As Amazon continues its storied rise as the largest online retailer in the United States, one of the biggest challenges facing its sellers today is how to effectively and consistently capture a significant share of sales. Due to Amazon’s growth and popularity, it is becoming increasingly difficult for individual sellers to stand out on this crowded marketplace. One effective way to combat this problem is to leverage Amazon’s super-popular subscription service, Amazon Prime.
Amazon’s Prime program is not just extensively used; it also has enormous stickiness among its user base. Consumer Intelligence Research Partners, LLC (CIRP) estimates that 54 million U.S. customers subscribe to this service, an increase of 35% from 2015.
Prime members spend, on average, $1,100 per year as opposed to $600 for non-members. That’s almost double the spend for members! Prime members also tend to shop more often than non-Prime members, making them a lucrative target for any seller on the Amazon platform.
Since Prime members pay a $99 annual membership fee in order to enjoy unlimited and free two-day shipping on eligible Amazon purchases, they are more likely to purchase products that qualify for these Prime benefits. Products that are Prime-eligible tend to enjoy significantly more sales velocity than the same products that are not Prime-eligible.
Often, Prime customers will only consider buying products that are Prime labelled. For sellers, this places a strategic emphasis on enrolling in one of Amazon’s two Prime programs: Fulfilled By Amazon (FBA) or Seller Fulfilled Prime (SFP).
Seller Fulfilled Prime: An Effective Alternative to Fulfilled By Amazon
While FBA grants sellers a hands-off selling experience in terms of fulfillment, customer service and returns, sellers are sometimes unable to take on the additional fees and operational processes required to participate in the program. Over and above the regular seller fees, participating in the FBA program requires sellers to pay a host of other fees like:
- Order Handling Fees
- Pick and Pack fees
- Weight Handling fee
- Storage fee
Head here for an exhaustive list of fees under Amazon’s FBA program.
In June 2015, Amazon introduced Seller Fulfilled Prime as an alternative for those sellers looking to take advantage of the Prime opportunity via drop ship fulfillment. SFP offers sellers important benefits:
- Similar Buy Box privileges as FBA sellers
- Increased sales velocity relative to non-Prime sales
- Complete inventory control
- The ‘Ship by Region’ feature, which allows sellers to flag SKUs as Prime products based on the customer’s shipping address
- Streamlined return processing
How Seller-Fulfilled Prime Works
Sellers must be deemed eligible by Amazon before they participate in the SFP program.
The first step to this end, is to establish an ability to ship seller-fulfilled orders in a fast, consistent and reliable manner that meets Amazon’s rigorous performance standards. Maintaining consistently high seller metrics is key; once Amazon accepts a seller’s application, it is expected that certain thresholds will be met.
For example, a seller cannot cancel more than 2.5% of orders each week. Another example is shipment rate, where at least 95% of orders must be shipped on time in order to retain the Prime badge. While stringent, Amazon’s rigorous SFP standards ensure that Prime customers receive the excellent level of service that they expect when purchasing items that are Prime labelled. In return, sellers receive the sales boost associated with selling Prime products.
Sellers who already maintain low shipping costs and who meet the high efficiency metrics and standards that Amazon requires for its Prime participants will discover SFP as an efficient, pain-free method to increase visibility and sales on the marketplace.
Which Sellers Does Seller Fulfilled Prime Benefit?
While Seller-Fulfilled Prime (SFP) can benefit most sellers on the Amazon marketplace, it is particularly cost-effective for sellers who primarily deal in large, heavy products. If such sellers were to opt for the FBA program, they would be responsible for shipping these large products from their own facilities to an Amazon fulfillment center. Moreover, they would also be liable for storage fees that are based on aggregate cubic feet of space taken up by their products in Amazon’s fulfillment centers. By opting for Seller Fulfilled Prime instead, sellers can avoid these fees and maintain better profitability, as well as keep inventory directly on hand.
With SFP, shipping directly to the customer enables sellers to enjoy the competitive advantages of selling Prime designated products while maintaining or increasing margins on their products. For smaller items, merchants can work internally or with logistics providers to move inventory across the country and market SKUs as Prime eligible to a vast majority of the U.S. population.
Sellers who already maintain low shipping costs and who meet the high efficiency metrics and standards that Amazon requires for its Prime participants, will discover SFP as an efficient, pain-free method to increase visibility and sales on the marketplace.
Seller Fulfilled Prime with CommerceHub
Once your business is enrolled in SFP, CommerceHub’s DemandStream platform provides the tools you need to manage the program. CommerceHub allow you to track your orders and integrate seamlessly with existing third-party products, inventory, and order management software for Amazon Prime.
Our powerful shipping and repricing tools are tailor-made for the Amazon marketplace and help you compete aggressively against competition. You can quickly view and fix product listing errors on the platform, without letting them affect your sales on Amazon.
Even better, the industry experts on our Marketplaces Team are always available to assist with and grow your business on Amazon! Ready for Seller Fulfilled Prime or have more questions about the program? Contact us today.