Delaware. This extreme labor shortage in certain regions creates “Prime Snail Zones,” where customers may experience significant delays in receiving orders.
It isn’t surprising that Amazon is facing these severe challenges – the company has churned through warehouse staff at twice the rate of the broader retail and warehousing industry. Its aggressive practices around how it hires and retains warehouse staff may have begun catching up on it. After all, a job at a fulfillment center is grueling and challenging work – Amazon’s questionable practices might have exacerbated quit rates in a profession with extremely high turnover rates. (If you’re interested in learning more about how challenging working in USA fulfillment centers can be and some of Amazon’s practices, watch this fun, funny, and informative John Oliver episode!).
While they could find people at low wages when they were the only game in town, the company might be looking at raising wages for workers to make itself attractive in an increasingly crowded market. Those increased wages mean increased costs for Amazon. And given the well-documented business pressures on the company’s e-commerce division, the company may pass them on as surcharges to its sellers rather than absorb them as a hit to its bottom line. Perhaps raising wages is a lever that the company does not want to pull to solve its staffing problems – which might provide some rationale for launching its “Hub Delivery network,” which aims to enlist the help of small businesses in its last-mile delivery operations. Businesses with a secure storage facility can sign up with the program and handle the delivery of around 30 packages for the company daily.
Regardless of all the issues Amazon may face, customers do not care – they have tasted the free, 1-2 day shipping experience for almost 20 years and expect it everywhere. Amazon is at risk of becoming a victim of its success. When customers do not receive their orders on time, it does not just impact the customer’s experience with Amazon – it impacts their experience with your brand and the reputation they have for your service quality.
With customers beginning to face pains, sellers must begin exploring alternative FBA strategies to keep delighting their customers with free, fast order fulfillment without becoming beholden to Amazon to make that possible. After all, if FBA takes as long as five days, while you fulfill your orders in under two days as an SFP seller, you can deliver a superior customer experience, which gives you a significant competitive advantage.
FBA Challenges Increasing
While the interests of FBA sellers are rarely aligned with Amazon’s own, recent times have been particularly complicated for them. A slew of restrictions and surcharges have all combined to erode seller margins and make the search for an alternative order fulfillment strategy essential.
Amazon has always focused on keeping its customers happy, mainly at the expense of its sellers. While customer experience has begun to take a hit, sellers have faced challenges for years, with recent times proving particularly difficult.
“Cahoot has amazing technology in addition to their large warehouse network, sort of like FBA but without the hefty fees or restrictions. Cahoot saved our peak-selling season!”
– Joel Frankel, Fames Chocolates
FBA – Expensive, Difficult To Manage, Full of Tricky Issues
In the last year alone, FBA sellers have seen it all – from restrictions on inventory to peak season surcharges. The program has become challenging to manage simply because sellers do not have visibility or transparency into what Amazon’s future changes to the program may entail. A single change that Amazon makes to FBA can completely disrupt sellers’ plans for Q4 and the holiday season, making business planning and predictability in operations very difficult to achieve.
FBA sellers facing challenges is not new – merchants have been playing catch up for years to Amazon. However, the impact of recent changes has been brutal to absorb for sellers:
Inventory Threshold Restrictions
- In the peak holiday season of 2022, around 5% of sellers (many forums claim a much higher percentage) were hit with inventory threshold restrictions, impacting their ability to restock products. These limits left sellers to make difficult decisions between multiple bad choices – for example, removing some items to free up space to restock faster-moving ones or investing extra marketing dollars with Amazon to turn over their stock quickly.
- Such experiences have left a bad taste in the mouth of sellers – after all, if Amazon restricts your restock limits and the product goes out of stock, your listing becomes inactive through no fault of your own. (Seller Fulfilled Prime allows sellers to avoid such scenarios – however, the onus is on the seller to ensure replenishments and inventory distribution are taken care of!)
