What is Amazon Seller Filled Prime?
In Q2 of 2015 Amazon launched a program called Seller Filled Prime. The program allows qualified professional sellers to put a prime logo on their listing if they are using a third-party logistics provider (3PL) to complete their orders or fulfilling from home. To have the prime badge displayed on your product, you have to be able to guarantee fast, free shipping. There are of course several other requirements to meet to be eligible for the program.
Sellers that participated saw an average of 50% increase in sales in Q3 of that year. This new method reduces pressure on Amazon warehouses to store all the products, and sellers get several benefits through Amazon as well as an increase in credibility and thus sales. You need a Professional Sellers Account and Premium Shipping to be eligible for a trial period.
Amazon SFP eligibility requirements
As mentioned, you need a Professional Sellers Account on Amazon, as well as a 30-day history of 30+ orders that were fulfilled through Premium Shipping, which means same day delivery or two-day shipping. You must also provide tracking ID’s for 94% of your orders, have a cancellation rate of less than 1% and an on-time delivery rate of 96% or more. You must work with approved Buy Shipping Service carriers that are available to pick up your orders by 4 pm in your time zone. Be sure to have a feedback rate of 4.5 or higher.
The requirements for Premium Shipping are less strict. Your account must be 90 days or older and orders must be tracked. You also need to meet the performance metrics set out above in terms of tracking, delivery, and the cancellation rate. You must have had at least 10 orders in the last 30 days.
Trial period before enrollment in Amazon SFP
A trial period is required to become eligible for Amazon SFP. Once your trial is over, you need to maintain the metrics set out by Amazon to continue selling through Amazon SFP. The trial typically lasts anything from 5 to 90 days. It involves fulfilling 200+ orders with a 99% on-time shipping rate, 99% same day shipping, a 95% use of Buy Shipping Service carriers and a cancellation rate of less than 1%. If you do not fulfill 200+ orders in the 90 days, then you can reapply, as long as you are still eligible.
Shipping rates
Keep in mind that with the SFP program, you must offer free shipping for all items. If you have warehouses in place, this is likely not a problem for you. If, however, you do not have a warehouse close to your customer, your shipping fees will be higher. Even with Amazon’s negotiated discount rates, the cost might be higher than the profit. Very large items of a fairly high cost might still be worth considering.
If you are a smaller seller, consider working with a third-party logistics provider. A 3PL will enable you to still reduce costs, and ensure that your shipments are processed and delivered on time. Not all 3PL companies have the resources that you need available. Do your research and choose a provider that can meet Amazon’s strict requirements.
Storage fees
Storage fees in Amazon warehouses are determined by the product-size tier and by month. From January to September, it is $0.69 per cubic foot for standard size, and from October to December it increases to $2.40.
Also, take into account long-term storage fees. If your product doesn’t have a high sales velocity and has been in storage for more than 6 months, Amazon will charge you an extra $11.25 per cubic foot. For items in storage more than 12 months, it increases to $22.50 per cubic foot. If you have large items, this can add up to a lot of money. SFP might be the answer for you in this case. You can learn more about the exact rates of Amazon storage fees here.
When should I choose Amazon SFP over FBA?
Smaller items don’t take up as much warehouse space, and therefore those FBA sellers don’t get hit as hard with storage fees from Amazon. Sellers of bulky or large products, however, often get slammed with extra fees. Especially if the sales velocity isn’t high. When shipping your products, you have to ship it to Amazon first, and sometimes pay for three shipments due to their Distributed Inventory Placement.
If in this case, you choose to build an Amazon SFP infrastructure, you don’t have to ship to Amazon’s warehouse first and incur those extra shipping fees. Ideally, you should have picking, packing and handling staff at this stage. Without the extra staff, the workload of SFP will outweigh the profit and you could lose your eligibility altogether.
You will also have more control over refunds and returns. Some FBA sellers don’t get reimbursed for their returns right away, or ever. This is due to human error on Amazon’s part.
Don’t forget that you will also have access to more than 60 million prime members, where the bulk of the money comes from. If you do it right, Amazon SFP could mean a lot more revenue for you.