This post is by Dan Burnham, Head of the Customer Success team at Volo. Dan has over 15 years of retail and ecommerce experience, and at Volo is focused on building a world-class customer experience and helping customers to grow. Volo provides technology and services to online multichannel sellers, and processes more than 40 million sales orders annually. This post was originally published on the Volo blog in four parts: Intro, Part 1, Part 2 and Part 3.
There’s one marketplace dominating large parts of global ecommerce right now – and that marketplace is Amazon. Within Amazon, there’s one area experiencing huge growth, and that area is Amazon Prime.
Amazon Prime Day on 12th July generated the kind of buzz other marketplaces can only dream about. Across the Volo platform we saw gross merchandise value increase 55% over the previous 30-day average, while Prime Day 2016 was 42% busier than the previous year, which was the very first Prime Day.
Sellers are scrambling to win the attention of the Amazon Prime customer and fighting to win the Amazon Buy Box. They’re qualifying for the Amazon Prime mark by using Fulfillment by Amazon (FBA) and sending their consignments to Amazon fulfillment centers across the world.
They’re also fulfilling Prime orders themselves, shipping from their own warehouse to the same high standards as Amazon. And they’re winning big time. What’s going on?
A short history of Amazon Seller Fulfilled Prime
Late in 2015 Amazon launched a closed beta program called Seller Fulfilled Prime (SFP for short). This was in major part caused by pressure in their FBA Fulfillment Centers by sellers’ slow-moving stock being stored for a long time. Presumably the thought process was, “Why don’t we invite sellers with excellent ratings the chance to offer Prime shipping from their own warehouse, using our logistics?”
The beta was extended by invitation to more and more sellers as Amazon refined the model. Sellers were jumping on the juggernaut and accessing lucrative Prime customers. They were saving on both shipping to and storing at FBA centers, and they were seeing remarkable returns. To illustrate this point, two Volo customers using SFP have seen a 100% increase in Amazon GMV over just a few months.
Amazon decided that Seller Fulfilled Prime was ready for the global prime time, if you’ll pardon the pun, in August 2016.
The seller benefits of Seller Fulfilled Prime
Amazon Prime customers currently number 57 million, up from 40 million in 2015. These customers pay a $99 annual fee (or the local currency equivalent), are fiercely loyal to Amazon, and choose to buy items with Amazon Prime badges next to them for the great value and the free shipping. They also benefit from other Amazon services targeted at them. The average Prime customer spends double that of their non-Prime counterpart.
Amazon predicts sellers joining SFP will see a 30% to 40% jump in their sales.
Amazon predicts that sellers joining Seller Fulfilled Prime will see a 30% to 40% jump in their sales. As long as they keep their metrics up to the required standard, Seller Fulfilled Prime sellers benefit from up to 60% cheaper couriers through the Amazon Logistics network and can also rely on excellent Amazon customer service.
It’s entirely possible for sellers to win the Prime badge with large bulky items that are unsuitable for FBA, as well as FBA-ineligible items (typically those deemed hazardous materials). Since Prime is so closely tied to winning the Amazon Buy Box – whose determinants center on price, the customer experience and seller track record, sellers can also compete successfully with both FBA sellers and even Amazon Retail itself.
How to jump on the SFP juggernaut
In a nutshell, there are two phases to getting on board. The first phase is known as “Premium Shipping”. An Amazon seller can set up new shipping templates that allow 1-2 day shipping and this allows you to offer extra charges for certain geographical locations. Premium Shipping is great for you because the shipping rate is an important metric in winning the Buy Box. You can also create far more specific shipping profiles than ever before, which gives you additional flexibility and helps with profitability.
You must use Amazon Logistics for shipping, except where they don’t have coverage.
If you perform well using Premium Shipping, you can contact Amazon – or perhaps they’ve contacted you directly – to register your interest in the second phase, which is Seller Fulfilled Prime. Providing you meet the shipping metrics and have processed enough Premium Shipping orders, you will be SFP-eligible and can submit a list of items you want to set labeled as “Amazon Prime”.