- The most difficult pill for sellers to swallow was that these revisions to their restock limits happened during the peak Q4 season for 2022. Merchants were not amused, and this comment from Amazon’s Seller Forums captures the prevailing sentiment well:
Margins Erode Further Amid Peak Season Surcharges
- Sellers were also hit with a peak season surcharge for the first time in 2022. While Amazon revised its fees in 2023 to one fulfillment fee that does not distinguish between peak and non-peak seasons, there is always an element of unpredictability around the company and updates they may announce to their pricing.
- On average, the peak season surcharge was $0.35 for every item sold using FBA.
- FBA is most frequently used by sellers with small and lightweight items – for these SKUs, the margins can often be wafer thin, with the potential for a $0.35 hike to tip the merchant into loss-making territory.
Storage Fees Rise as Amazon Runs Out of Space
- In an announcement from Amazon, Dharmesh Mehta, the Vice President for Worldwide Selling Partner Services, said, “This year, we saw some sellers use more of our storage than we expected or believe was needed to serve customers well, and that constrained how much product from other sellers could be sent into FBA.”
- While they may not refer to it directly, it is clear the company is constrained for space in its warehouses and chose to increase long-term storage fees for sellers in 2023 – Amazon has introduced its Storage Utilization Ratio metric, using which it now levies a surcharge on sellers that have inventory sitting in the company’s fulfillment centers for more than 180 days. Previously, long-term storage fees only applied on items sitting in their warehouses for more than 365 days.
Demand Forecasting Crucial as Removal and Disposal Fees Surge
- With Amazon now introducing significant surcharges for the removal and disposal of inventory in its warehouses, it makes demand planning and forecasting more crucial for merchants. Unfortunately, with the economic and macro uncertainties, this has come at the worst possible time. Despite being an incredibly challenging time to forecast demand predictably, sellers must attempt to do so with as much accuracy as possible to avoid being impacted by these fees.
- Depending on the weight tier the item falls into for standard-sized products, your removal and disposal fees can increase anywhere from $0.45 to $1.06.
- Depending on the weight tier the item falls into for oversized products, the increases in removal and disposal fees range from $1.62 to $4.38.
Amazon Can Raise Prices, But FBA Sellers Can’t!
The most apparent solution for sellers to absorb all these surcharges might be – to pass the extra cost onto the end customer. However, on Amazon, the solution is more complex than simply raising your price to reflect these increased costs. You would think sellers have one major worry – “How will my customers react to the price hike?” They have something far more significant to worry about – having their listing suppressed entirely.
- When a seller attempts to revise the price of their product upward to keep pace with these surcharges, they may run into an error that looks like this:
- Amazon is a company that prioritizes the customer at every turn over the seller – and this is one of the best examples. Their algorithms constantly look at the prices of various products, comparing them across various sellers on and off their marketplace. The algorithms do this to ensure that Amazon always maintains the best price compared to any other competing marketplace. Your listing gets deactivated if the company’s automatic algorithms report a false positive and flag your products as priced too high. It is well known to sellers that Amazon is a different game – while associates take care of the products on the shelves of brick-and-mortar stores, AI and automation take care of Amazon’s enormous marketplace. The most frustration for the seller comes from the fact that Amazon chooses to act as a self-appointed pricing regulator – it ensures the customers always get the best prices on the Amazon marketplace compared to any other platform but impacts the ability of the seller to absorb FBA costs isolated to Amazon. These issues are complicated and cumbersome to resolve for sellers on their own, but there is no other choice – it is nearly impossible to get on the phone with someone from Amazon.
It’s All Likely To Get Worse With Amazon’s Cost Cuts
Setting aside the declining customer experience and mounting challenges for sellers, the party at the center of everything is Amazon – the company witnessed skyrocketing demand during Covid which drove a boom in e-commerce. However, the company faces numerous challenges amid the resumption of in-person life, the present inflationary environment, and a slowdown in consumer demand. Faced with an urgent need to restore growth, profits, and the confidence of its investors, the company has scaled back its aggressive investments in FBA – which could make the times to come even more challenging for sellers.
Business Pressures in Amazon’s eCommerce Division
- Amazon worked overtime to keep up with the boom in consumer demand that e-commerce witnessed during the Covid-19 pandemic, doubling the size of its already enormous logistics network.
