June 20th, 2023
How to Choose the Right Amazon Shipping Option for Your Business?
You are selling on Amazon but what is the best way to get your products into the hands of customers? As a Seller Central Amazon seller, you need to consider the impact it has on your business.
Here are a few questions to ask yourself:
- Do you have the manpower to execute shipping operations in-house?
- How do your overhead costs compare to FBA fees?
- Which option will give you the Prime badge to build your brand's credibility?
- How long does it take to get the order to the customer?
We’re going to break down the basics and help you compare these top three Amazon fulfillment options: Seller Fulfilled Prime, Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM).
History of Seller Fulfilled Prime
Amazon launched Seller Fulfilled Prime in 2015, giving sellers the ability to handle fulfillment while still displaying the coveted Prime badge that so many shoppers know and love. With SFP, Amazon customers still receive the fast and free shipping options that Amazon is known for, and sellers get the flexibility to ship from their own personal warehouse or a third-party fulfillment center.
In 2019, Amazon suspended SFP enrollment because it failed to deliver the "high quality experience" that Prime customers have come to expect. With strict quality standards that impact ecommerce platforms worldwide, Amazon is constantly striving to create an exceptional customer experience. With Amazon, shoppers can be confident that their expectations will be met.
On June 13, 2023, Amazon announced that they plan to reopen new seller enrollment for the Seller Fulfilled Prime (SFP) program before the end of the year. As the number of shipping options and customer expectations continue to grow, it’s important to carefully consider which fulfillment option is right for you.
Amazon Seller Fulfillment Options
Amazon offers two types of merchant-fulfilled operations, FBM and SFP, as well as an option where Amazon stores, packs, and ships for sellers called FBA. Here's a breakdown of the basics:
- Fulfillment by Merchant, or FBM, is a fulfillment method in which the seller is responsible for fulfilling the products they list on Amazon. Amazon FBM is managed through the seller or a third-party logistics (3PL) provider.
- Seller Fulfilled Prime (SFP) allows eligible sellers to showcase an Amazon Prime badge on their product listing. With this option, sellers deliver directly to domestic Prime customers from their own fulfillment center. By opting for SFP, you are pledging to fulfill orders with Two-Day Delivery at no extra cost to the Prime customer. Amazon grants you access to the appropriate transportation solutions to assist you in meeting the demands of Prime customers.
- Fulfillment by Amazon, or FBA, is the fulfillment option in which the seller ships products to an Amazon fulfillment warehouse. Then when an order is placed, Amazon will pick, pack and ship the order.
Fulfillment by Merchant
Weighing the Pros and Cons of Amazon FBM
Seller Fulfilled Prime
Seller Fulfilled Prime FAQs
Who Can Use Seller Fulfilled Prime?
SFP is an excellent option for experienced, high-volume Amazon sellers. To participate in the SFP program, you must have consistently high seller performance metrics and a strong order fulfillment history.
To enroll, sellers must pass a trial period to prove they meet Amazon's requirements. During the trial period, the Prime badge won't appear on the seller's listings.
Once sellers have completed a 5 to 90-day trial period with a minimum of 200 orders, they will be automatically enrolled in the program. They are expected to adhere to Amazon's strict quality standards for customer service, returns, and refunds.
How Do You Enroll in Seller Fulfilled Prime?
Applications should reopen later in 2023. If you’re interested in signing up for Seller Fulfilled Prime, join the waitlist to be notified when enrollment reopens.
The Benefits of Participating in Seller Fulfilled Prime
Seller Fulfilled Prime made its grand debut in 2015. This shipping option allows sellers to add the Amazon Prime badge to their listings by committing to deliver products to Prime customers with the same fast and free shipping as traditional Prime. This has become a popular choice for sellers who want greater control over their order fulfillment and customer service.
Qualifying as an Amazon Seller Fulfilled Prime seller may seem intimidating and rigorous, but it certainly has a laundry list of advantages as well. Sellers with the coveted Prime badge tend to earn higher profits than those without it. SFP is often more cost-effective than FBA in the long run, and SFP grants you greater control over inventory, fulfillment, and shipping options, while also providing access to Amazon’s customer service.
How to Qualify for Amazon Seller Fulfilled Prime
- Offer your customers premium Amazon shipping options
- Maintain a 99% on-time shipping rate by shipping at least 99% of your orders within the designated time frame
- Maintain an order cancellation rate of less than 0.5%
- Use Amazon Buy Shipping Services for at least 99% of orders
- Deliver your orders with Amazon-supported Seller Fulfilled Prime carriers
- Agree to the Amazon Returns Policy
- Allow Amazon to handle all customer service inquiries
Fulfillment by Amazon
Weighing the Pros and Cons of Amazon FBA
FBA is a great option for high volume, high margin products where sellers don’t have the capacity to store and ship their products or want to simplify their processes. FBA Sellers send inventory to an Amazon warehouse and have their orders shipped directly by Amazon. With FBM, sellers take responsibility for storing inventory and shipping orders.