Amazon reviews the performance of how your Prime labeled items are being shipped and if enough volume has been dispatched, they’ll allow you to have the Prime badge on your item offers. You must use Amazon Logistics for all shipping, except where they don’t have postcode coverage and then an approved carrier can be used. Both Amazon Logistics and approved carriers are assigned to orders through Amazon functionality known as “Buy Shipping”.
So, what to do next with this Seller Fulfilled Prime thing? Well, the best place to go first is Amazon Seller Central, where you can find the details on program eligibility and requirements (Seller Central login required).
Is Seller Fulfilled Prime right for you?
Amazon Seller Fulfilled Prime is getting a lot of attention at the moment, and rightly so, but is it something you should throw everything at?
Some of you may not be selling on Amazon at all, preferring your own website or perhaps other marketplaces. Some of you may experienced Amazon web sellers. Some of you could be tapping into the huge growth of the Amazon Prime customer base and fulfilling your orders via Amazon Fulfillment centers in the FBA program.
If you’re starting to evaluate whether you should get involved, this will help you assess whether it’s for you.
Amazon FBA sellers
For those of you using Amazon FBA, Seller Fulfilled Prime allows you to expand your operations. If you’ve been overly reliant on FBA warehouse space, or your items are not moving as quickly as you’d like, and you’re being hit by the new harsher long-term storage penalties, Seller Fulfilled Prime is definitely worth looking into.
You can use Seller Fulfilled Prime for larger or bulky items that don’t make economic sense through FBA. You can also sell items that are FBA-ineligible, like some hazardous materials. Consumer electronics products are also great for Seller Fulfilled Prime. In short, it’s a great opportunity, if you have your own warehouse, for you to offer items from your own premises and still keep the crucial Prime badge.
Amazon Non-FBA sellers
For non-FBA sellers, Seller Fulfilled Prime gives you access to the same set of benefits that FBA provides, but without the increased fees that using FBA entails, i.e. shipping and storage. For both types of sellers, Seller Fulfilled Prime gives you access to very favorable shipping rates via Amazon Logistics.
Typical products that do well on FBA are the following:
- Fast-moving items.
- Items with high demand during peak periods like the final quarter of the year.
- Items with a predictable demand.
- Products eligible to be sold across Europe (such as items without country-specific plugs).
Ideal products for Seller Fulfilled Prime, on the other hand, tend to be less commodity-based. They’re typically:
- Slower-moving items.
- Items with variations.
- Fragile, seasonal or high value items.
- Items with unpredictable demand.
- Fast-fashion and personalized items.
In other words, there’s probably something there for all sellers.
Amazon Premium Shipping sellers
For those sellers who are using the Premium Shipping part of the program (considered the stepping stone to Seller Fulfilled Prime), you’re clearly on the way towards attaining Prime badge status for your best products.
With the right software and expertise, you can use the Amazon API to print labels for Amazon Logistics, as well as for other approved couriers that Amazon supports. Again, with the right system in place, you’ll be able to locate your Premium Shipping-labeled orders and ship them in time to meet Amazon’s demanding, customer-focused conditions.
Amazon Non-Premium Shipping sellers
For sellers who are not yet using the Premium Shipping program on Amazon but have the capability, you can specify on a product-by-product basis the new “Merchant Shipping Groups” that Premium Shipping allows.
This will give you access to the much better shipping profiles that Amazon Premium Shipping Sellers already enjoy. Start with the products that do well on Seller Fulfilled Prime (see above).
For those of you yet to embrace business with the Seattle-based colossus, now is a great time to start selling on Amazon. The Seller Fulfilled Prime program is a massive opportunity. Amazon’s stringent conditions are difficult metrics to meet for poorly-performing sellers, but the number of orders that they require to be processed for eligibility is low – opening the door for new sellers.