- The company found hiring warehouse workers to expand its network a drag on its bottom line. It isn’t surprising, given that the average wage for warehouse staff is now $19 / hr. Working in warehouses is no longer a minimum wage occupation and is one of many factors affecting Amazon.
- In its first quarter results for 2023, the company reported complete flatness in sales from its e-commerce division, while the cost of fulfillment surged by 21% year on year.
- With the pressures on its business, the company can no longer afford to continue aggressively investing in building its network – in fact, it’s seeking to do the opposite.
Aggressive Cost-Cutting Likely To Slow FBA Even Further
- CEO Andy Jassy has identified FBA as an area where the company can improve its bottom line by cutting costs.
- The cuts have been aggressive, with the company canceling plans for as many as 99 warehouses that it planned to set up.
- It has also begun consolidating its network from a national model to a regional one, featuring eight major, interconnected hubs.
- All this means that delayed deliveries may become ever more frequent on FBA.
With all these events swirling around sellers, some quick and decisive strategy pivots in order fulfillment may be essential to meeting customer expectations in the times ahead.
“Cahoot allows us to offer 2-day shipping on our website in addition to driving more sales nationwide SFP on Amazon. This app saves us a ton of time and money every single day!” – OZ Medical
What Can You Do As A Seller? - Diversify Beyond FBA
For sellers operating on Amazon, the approach has often been relatively straightforward – let Amazon FBA take care of it all, with Fulfilled By Merchant (FBM) or SFP as a backup in the rare event of an emergency. However, given the present challenges, a backup may no longer suffice – sellers may need to devise an entirely new order fulfillment strategy.
Sellers Have Traditionally Relied on FBA
- According to Statista, 64% of Amazon sellers use Fulfilled By Amazon exclusively to deliver their orders, with only 15% choosing to completely cut ties with FBA and handle everything independently.
- There are good reasons for this – the algorithm determining whether a product listing will win the Buy Box uses fast order fulfillment as a leading criterion. The fact that FBA listings are automatically Prime eligible is attractive for many sellers (SFP listings also have a great chance to win the Buy Box, while merchant-fulfilled non-Prime orders trail well behind).
- The well-known A9 algorithm, which ranks products in search results on Amazon, also prefers listings with fast order fulfillment, which has led sellers to lean in heavily on FBA (again, a Seller Fulfilled Prime order can show up favorably, subject to the merchant doing other things right – such as optimizing for the right keywords in their product detail page copy).
The question sellers might ask is – why to do all the extra work with SFP when it is easier to win the buy box and rank well with FBA itself? This question meant that FBA was the de-facto choice for many years, with SFP / FBM listings being backups for rare emergencies. But with those emergencies becoming more frequent and the operational excellence of FBA under serious question, it is time for sellers to identify an alternative strategy.
Seller Fulfilled Prime - The Essential Alternative Strategy to FBA
While Amazon may be working through numerous challenges, the reality of the situation is apparent for all players in e-commerce – free and fast shipping is here to stay. When the 150 Million Prime members apply the Prime-only filter when browsing for products on Amazon, they do it for no other reason than fast and free delivery.
Customers simply do not care about the issues plaguing Amazon – their only expectation is free and fast order delivery. Therefore, issues with FBA do not simply affect Amazon – late orders ruin the customer experience and, by extension, the relationship people have not just with Amazon but with your company.
The imperative becomes clear – Seller Fulfilled Prime is no longer a backup to be used in the rare event of an FBA emergency; it is an essential alternative strategy to customer delight and business growth.
However, while we’ve outlined all the issues confronting Amazon, this company bends to no one – sellers, investors, the government, or even regulators. The only stakeholder the company is genuinely interested in is its customers. So why would the company re-introduce Seller Fulfilled Prime when Amazon’s style has always been to keep steamrolling its domination upon the e-commerce world?
Why is Amazon Reopening SFP? - It’s The Government!
