What is Seller Fulfilled Prime, and should you use it? As Amazon’s fees continue to tick up, many sellers are looking for ways to save money. While you can—and perhaps should—play around with your pricing or your ad strategy, there’s another overlooked place for cost-cutting: Shipping and fulfillment.
Shipping and fulfillment is not a place where most Amazon brands think about saving. That’s because they are often using Fulfillment by Amazon (FBA), Amazon’s in-house fulfillment service.
FBA is a great deal for most people, and it’s exceedingly easy to use.
But as the cost and complexity of FBA increases, some brands might consider looking into Seller Fulfilled Prime. Seller Fulfilled Prime is the program that allows you to ship your own products, using your own warehousing and fulfillment operations, and still retain the Prime badge.
Seller Fulfilled Prime initially launched in beta in 2015 to a small group of sellers. But as of last year, it is available to anyone who can meet Amazon’s 1- and 2-day delivery requirements nationally and maintain a cancellation rate below 2.5%, among other requirements.
We should say that it is not easy to meet the demands of SFP. But for some brands, SFP can actually save you money in the long run. We’ll explain below.
Why switch to Seller Fulfilled Prime?
First, let’s just be clear: For most brands, FBA is a good deal. If you have a small, low- or medium-cost product that sells well year round and doesn’t damage easily, then you may want to keep forging ahead with FBA.
But there are some types of products that aren’t quite so cost effective on FBA. For example:
Easily damaged products. If you sell fragile products, then many of your customers might report that their orders are damaged in transit. Damaged products can lead to bad reviews and high returns, both of which hurt you in the long run on Amazon.
Let’s say you sell commemorative glassware. If Amazon decides to ship your product in an envelope, it may break in transit. You’ll be dealing with an angry customer, but you won’t be able to fix the problem. When you use FBA, you can’t ask Amazon to package the product in a box with extra padding.
The only way to control the packing of your products is to ship the products yourself and maintain direct control over the packing of products.
High-price products. It’s inevitable that some products will get lost or damaged in Amazon’s warehouses. If you sell expensive items, particularly those above $200, these lost or damaged items will cost you.
Sure, you can get reimbursements, but you probably have to spend a lot of time identifying and tracking down those reimbursements. You might rather be in control from the start.
Products in odd shapes and sizes. If you sell products that have odd shapes, sizes, and weights, they can potentially become cost prohibitive to ship with FBA.
Think of a cheap, lightweight product that occupies a lot of space—like packing peanuts. Because of Amazon’s size and weight rules, it’s possible it would cost more in FBA fees to store and ship this item than you could even sell it for.
In our recent webinar, Matt Snyder discussed how his company, Brands Excel, had actually been able to cut the costs of shipping and fulfillment by as much as half in some cases.
Multi-channel logistics. If you sell on many different platforms, you should certainly take SFP seriously.
The reality is, you can’t be as dynamic with your inventory when you just ship it to Amazon or Walmart. That’s fine if Amazon is essentially your only significant channel.
But let’s say you sell across many different platforms, including your DTC, and one platform suddenly starts overperforming. For example, you go viral on TikTok, and suddenly everyone wants to order from your TikTok Shop. You might want to shift around, say, your Amazon inventory to Walmart, but you’re stuck.
That inventory is already locked in. Fulfilling your own products lets you be far more dynamic in a multi-channel world.
Is Seller Fulfilled Prime helpful during the holidays?
When deciding whether to try Seller Fulfilled Prime, you should think carefully about how it might perform for you during busy sales events in particular.
On one hand: SFP is especially useful during, say, the holidays because you can avoid a lot of the low-inventory fees that might throw your profitability calculation into flux.
On the other hand: If you don’t have a very nimble fulfillment system of your own, the holidays can add stress. Ship orders too late, and Amazon might simply take away your Prime badge.
Here are some things to consider:
Peak periods. Let’s say you sell a product that has a very specific, concentrated peak—whether that’s because you sell giftable products, summer-specific products, or something else along those lines.
Maybe you have 60 days in a year where most of your business happens. The stakes of anything going wrong with FBA are therefore quite high. Maybe the warehouses are full, and your products sit on a truck.
If you miss even a couple of days of sales during your peak period, it can have a big impact on your overall business.
Seller Fulfilled Prime can especially be useful during these high-volume sales periods—that is, if you have a fulfillment system that you can be sure is nimble.
Fees. In Amazon warehouses, inventory limits and capacity fees also regularly tighten during high-volume periods. For example, in Q4, many sellers have found themselves battling against Amazon’s tight inventory limits and spiking fees.
Amazon’s low-inventory fee in particular can cause pain during these events. The low-inventory fee is assessed every Sunday and applied, if relevant, to all of your sales in the future week.
If your inventory is too low the week ahead of a big sales event, like Prime Day, then you’ll be paying extra on every sale that week.
Flexibility. Because Amazon’s warehouses are already very crowded during big sales events, it’s hard to be flexible with your inventory. You need to prepare for a ton of sales in a concentrated time span and then a likely drop off in the following weeks.
That means being very strategic with your inventory. When you use your own fulfillment system, you get to be as nimble as you need to be.
So if Seller Fulfilled Prime worth it?
The truth is, for most brands, SFP is going to be a big hassle. You need scale to ensure that you have enough product in warehouses across the country to meet Amazon’s 1-to-2 day shipping requirements.
You also need to pay for technologies that hook into your seller account and automatically forward orders to their 3P partners.
And, in some cases, you probably need a product that FBA just isn’t designed well for—like a high-price, fragile product or a large-sized, low-cost product.
But if those descriptions fit you, then Seller Fulfilled Prime might well help you pad out your profit margins.