For many businesses who aren’t selling on Amazon, the only barrier to entry is organizing your product data. You should consider starting with a limited number of stock items with good inventory depth, which will minimize the initial integration efforts. This can be the springboard to becoming eligible and into the program as soon as possible.
Finally, a word on warehousing. Some of you may rely on drop ship partners to warehouse and ship some (or all) of your products. Seller Fulfilled Prime essentially revolves around your own warehouse – with one important caveat. If your third party logistics are outstanding, and they meet the SLAs you set them, it’s entirely possible you can fulfill and ship orders from different places other than your warehouse and still hit the required metrics.
Winning with Seller Fulfilled Prime
Winning is what it’s all about: winning the Buy Box from other sellers, some of who might be Amazon FBA sellers, or Amazon itself; winning on sales growth and winning on profitability through focusing on the right things. Some sellers are already doing just that. Here’s a word from Martin McEwing, eCommerce Manager at No1Brands4You, a Volo customer and early pioneer of Seller Fulfilled Prime:
We were early into Seller Fulfilled Prime, having been approached by Amazon at the end of 2015. It’s been huge for us, an important part of our Amazon strategy. Obviously, it’s key that you maintain your performance metrics to keep the Prime badge. Being able to centralize our operations through the Volo platform, coupled with the visibility we get from the analytics, has really enabled us to stay on top of our game.
Seller Fulfilled Prime checklist
You’ve got to be “in it to win in it” as they say, and to be in the program, generally speaking, sellers need to meet the following requirements:
- Have a warehouse in the USA (for Amazon.com) or the UK (for Amazon.co.uk).
- Be willing to palletize your goods for collection by Amazon Logistics.
- Be shipping more than 50 orders a day through the Merchant Fulfilled Network (MFN).
- Be willing to purchase shipping from Amazon Logistics to deliver the goods.
- Have great performance ratings.
Great data and analytics
To win at Seller Fulfilled Prime, you’ve got to have great product data and great data on how your business is really performing. The fewer items you make available for Prime, the less work you have to do to organize the data you get from your suppliers, optimize your listings for Amazon, and publish them to the marketplace. Good suppliers with good data feeds make integration and day-to-day operations so much easier. Make sure the products you choose for Amazon Prime are the right ones.
Knowledge is power, especially accurate knowledge of your business operations. Knowing which items are selling fast, how fast they’re selling, and exactly what profit you’re making on them is key. Great analytics give you the information you need on your Amazon Seller Fulfilled Prime sales and profitability so you can make good decisions.
Winning on process and productivity
OK, so this is the slightly more technical side of things, but it’s also dear to your wallet or purse too. We’ve just talked about integration, and to that we need to add automation.
Once those orders start flooding in, you’re going to need to separate them out, print pick-lists, pick them, print invoices and labels, pack them, label them and ship them, all in time to meet Amazon’s super-stringent demands. The more automated and integrated your processes, the faster your order processing time, the lower your costs, the greater your profits.
Consider these three Seller Fulfilled Prime factors in the order fulfillment and shipping phase:
- Couriers: When Amazon Logistics can’t deliver your Prime order, you can use one of your other integrated couriers.
- Automation: Order processing is faster if you can pre-purchase labels. Barcode scanning helps you pack items and print your Amazon labels accurately and quickly.
- Integrated labeling: Why waste pick-lists when you can print your label and your invoice on a single sheet? You can pick from the invoice, peel off the label, put the invoice in the box, pack the box and label it. As well as time, you’re saving on paper and recycling, since there are no redundant pick-lists to dispose of.
I hope this post has helped you understand Amazon SFP, and decide if it’s right for you. Seller Fulfilled Prime is a tremendous opportunity, and something you should definitely have in your arsenal to win orders and make a profit on the worlds largest and most competitive online marketplace.
To find out more about Amazon Seller Fulfilled Prime, download Volo’s free eBook.