On Thursday, April 21st, Amazon announced a brand new service for DTC ecommerce websites: Buy with Prime.
Third-party ecommerce merchants that sign up for the service will install the Prime badge in their checkout process, use Amazon Pay, and leverage Amazon’s huge distribution network to fulfill orders on their own sites. It’s Amazon payment and fulfillment for ecommerce brands.
The potential benefits for a DTC seller are obvious: they’ll be able to offer their customers one-and-two day delivery, and Prime users will have their checkout information pre-loaded on the site. This is no small win – according to McKinsey, more than 90% of US online shoppers expect free two-day shipping.
Some drawbacks are obvious – you’ll have to put Amazon branding all over your checkout and post-purchase experience, for instance. Many others are harder to spot, though, and they affect the entire customer experience that you’ve worked so hard to create.
In this blog, we’ll walk you through the basics of what Buy with Prime (BWP) is, how it’s going to affect the ecommerce industry, and how it negatively affects your customer experience. Finally, we’ll share our perspective on how you can get the key benefit of Buy with Prime (fast and free shipping) without surrendering your brand to Amazon.
What is Buy with Prime?
Amazon Buy with Prime gives DTC sellers the ability to offer their customers the Amazon Prime checkout and delivery experiences. When a seller integrates with the service, they’ll get:
- The Prime logo and expected delivery date in their checkout process
- Checkout financing operated by Amazon Pay
- Checkout will pre-load customer information if they’re already Prime members
- Fulfillment from Amazon FBA, Amazon’s fulfillment network
- Shipping by Amazon Logistics
- Amazon-branded packaging
- Option to adopt Amazon Prime’s returns policy
As we mentioned above, the benefit is obvious: Amazon Prime is the gold standard for speedy online delivery, and you’ll get it on your site. Prime has consistently raised customer expectations for fast and free delivery over its history, to the point where slow shipping and paid shipping are two of the biggest drivers of cart abandonment.
If you don’t currently offer fast and free shipping, Buy with Prime will immediately fix that issue for you. The theory behind Buy with Prime is that the boost in ease of transaction and expectations for fast delivery will increase conversion rate, thus increasing your web store’s growth.
How Buy with Prime Shifts the Ecommerce Landscape
Buy with Prime will leave DTC sellers with little choice but to improve their delivery experience to meet the standards long set by the marketplaces.
Online brands have long maintained that their curated shopping experiences, community building, and custom boxes counterbalance the raw power of fast and free delivery from marketplaces. A look at ecommerce transaction value in the United States suggests otherwise, though.
US consumers spend nearly four times as much on Amazon, Walmart, and Target’s ecommerce sites than they do on all DTC ecommerce sites combined. And on top of that, the marketplaces are growing faster. We attribute a huge part of the marketplaces’ advantage to the fast and free shipping that they offer by default on most goods. After all, online consumers cite fast and free shipping as a baseline expectation in survey after survey.
Buy with Prime will ratchet up US consumer expectations for fast and free shipping even further. Now, DTC sellers aren’t just putting their superior brand and shopping experience up against the convenience of the marketplaces. They also have to fight against competing DTC sellers that sign up for Buy with Prime and thus combine the power of their brand with Amazon’s famed fulfillment network.
The above example isn’t real – yet. But imagine if your top competitor installs Buy with Prime on their site and blows your delivery speed out of the water. Online consumers love comparison shopping, and you’ll be at a severe disadvantage on your Product Display Page (PDP) and in checkout. You can expect your cart abandonment rate to skyrocket.
In short, your slow delivery experience will become an even bigger liability than it already is.
How Buy with Prime Interrupts Your Customer Experience
So, the answer must be simple, right? Just sign up for Buy with Prime and see your sales skyrocket.
If only it were that easy.
Unfortunately, Amazon Buy with Prime is a much better deal for Amazon than it is for DTC sellers, and it’s all in the way BWP will impact your customer experience and ability to retain loyal buyers.
To Amazon, Buy with Prime is about much more than extending its fulfillment network, Amazon FBA, to DTC sellers. In fact, they care much more about their ability to get your browsing and purchasing data and use it to their advantage. With BWP, a seller has to use Amazon Pay for transactions. That means that Amazon will get all of your customer data, and not to mention they’ll bank tons of transaction fees.
While Amazon is laughing its way to the bank, it will be interrupting your customer experience at every step of the journey.
How BWP Affects Discovery
We’ll start at the beginning of the customer journey: product discovery. Here, DTC stores are already at a severe disadvantage: a majority of US shoppers say that they start their online product searches on Amazon.
It’s already an uphill battle trying to get customers to your website. If you install Amazon Buy with Prime, you’ll give Amazon even more ammunition to prevent shoppers from ever making it to you.
It’s simple: if you give Amazon rich data on what your customers are purchasing, they’ll know exactly what to suggest to the customer the next time they stop by Amazon. Since most of these shoppers are Prime customers, it’s a sure bet that they’ll do so. And when they visit, they’ll see product recommendations perfectly targeted to them, thanks to the additional information that you gave Amazon through Buy with Prime.
Fewer customers will make it to your site organically, because more of them find what they’re looking for on Prime without ever turning to a search engine. You’ll have to react by spending more on digital advertising, raising your ACOS and hurting your margin.
How BWP Affects Conversion
As a plug-in that will prominently live on the PDP and checkout pages, Amazon Buy with Prime most obviously affects conversion.
While the Prime button promising fast and free shipping from Amazon should help lower cart abandonment rate from shoppers that want fast shipping, it raises a whole host of other issues that counteract the benefits.
First, and perhaps most obviously, Buy with Prime will repeatedly remind shoppers that they should check Amazon before completing a purchase on a DTC website. Price checking is already a core part of many shoppers’ online purchasing behavior, and the Prime logo will only serve to further solidify this trend.