Amazon themselves are not particularly enthused about the program. In an interview at the Code 2022 conference, CEO Andy Jassy remarked that he did not believe that 3rd party sellers could meet the timelines that Amazon does and that outsourcing Prime order fulfillment had the potential to “significantly degrade” or even “eradicate” the quality of the experience on the program. That is a strong opinion – which begs the question, why reopen it now?
Aside from the issues with FBA and Prime that Amazon may be working through, it may have had its hand forced by several external problems it is facing now – from governments and regulators in multiple markets:
- In the European Union, the company faced allegations that its Buy Box algorithm favored FBA and that it used non-public data on its 3rd party sellers to develop competing brands and private-label products.
- Faced with the prospect of being fined a staggering $47 Billion, the company made several concessions – including agreeing to let Prime sellers have their pick of carriers for delivery operations and to shut down the use of non-public data on its sellers for brand and product development.
- Now, these issues have begun to confront the company closer to home. The Federal Trade Commission, headed by Commissioner Lina Khan, alleges that Amazon equates the sale of 3rd party products on its marketplace to using its FBA network. The FTC is preparing “The Big One,” a lawsuit centered around the preferential treatment that Amazon affords FBA – which it intends to file before August.
- The American Innovation and Online Choice Act (S.2992) is a bipartisan piece of legislation gathering momentum in the US Senate focused on opening up more choices for the American consumer online – including loosening the chokehold that Amazon has over the logistics piece of Prime.
Faced with all these challenges, Amazon may be looking at reintroducing the program as a way for it to get ready for its day in court – what better way to prepare for its day in court than by showing to regulators that by reopening Seller Fulfilled Prime, it is not stifling competition on order fulfillment – rather, it is doing just the opposite, while at the same time, providing the end-customer a high-quality experience through the Prime promise of free and fast shipping.
So now that we’ve explained all of this, it’s time to get into the details – what is the list of requirements that Amazon expects its sellers to meet for Seller Fulfilled Prime?
Seller Fulfilled Prime Requirements
On August 8, 2023, Amazon announced wide ranging changes to the criteria it expects sellers to meet on the SFP program. The list remains lengthy and as challenging as ever. Here are the latest SFP requirements, which will go into effect October 1, 2023:
- Maintain an On-Time Delivery Rate greater than 93.5% (A delivery is on-time if it is delivered on or before the delivery date promised to the customer when they checkout).
- Maintain a Valid Tracking Rate (VTR) higher than 99% – a package has Valid Tracking if it has atleast one carrier scan. This scan must occur before the package is delivered, to ensure it provides a tracking number that can be used by the customer to track their order on Amazon.
- Any product linked with a Prime shipping template must offer a minimum shipping speed of 3-5 days to the contiguous United States (the lower 48 states), across all 3 size tiers – Standard, Oversized and Extra Large.
- 30% of product detail page views on standard sized products must promise 1-day delivery to customers. The requirement for 2-day delivery is 70%. For oversized products, these metrics are 10% and 45% respectively. For Extra Large products, 15% of product detail page views must promise 2-day delivery (there is no 1-day expectation for these SKUs as of now).
- Merchants must now first go through a pre-qualification process before starting their SFP trial. In the 90 days leading up to their trial, they must self-fulfill at least 100 packages, with a cancelation rate <2.5%, valid tracking rate >95% and late shipment rate <4%. Once they are on the trial, they must ship at least 100 packages in 30 days, while meeting all the SFP program requirements. During this entire period, the Prime badge will not be visible on listings to customers. After successful completion of the pre-qualification and trial period, Amazon will enable the Prime badge for your listings.
- Sellers must provide free returns for all eligible items weighing less than 50 lb, for any seller or buyer related reason.
Amazon originally announced that they would charge a fee of 2% of the unit price for every item shipped via Seller Fulfilled Prime, or a minimum of $0.25. Amid growing pressure from regulators, the company waived this fee to avoid negative reactions from sellers and officials. The company removed the fee a few days before September 26, 2023, when the Federal Trade Commission and 17 US states sued Amazon for anti-competitive behavior.