Typically, Amazon FBA takes a 10-15% fee on every transaction. These fees vary slightly depending on your specific product. Small and new businesses that are unable to afford FBA fees may find that FBM is a better fit for them. With FBM, sellers have control of packaging and their Amazon shipping options but are required to take on the responsibility of customer service.
FBA is ideal for sellers who fulfill the following criteria:
- Your product has a high turnaround rate and you sell at a higher-than-normal volume
- You don’t mind lowering the cost to the lowest possible profit point
Learn how FBA works, the benefits, inventory management, and more in our one-page Amazon FBA reference guide.
Key Differences Between FBM, Seller Fulfilled Prime and FBA
FBM (Fulfillment by Merchant)
- As a seller, you are responsible for prepping, packaging, shipping, and returns on all FBM orders.
- You are required to handle all customer support inquiries and match or exceed Amazon’s customer service policies.
- You are eligible for discounted shipping rates when using Amazon’s network of partnered carriers.
- As a seller, you avoid unexpected costs and Amazon policy changes.
Seller Fulfilled Prime
- As a seller, you keep all of your stock in your own warehouse or the warehouse of your choice via a third-party provider.
- As a seller, you are free to choose from your own network of shipping carriers, which can be especially beneficial if you are able to secure lower shipping rates.
- You can sell non-FBA eligible items under the Prime badge.
- You avoid accruing costly FBA storage fees and penalties associated with excess inventory.
Amazon FBA (Fulfillment by Amazon)
- As a seller, you prep and ship your products to the fulfillment center(s) rather than sending them directly to the customer.
- Your inventory will be listed with the Prime logo.
- Amazon handles packing, delivery, customer service, and returns.
- Pay as you go. Amazon charges sellers for the storage space they use and the orders Amazon fulfills on their behalf.
- The cost of shipping is included in the FBA fees.
Winning the Buy Box
Seller Fulfilled Prime and FBA products have increased chances to win the Buy Box. Winning the Buy Box means that when customers click on “Add to Cart,” their default option is to buy the product from you.
The Buy Box is responsible for nearly 82% of all sales, making it a valuable win for sellers. If you play your cards right, SFP or FBA can give you the competitive advantage you need to boost sales and visibility.
The Cost Breakdown
Fulfillment by Merchant (FBM)
One of the greatest advantages of selecting FBM is that it involves minimal initial costs, which reduces the financial burden on your business during the startup phase. Amazon FBM fees generally only include the expenses incurred by sellers when shipping orders themselves. However, these fees vary significantly between sellers and are largely influenced by your product catalog and shipping and delivery preferences.
There are a few fixed fees associated with an FBM account. To get started with FBM, you can either choose an Individual Selling Plan with a $0.99 fee for every unit you sell, or you can upgrade to the Pro plan. A professional account costs $39.99 per month and unlocks key features like A+ Content and important metrics that are not available with the Individual plan.
There is also a referral fee that Amazon deducts each time a product unit is sold, which is a percentage of the total sales price and is typically around 15% for most categories.
Fulfillment by Amazon (FBA)
As an FBA seller, you won't have to pay for shipping, handling, or packaging to ship your products in the traditional sense. While this is a convenient feature that Amazon employees handle, you're required to pay Amazon seller fees associated with FBA. The price is determined by the size and weight of your product.
Because your products are stored in Amazon's fulfillment centers, Amazon charges storage fees to maintain your inventory. These fees are divided into a monthly fee and a long-term storage fee, known as the FBA aged inventory surcharge.
You can pay these fees by deducting them from your existing account balance or adding them to the credit card you put on file when you set up your seller account.
Seller Fulfilled Prime
Applying for Seller Fulfilled Prime is free of charge. Additionally, Amazon does not charge any warehouse, shipping, or handling fees, which can grow to be quite expensive over time.
Shipping costs for SFP vary depending on order volume, package size, and recipient location. Sellers must provide free standard shipping for all Prime orders, which may increase shipping expenses.
Similar to FBA, Seller Fulfilled Prime requires sellers to pay a referral fee, which is typically 15% of the product's selling price.
Doubling Up on Fulfillment Options
Can’t choose between Amazon FBM, Amazon FBA or Seller Fulfilled Prime? Mix and match! Many sellers choose to enroll their most popular products and best-sellers in Amazon FBA, while FBM or SFP is a great choice if your product tends to sit or only has seasonal appeal.
By opting to participate in multiple fulfillment programs, you can optimize your margins and avoid the costly inventory fees that Amazon charges sellers when their products sit too long at an Amazon warehouse.
Understanding the best way to ship your products is a crucial part of your business strategy. We can help you navigate the options and determine the best choice for your brand. Simply follow this link and fill out the form to schedule a free consultation. From there we will send you an email to schedule your time.