What Is Amazon SFP?
Amazon SFP (Seller Fulfilled Prime) is an Amazon fulfillment that allows Prime sellers to fulfill their own orders, either through their own internal fulfillment operations or with a 3PL partner or other outsourced fulfillment solution. The program was launched in 2015 to help clear space in Amazon’s warehouses to make room for their newly launched Private Label brands. Merchants enrolled in Amazon SFP store inventory in their own (or partner) warehouses, handle all fulfillment, and manage customer feedback. Sellers are required to maintain Prime service levels (most notably free 2-day delivery), which Amazon monitors closely, shutting down SFP accounts that drop below 99% on-time fulfillment or 97% on-time delivery.
Amazon SFP was a boon to both Amazon and its third-party sellers. It enabled sellers to take advantage of the 30% boost in sales associated with the Prime badge without giving up visibility into their inventory levels and distribution and often saved them money on fulfillment costs. Amazon benefited from reduced fulfillment costs and additional warehouse space but was able to maintain a diverse sku profile in the Prime catalogue. The program was so popular that several years after it was launched, SFP was closed to new applicants. Qualifying sellers interested in the program were only given the option to sign up for the waitlist.
What Are the Benefits of Amazon SFP?
There’s no doubt that the Prime badge draws in loyal shoppers and drives conversions. In fact, Prime members spend almost twice as much money on Amazon each year as non-members. Amazon SFP gives sellers the benefit of added visibility and increased sales that ultimately come with the Prime badge without fulfilling their orders through Amazon’s notoriously proprietary fulfillment network. There are many ways that sellers benefit from configuring their own fulfillment solution:
- Inventory Visibility: Amazon’s ecommerce distribution centers are highly efficient but sacrifice merchant visibility and control to achieve that efficiency. Once inventory is inbounded to their facilities, Amazon does not give merchants insights into the geographic distribution of that inventory. Multichannel merchants likely want more visibility to gain insights into their demand distribution and new market opportunities.
- Brand Recognition: When orders are fulfilled by FBA, they arrive on the customers’ doorstep in Prime-branded packaging. This can be a confusing experience for some consumers who feel more as if they’ve made a purchase from Amazon itself rather than the individual seller. When merchants are fulfilling their own Amazon orders they can also include additional items in the package, like a coupon code for a purchase from one of their more profitable sales channels.
- Streamlined Multichannel Fulfillment: Merchants who sell on Amazon as part of a multichannel selling strategy should strongly consider Amazon SFP in order manage fulfillment for all of their sales channels through a single network. Amazon Multichannel Fulfillment is an option for some non-Amazon channels, but some of the larger marketplaces like Walmart won’t allow fulfillment by Amazon, so a merchant with a diverse multichannel strategy will likely have to choose between segmenting fulfillment between FBA and an outside provider and moving to SFP
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Changes to Amazon SFP Requirements
Amazon announced just before 2020 peak season that very few SFP sellers were meeting the Prime delivery requirements and that, as a result, they planned to double down fulfillment and delivery requirements for sellers enrolled in the program. To give sellers time to adjust to the changes, they announced a 2-part roll-out, eliminating Regional SFP for standard-sized products and introducing new requirements for weekend fulfillment and carrier pickups as of February 1, 2021. The original announcement included more stringent requirements that would go into effect June 1, 2021, but in May, Amazon notified sellers that the February 1 requirements would be maintained until at least December 31, 2021.
The requirements for standard-sized and oversized products are notably different and offer some advantage to sellers of oversized items. As of February 1, standard-sized sellers must provide nationwide Prime coverage, but oversized sellers are still eligible for Regional SFP. This means that, although weekend fulfillment requirements necessitate top-tier warehouse partnerships and expanded 1-day delivery coverage, oversized sellers can choose to provide Prime coverage in only their most profitable geographic regions.