The critical thing to remember (which is the kick in the teeth for sellers) is that Amazon FBA does not face any penalties for missing any of these – whereas, in SFP, the onus is on the merchant to diligently track these metrics and ensure you never fall below the standard.
If this list appears daunting, you’re not alone – many sellers feel these criteria are tough to meet. So before even looking at where the challenges and roadblocks lie, it’s worth asking – why is it worth being part of the program, and what value can it deliver to your business?
“Amazon SFP is such a demanding program, it is very difficult to find partners with the ability to pull this off. Cahoot is clearly geared towards Amazon Seller Fulfilled Prime, and excels at it via a network of strong fulfilment partners and a deeply knowledgeable team.” – Cali’s Books
The Competitive Advantage SFP Provides Your Business
- Profitability: The most significant advantage SFP can give your business (after you’re unshackled from all the FBA fees) is profitability. While FBA offers great rates for small, lightweight and fast-moving SKUs, it may not be the best option for big and bulky SKUs. For these SKUs, you can improve margins and profits significantly through SFP.
- Superior inventory management: When you work with FBA alone, you face problems when trying to expand to other sales channels. Let’s say you’re trying to expand to Walmart. Now you’ll have no choice but to inbound them some of your inventory as well to cover the same geographic regions, creating redundancies. By participating in SFP, you can utilize the same pool of inventory and warehouse infrastructure to fulfill orders across Walmart, Shopify and all your other sales channels. This reduces the buildup of redundant inventory and makes your operations leaner and more efficient.
- Potential to surpass FBA delivery times: With all the cost cuts, business pressures, and staffing shortages at Amazon, it’s probably true that an SFP seller with an excellent operation beats FBA on order fulfillment timelines (simply because the adherence to the 93.5% on time delivery criteria is likely to match or exceed what Amazon does on average).
- Accelerate sales with Prime on every SKU – FBA is optimized for lightweight, fast-moving SKUs. However, the consumer expectation today is for free and fast shipping on every e-commerce order. FBA does not make economic or practical sense for some larger-sized and heavier SKUs. With SFP, you can finally have the Prime badge for these products, which will significantly boost their sales rank and buy box win probabilities. With this, you can drive increased sales of these SKUs, growing revenues.
- Freedom from Q4 restrictions and surcharges: For long-tail, slow-moving or seasonal SKUs, FBA’s long term storage fees can become a drag on margins and profits. With the right SFP fulfillment partner, you can eliminate high storage fees and peak-season surcharges, which improve your margins for these classes of SKUs.
- Improved predictability and planning: Freedom from all these Q4 surcharges means you can clearly plan your operations for the rest of the year. Free from the threat of sudden surprises, you can plan your goals for the close of the year with more confidence and certainty.
- Potential to Scale Beyond Amazon: Many merchants are already consumed by the busy work of working with FBA to handle their Amazon operations and all their other platform-captive fulfillment partners (for example, Walmart Fulfillment Services for Walmart). An excellent SFP operation can serve as a template through which you can achieve fast shipping across every platform without being beholden to the constraints of each marketplace. Additionally, you will be able to do so more cost-effectively than Amazon’s Multi-Channel Fulfillment (where Amazon fulfills orders for merchants across other platforms). You will also be free from the constraints that using MCF brings (such as being unable to use it to fulfill Walmart orders).
On Walmart for example, listings offering 2-day delivery rank higher in search results, win the buy box more often and see conversion lifts as high as 50%. Sound familiar? But once you’ve figured out a strategy for Seller Fulfilled Prime, you’re in a great position to extend that to Walmart, without having to work with Walmart Fulfillment Services. This means you’re free from the headache of having to learn their processes and guidelines. With SFP, it will cost you the same to ship orders across every sales channel. This is unlike MCF, where shipping orders originating outside Amazon is significantly more expensive.