When the price check occurs, the DTC brand can only lose. The customer may see that Amazon has the same item for less (a common occurrence because Amazon strictly enforces their “lowest price” rule), and they’ll also see a host of competitive offers.
Taken together, the increased risk of losing a customer to Amazon counteracts the benefit of fast and free shipping.
On top of that challenge, Buy with Prime also removes a key DTC seller tool to boost AOV. Many sellers use free shipping as a carrot to induce customers to sign up for loyalty programs or to increase their cart size. “Free shipping for orders over $49” is a tried and true tool to increase profit, but with Buy with Prime, it goes out the window. Larger order sizes and customer loyalty programs are key pillars in DTC profitability, because each maximizes profit dollars relative to overhead and marketing spend. Amazon will interrupt your ability to use these tools, and instead it replaces your tools with its own loyalty program – Prime.
Finally, Buy with Prime will hurt conversion because it will likely increase cart abandonment rate. According to BigCommerce, the average cart abandonment rate is nearly 70%, and that number rises to a whopping 86% for mobile shoppers. Most DTC sellers know the truth behind that large number – many shoppers use online carts as a “save for later” feature, and they come back to complete their purchase at a later date.
Buy with Prime will interrupt that process and steal customers that are carefully considering a purchase. It’s simple: they know what’s in your customer’s cart, and they’ll be sure to show that customer competitive options when they visit Amazon.com.
How BWP Affects Post Purchase
Since Buy with Prime is so new, we don’t yet have a complete picture of its price structure, but sellers expecting FBA’s low rates will likely be disappointed. Amazon already lets sellers use FBA for their DTC orders through its re-branded offer, Amazon Multi-Channel Fulfillment, and the prices aren’t great.
Cahoot’s analysis of FBA rates versus MCF rates reveal that MCF is over 50% more expensive than FBA – and that’s with small items that Amazon loves to ship. Sellers that have done the math to consider Amazon FBA vs FBM already know that FBA is a bad deal for items larger than a few pounds, and Amazon’s history suggests that Buy with Prime will be an even worse deal.
On top of that, Buy with Prime will replace your beautiful custom branded box with an Amazon Prime box. No more free marketing from unboxing videos, no more custom inserts to boost repeat rate, and no more amazing first impressions: Amazon now owns your post-purchase experience. Yes, the experience is improving in terms of delivery speed, but it’s degrading in every other way. And to add insult to injury, you’re now marketing for Amazon by using their ubiquitous packaging – not to mention the literal ads they often put on the boxes or the packing tape.
How BWP Affects Repeat Purchases
Last but certainly not least, Amazon Buy with Prime will also interrupt your ability to win repeat purchases from your customers – the linchpin of sustainable profitability.
You’re up against some daunting statistics – according to Fool.com’s survey of over 1,500 Prime customers, 85% visit Amazon at least once per week, and 45% make a purchase at least once per week.
And now, every time they visit Amazon, they’ll see recommendations to buy your products right then and there instead of going back to your website.
Amazon can and will use the data it gains from its Buy with Prime plugin on your site to sell to your customers with pinpoint precision. With Prime users visiting Amazon.com just about every week, they’ll quickly start buying your product (or a competitor’s) on Amazon instead of your site.
Amazon is touting Buy with Prime as a way that you can tap into Prime’s huge customer base.
In reality, it’s Amazon’s way to tap into your customer base.
Alternatives to Amazon Buy with Prime and FBA
DTC sellers must feel like they’re stuck in between a rock and a hard place: on one side, they’re squeezed by demanding customer expectations for fast and free shipping. On the other, they’re faced with the incredible expense of providing fast and free shipping. And now Amazon comes along promising to help with the latter challenge – but it’s a poison pill that comes with an invasion of their customer experience.
The major players in ecommerce all want to extract as much value from sellers as they can at every step of the journey. We’ve already covered Buy with Prime at length, but Amazon is far from the only one building a fulfillment network: Walmart is building Walmart Fulfillment Services, and Shopify just acquired a 3PL network for $2.1 billion to reinforce the failing Shopify Fulfillment Network.
The common theme among each is their desire to control sellers – they won’t work with one another, and so if you want to enjoy a successful multichannel fulfillment and sales strategy, you’ll have to duplicate inventory. This in turn will significantly increase your carrying costs and overhead, and it will be impossible to optimize.
Thankfully, there’s a better way.
Amazon can provide fast and free shipping affordably across the country thanks to its ability to distribute inventory to multiple locations and tightly control fulfillment with intelligent, automated rules. Ten years ago, they were on the forefront of this revolution in fulfillment, but now they’re far from the only ones that can affordably power fast and free shipping.
Cahoot is at the forefront of boosting profitable growth for online sellers by enabling fast and free shipping across all channels. Unlike Amazon Buy with Prime, Cahoot fulfillment operates in the background, leaving you to own your customer experience – but with new and improved fast delivery. And again unlike Amazon Buy with Prime, it works for all sales channels: Buy with Prime certainly won’t be available for Walmart and other major marketplaces, and it likely won’t be available for Shopify either.
And more than Amazon – and other distributed 3PL networks – Cahoot offers unparalleled flexibility in fulfillment to support the exact needs of DTC sellers. We offer efficient B2B fulfillment alongside our fast B2C fulfillment, and we also can integrate seamlessly with existing merchant-operated warehouses. If you have one warehouse on the East Coast, and shipping across the country is killing your margin, we can stand up a West Coast location for you and install our market-leading technology to intelligently govern your new, nationwide fulfillment network. Of course, if you need a full service solution, that’s in our wheelhouse as well.
Contact us to speak with a fulfillment expert and learn how we can boost your growth while cutting costs and headaches today.