The other major change — again different for standard size and oversized products — is enhanced 1 and 2-day delivery promises. Amazon has defined itself by its devotion to customer service and needs to maintain the perceived value of its Prime membership. They have, therefore, instated enhanced 1 and 2-day delivery promises for Prime products, which are now measured by the percentage of page views that display a Prime delivery guarantee. The requirements as of February 1 are:
- 2-day delivery for 55% of page views of standard-sized items
- 2-day delivery for 30% of page views of oversized items
- 1-day delivery for 20% of page views of standard-items
- 1-day delivery for 5% of page views of oversized items
Measuring compliance based on page views rather than actual delivery performance makes building an Amazon SFP network incredibly complicated. The greatest complicating factor is that compliance with page view requirements depends greatly on order cut-off time and the time of day that shoppers are looking at the product detail page. For example, if a seller’s order cut-off time for same-day fulfillment is 2:00pm, any shoppers viewing their products after 2:00pm will see a 2-day delivery promise. The percentage of page views that display a 1 or 2-day delivery promise is going to be highly contingent on what time of day shoppers are most active. For this reason, SFP sellers should prioritize a fulfillment partnership that will build a network based off of all of these contributing factors and can monitor for the most active times of day and days of the week and optimize for page view compliance.
Looking for an SFP solution? Reach out to one of our Amazon fulfillment experts.
What Does the May 2021 Announcement Mean for Amazon Sellers?
SFP sellers who have been working to meet the February 1 requirements are likely relieved to have a bit of a reprieve. Weekend fulfillment, expanded coverage, and new page view requirements were certainly more than enough to keep brands of all sizes on their toes. The question now is how can businesses make the best use of their time between now and December 31 to ensure that they’re not caught flat-footed when another change to the SFP program is inevitably announced? Below are 3 things Amazon sellers can be doing now that they have a little bit more breathing room.
- Optimize your Amazon marketing strategy. Many SFP sellers’ primary focus has likely been negotiating Saturday or Sunday fulfillment SLA’s with warehousing partners and monitoring page view metrics through the new seller dashboard. These merchants may not have had the internal bandwidth to research the new A10 algorithm rollout and examine how their search rankings have been affected. Now is the time to prioritize keyword research and align your Amazon SEO strategy with your paid advertising campaigns. Optimizing your marketing strategy now will drastically improve the ROI on your marketing budget when the competitive holiday season rolls around because you will have taught Amazon’s algorithm to value your listings.
- Take a look at your sku profile. If you’re meeting the new SFP page view requirements and maintaining your margins, you’ve likely added a few new warehouses to your fulfillment network. The upfront cost of ordering and inbounding additional inventory may have led you to limit your skus listed with the Prime badge to only your most profitable skus. Now is a great to time to a hard look at your sku-level profitability and decide which skus are still making significant contributions to your bottom-line revenue and readjust or re-allocate.
- Continue to optimize your fulfillment network. At the end of the day, Amazon will continue to pursue the highest-possible standards of customer service. Choosing a fulfillment partner with the flexibility and scalability to adapt to the next customer service enhancement Amazon will certainly announce will ensure that your business can pivot quickly without adding undue burden to your internal operations.
The Cost of Amazon SFP
These new requirements mean that there will truly be no one-size-fits all solution for Amazon fulfillment. For some sellers, especially those with a majority of standard-sized products in their catalogue, the cost of building a distributed network to support these page view percentages may outweigh the benefits of SFP. These merchants may find that managing a segmented fulfillment strategy, while operationally burdensome, will ultimately be more cost-effective in the long-run.
Surprisingly, some sellers may even that dropping the Prime badge altogether and fulfilling through FBM (Fulfillment by Merchant) better supports their long-term growth plan. This was the case for hydrogen water brand, HyVIDA. They found that by moving fulfillment away from FBA and dropping the Prime badge, they gained a new level of control over their customer interactions that enabled them to drive traffic to more profitable channels and actually double their ecommerce sales year over year.
Amazon will likely never drop its pursuit of the highest standards of customer service and fulfillment speed, and should prioritize flexibility and scalability in their supply chain in order respond and succeed in the face of this and any future changes in the Amazon marketplace.
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