- Savings in time and money: While moving away from FBA can provide significant cost savings, working with a partner like Cahoot means fewer things to worry about and more time back on your plate. Rather than constantly reaching out to Seller Forums for help or reading FBA documentation to understand how the latest changes affect your business, you can put that time into the things that matter – ideating great new products, coming up with creative marketing campaigns, and delighting your customers every moment of every day.
While these are all great benefits for sellers and provide their businesses with significant competitive advantages, making a success of the SFP program is highly challenging. Most merchants know that the requirements list is rigorous and demanding, but few are aware of the exact stumbling blocks that trip up people. Fewer are aware of solutions available to overcome these roadblocks and win at SFP.
Succeeding at SFP is hard - here’s why
While the list of criteria is long and rigorous, we’ve identified the most challenging aspects of the program that trips up most sellers:
Nationwide Fast Delivery Forces Most Sellers to Use Expensive Air Shipping
- In the past, Amazon had “regional Seller Fulfilled Prime” – which allowed sellers to manage order fulfillment in certain geographical parts of the country while still having the Prime badge on their product listings.
- The Regional SFP program allowed merchants who owned a single warehouse or worked with a traditional 3PL with a single warehouse location to meet the program’s requirements through economical ground shipping.
- However, Amazon now expects sellers to make products across every size tier available within 3-5 days (at the most) across the entire continental U.S. – additionally, approximately 70% of standard sized item orders must be delivered in under 2 days across the nation.
- The new requirements eliminate the possibility of regional models working any longer – having your inventory stationed in just one location means that shipments to certain parts of the country cross multiple shipping zones. The only way to deliver orders on time in such “single-node” operations is by using expensive air shipments. Making expensive shipments by air completely nullifies any cost savings merchants hoped to achieve when leaving FBA – in fact, it could worsen things.
- It becomes vital in such a scenario to use an SFP fulfillment partner with a strategically located network of fulfillment centers, such as Cahoot, whereby it is possible to cover the entire country in 2 days while still using economical ground shipping rather than express air shipments. Such a network is one of the very few ways it is still possible to both have nationwide coverage and significant cost savings over FBA.
- Lastly, sellers must ensure that their product listings are classified correctly by Amazon. The metric for % of product detail pageviews that must promise a certain delivery speed is based on the size tier the item falls into (if an oversized or extra large item is classified as standard sized by mistake, you will be under pressure to get a large number of orders of those items delivered in under 2 days).
Amazon Expects Delivery in 2 Calendar Days, While Carriers Operate on Business Days
Amazon now expects sellers to make Prime deliveries in 2 calendar days (necessitating the need to work with carriers that support weekend pickup and delivery). This requirement has caused sellers a lot of pain and grief, and here’s why:
The Misleading Pageviews Metric
In its latest round of revisions to the program criteria, Amazon has increased the percentage of product detail pageviews that must promise 1 calendar day and 2 calendar day delivery.
Now, 30% of product detail pageviews for standard sized products must promise 1 day delivery, while 70% must promise 2 day delivery. But when does your listing promise 1-day delivery, and when does it promise 2-day delivery?
Let’s understand this with a few examples:
Let’s imagine every order is delivered the very next day after it ships. If a customer views your order on a Monday and places their order before the cutoff time, you will ship it that same day, and it reaches the customer the next day. In this case, Amazon displays a 1-day delivery promise and this pageview counts towards your 1-day metrics.
In this second case, when a customer looks at the product detail page after the cutoff time, you ship the order the next day after it is placed, and it reaches the customer the day after. This therefore fails to meet the 1-day promise, but meets the 2-day delivery promise.
In this last case, it gets really bad. If a customer views your listing on a Saturday evening, the item is expected to ship only on Monday (assuming you don’t ship Sundays) and it will be delivered to them on Tuesday – a full 3 days later.
In this case, such a pageview counts toward neither the 1-day nor 2-day metrics. The implication is clear – your listings will display 2-day and even 3-day delivery promises for significant periods of time. The mapping between the number of warehouses you have, the percentage of the US population you can service with 1-day delivery, and the % pageviews that actually promise 1-day delivery is not linear. This graphic illustrates that:
If you have warehouse locations, you can cover 42% of the US population with 1-day delivery. But different customers look at your product detail pages at different times of the day, and see different delivery speed promises.
