Amazon Prime is a major subscription in the U.S. and abroad. There are 148.6 million subscribers to Amazon Prime stateside and as many as 200 million subscribers globally. Tapping into that market can be majorly profitable for online retailers.
Amazon’s reach is massive. In September of 2020 alone, Amazon had 2.44 billion visits over desktop and mobile devices.
Reaching Amazon Prime subscribers can be a great way to boost sales. After all, one study of 500 Amazon customers estimated that Amazon Prime subscribers spend nearly double the amount the average non-member spends on the site. While non-Prime subscribers spend around $700 per year on the eCommerce platform, Prime members spend around $1,300 every year.
It pays to reach these markets.
But Fulfillment by Amazon might not be the best way to do it. Some eCommerce retailers are exploring the benefits of Seller Fulfilled Prime. Here’s what you need to know about the challenges of Fulfillment by Amazon, how Seller Fulfilled Prime works, and how a third-party logistics provider can help.
The Challenges of Fulfillment By Amazon
Many online retailers are drawn to Fulfillment by Amazon (also known as Amazon FBA) because it gets them onto the popular marketplace’s interface and allows them to take advantage of Amazon’s expansive logistics operation to handle the shipping of their online orders.
Another undeniable perk of Amazon FBA is that items are also available for Amazon Prime shipping. When using Fulfillment by Amazon, Amazon handles disgruntled customers and manages reverse logistics as well. With dozens of warehouses spread across the country and the globe, online retailers believe that Amazon FBA is one of the best ways to get their products delivered to their customers quickly.
But Fulfillment by Amazon isn’t always as picture-perfect as it initially appears.
Mishandled inventory is one common problem that many online retailers are forced to deal with. It can take days or weeks for inventory to be logged into the Amazon FBA system and be ready to ship, which can cause delays in your customers’ shipments, which can result in poor seller ratings and even canceled orders. And even if this delay doesn’t affect customers awaiting shipments, it still means that your inventory is sitting on a pallet or on a loading dock somewhere without bringing in any revenue.
Shipping, Inventory, and Storage Issues
Another common issue? Product gets lost in the Amazon supply chain. When this happens, you can always file a claim and usually, Amazon will reimburse you for the loss, but again, you won’t be generating sales while your product is lost. Plus, in its valuation of your lost merchandise, Amazon may not reimburse you the amount you paid for it; you could lose money.
Some sellers also have shared that after they ship inventory to Amazon FBA, more inventory shows up online than what is actually there. To correct this, you have to go through a frustrating back and forth process to get your inventory numbers adjusted in the system.
Lack of Personalization
Additionally, there’s no room for packaging personalization. Everything gets shipped in Amazon’s packaging, emblazoned with Amazon’s logo, not yours. You can’t include a personal note to your customers or ship your products in a personalized box. When customers order from your Amazon FBA store, they form a stronger connection with Amazon than they will with your brand! It’s missing that personal touch.
Other issues that accompany selling your products through Amazon FBA?
- Amazon Inventory Product Swap: If a customer places an order from an online retailer for a particular item, but that item isn’t in any nearby warehouses, Amazon may opt to ship them an item with the same SKU from a closer warehouse. What’s the problem with that? The item is from another seller, but the original seller gets credit for the sale. And if the sent item is actually a knockoff with the same SKU, the original online retailer is the one who had to deal with the damaged reputation.
- Sales Tax Complications: Amazon has warehouses in around half the states in the U.S. Since Amazon is pretty guarded about where items are stored and it could be any number of locations in a wide array of states, this can create plenty of sales tax headaches for the sellers.
- Changing monthly storage fees: Amazon FBA is notorious for changing the fees they charge retailers to store goods in their warehouses. These inconsistencies can make it hard for online retailers to budget or plan ahead
What is Amazon Seller Fulfilled Prime?
Seller Fulfilled Prime is one way that many online retailers are opting to reach new markets—via Amazon’s digital storefront—without having to give up as much of the control of the shipping process or dealing with quite so many headaches.
Through Seller Fulfilled Prime, merchants list their products as being Prime eligible, and handle the fulfillment themselves. Plus, they get the perk of displaying the Prime badge on the products they are already shipping to customers with two-day shipping and free standard shipping. Currently, there is no additional fee to enroll in the Seller Fulfilled Prime option.
Merchants who are part of the Seller Fulfilled Prime program:
- Offer Prime shipping benefits like free one- and two-day shipping.
- Purchase the shipping for all of their Prime products through Amazon’s Buy Shipping services to buy shipping labels, ship and confirm orders, and track shipments. These labels can be purchased individually or in bulk, and can also be purchased through the Merchant Fulfillment API.
- Must meet all shipping, returns, and customer services products as specified for Amazon Prime products.
To participate, merchants must demonstrate to Amazon that they have the capabilities to meet their performance requirements. This happens during a trial period to show that these online retailers can meet Amazon’s customer service expectations. As part of the trial period, retailers must meet the following requirements for a minimum of 50 Amazon Prime trial orders:
- On-time shipment rate of 99 percent or more for Prime Orders
- Using Buy Shipping Services for 98 percent or more of Prime Orders
- Cancellation rate of 0.5 percent or less of pre-fulfilled Prime Orders
If they fulfill all requirements during the trial period, merchant applicants are automatically enrolled in Seller Fulfilled Prime.
There are certain other requirements and stipulations for Seller Fulfilled Amazon including shipping rates and times to Hawaii, Alaska, and other regions. Some of the provisions include:
- Same-Day Delivery is currently only offered in select cities
- Free standard delivery is a requirement for all regions in the lower 48 states of the U.S., including regions that are not currently eligible for Amazon Prime.
- Economy shipping, Same-Day Delivery, and International Delivery are optional for Prime-enabled shipping templates.
- Expedited shipping is disabled for Seller Fulfilled Prime.
How a 3PL Can Help—While Maintaining Your Prime Status
A third-party logistics (3PL) provider can help you regain control of your inventory and your order processing, while still working at scale with fast shipping rates.
As your Seller Fulfilled Prime partner, OceanX can help you expand your markets and fulfill orders faster and easier than ever. Amazon recently reported that those who use Seller Fulfilled Prime, selling their products as Prime products for the first time can see an average sales increase of as much as 50 percent. With Seller Fulfilled Prime, you can start—or continue to—reach Amazon’s biggest customers, Prime members.
What else can we offer? Better control of your inventory. Our warehousing fees won’t constantly fluctuate like Amazon’s, which gives you better predictability of your costs and total profits. Also, Amazon FBA fees can pile up quickly. We can help eliminate many of those costs through our industry connections and flexible warehousing space.
Most importantly, what you gain when you work with a 3PL provider like OceanX is personalization.
We’re not just talking about data-based insights and inventory predictions. We’re also talking about personalized packaging and shipping, and far more product flexibility than you could ever get with Amazon FBA. Packaging is more important than ever before. In the world of eCommerce, it replaces the feeling you get of walking into a store, supports your brand identity, and creates a deeper connection between your customers and your brand.
If you’re ready to tap into the soaring Amazon Prime market while still maintaining control and saving money in the process, we can help. Connect with OceanX today to learn more!