As per our research, in reality, only 21% of pageviews may actually promise 1 calendar day delivery. To meet the new Seller Fulfilled Prime delivery requirements, it could take as many as six to nine strategically located warehouses.
These demanding metrics mean that traditional 3PLs will find it nearly impossible to help Seller Fulfilled Prime merchants (learn more about why traditional 3PLs are failing, and how peer-to-peer order fulfillment networks are designed to help you find success on SFP here). It becomes crucial for merchants to partner with order fulfillment networks that have warehouses at different strategic locations across the country, ensuring customers from anywhere see fast delivery promises.
While merchants may want to upgrade to a better fulfillment partner who is better positioned to meet these requirements, it’s easier said than done to leave your current 3PL for better alternatives. Many merchants don’t know how to evaluate and find the perfect fulfillment partner for them. If you’re looking for a step-by-step guide on migrating fulfillment partners, check out our guide here!
The Juggling Act Between Cut-off Times, Economical Shipping, and Meeting SLAs
- With Seller Fulfilled Prime, a late cut-off time can potentially increase the number of orders your carrier picks up that same day, boosting your 1- and 2-day delivery metrics.
- If FBA faces any issues or does not meet the delivery promise shown to the customer on the product listing, there are no penalties for Amazon – but a seller must meet the 93.5% on time delivery criteria set for them.
- Here’s a graphic we’ve created for how delivery timelines look like when operating with a 2 PM cutoff time (based on our discussion of the pageviews metric):
- Sellers must carefully make the tradeoff between increasing their cutoff times (if they can schedule a late pickup with their carriers) versus also ensuring that those orders reach the customer the next day. Increasing the cutoff times increases the % of pageviews that promise 1 and 2 day delivery, but you must ensure that you can actually get the product to the customer’s doorstep within the time you’re promising.
- Here also, sellers need to strategically place their inventory in a network of warehouses to avoid shipping orders placed close to cut-off times through expensive overnight air shipments. Placing inventory in different strategically located warehouses will enable nationwide coverage through economical ground shipping, all while meeting the customer’s expectations.
The shift to calendar days has had the most significant impact on the operational side of things – sellers now have to plan a whole different way of running their business and schedules, which have also become challenges:
Operational Excellence Needed
Challenging to Staff And Operate Warehouses on Weekends
- As we’ve mentioned before, staffing is often the biggest bottleneck towards finding success with order fulfillment.
- With weekend pickup and delivery expected to meet the calendar day-based SLA, most merchants with a single warehouse or those working with 3PLs face difficulties succeeding in the program.
- If you own and operate your warehouses, paying your staff to work on the weekends or hiring additional people may eat into your margins to unfeasible extents.
- Traditional 3PLs, which are asset-heavy, also face cost pressures around labor – which they may be forced to pass onto sellers.
- While these options erode any cost savings that sellers see over FBA, you are not without alternatives – consider platforms like Cahoot, where each of our fulfillment centers is vetted for operational excellence and meets this challenging requirement.
Arranging for Carrier Pickups on Weekends:
- In addition to warehousing, your carriers are another critical element in making your logistics work.
- Not all carriers offer weekend pickup and delivery – some may require you to be a large shipper and maintain minimum order volumes.
- All this means you may have to contact your account manager at the various carriers and enquire about possible options.
However, while all this can be done, the biggest reason sellers shy away from SFP is the heavy amount of process management, collaboration, and busy work needed to keep this operation running.
Managing Weekend Operations Can Overwhelm Sellers
- It becomes easier to understand why so many sellers shy away from Seller Fulfilled Prime – between working with multiple 3PLs to ensure your inventory covers the country, to operating and staffing your warehouses on the weekend as well as coordinating with your shipping carriers to arrange for weekend pickups, it can seem incredibly overwhelming.
- As a seller, the SFP program can drain your bandwidth, time, and resources.
- You might often wonder whether managing so many stakeholders and sifting through so much busy work is worth it when FBA offers you only one party to work with – even if that party is Amazon, whose interests often tend to be misaligned with yours.
- It does not have to be this way – sellers must spend time identifying partners who provide a unified experience where they get to work with just one vendor. Platforms like Cahoot help sellers meet and surpass the SFP program while ensuring you deal with only one company rather than coordinating between multiple 3PLs and carriers, preserving precious time and resources for you and your business.
Unnecessary Surcharges From Amazon Buy Shipping
- In its latest round of revisions, Amazon no longer mandates the use of its Buy Shipping platform to print shipping labels.
- This is a major relief for sellers, because Amazon Buy Shipping comes with one major issue that they have reported anecdotally – the platform is not great at estimating the delivery timelines for USPS services (the comment below from Amazon’s Seller Central forums highlights the issue):
- In many situations, Buy Shipping does not accurately estimate the delivery timeline within which a USPS service can make orders.
- In such cases, sellers are faced with a choice to pick from two bad alternatives: fail to show the customer a fast delivery promise (not an option for SFP sellers) or buy a more expensive label from the choices that Buy Shipping does believe are capable of meeting the SLA:
- This can be tough for sellers to swallow – as order volumes increase, the extra costs paid on each shipping label begin to mount, eroding margins and profitability. Thankfully, Amazon no longer requires the mandatory use of the service.
- However, this does not automatically mean that you will see increased savings. You still need to make sure that you’re picking the most economical label on every order! This requires technology like Cahoot’s next generation shipping software, which intelligently rate shops across warehouse locations, carriers and shipping services to always print the cheapest label that will meet the delivery promise committed to the customer.
So while a lot can potentially go wrong, sellers can also make the program work for them and find success – by following specific vital strategies.
To round off our ultimate guide to Seller Fulfilled Prime, we want to help you start finding success in the program by giving you a few top tricks and recommendations to succeed through our handy dandy cheat sheet!
“Cahoot is a game-changer. Their fully automatic shipping label creation intelligently assigns the best carrier and shipping service for all my orders across all my channels.” – Loveourprices.com
The Cheat-sheet to Winning at Seller Fulfilled Prime
- Achieve Nationwide Coverage With a Warehouse Network – Making orders nationwide in under two days is no easy task. You need to distribute inventory strategically in different locations to cover 100% of the country in this window. Operating from a single warehouse or 3PL fulfillment center will simply not cut it – you need to spread your product placement across a network to meet the program requirements.
- Use Data to Guide Inventory Placement And Avoid Air Shipping – Even with a network model, it is crucial to analyze where most of your orders are coming from – placing your inventory close to those “order hubs” becomes a vital part of ensuring you will meet and exceed the one and two-day delivery requirements. This also ensures that you can reach all of your customers through economical ground shipping rather than being forced to make expensive air shipments.
- Consolidate Relationships And Eliminate Busywork – SFP can lead you down the rabbit hole of investing in multiple 3PLs and coordinating with numerous carriers to make the program work for you. Sellers need to conduct research and identify a platform that provides a single relationship for you to manage – otherwise, logistics can overtake your focus on the activities that matter – selling and taking care of your customers.
- Save Every Dollar Across Every Shipment – The whole point of moving away from FBA towards a program like SFP is to extract cost savings. It is essential to align your technology towards automation, whereby you’re automatically generating the lowest price shipping labels on every single order.
- Monitor Metrics Like a Hawk – Amazon provides you with dashboards on Seller Central that provide all the SFP metrics needed. It is crucial to constantly stay on top of these and keep adjusting your strategy to ensure you’re meeting their expectations.
Succeeding in this program is challenging, but we think these tips are a great place to start. As Q4 and the holiday season approach, now is the time for sellers looking to diversify their order fulfillment beyond FBA and offer fast, profitable free shipping across every SKU to identify a partner who can help you win at Amazon Seller Fulfilled Prime. If you’d like to understand how Cahoot can be with you every step of the way, just fill out this form, and we’ll be in touch!
