Selling your products on Amazon can be very beneficial for your business, as it can help you reach a large new audience of potential customers. It can be a great way to grow your business, but the Amazon order fulfillment process can also seem daunting and confusing, even if you are familiar with ecommerce fulfillment. When you sign up as an Amazon seller, the many different shipping options can seem overwhelming. You can choose to have your orders fulfilled by Amazon (FBA), or you can choose a self-fulfilled order processing route, like Fulfilled by Merchant (FBM) or Amazon Seller Fulfilled Prime (SFP). Typically, FBA is the easiest fulfillment process for vendors, but it can also be the most expensive. Going with FBM or SFP is more cost-effective but can be more complicated. Read our guide below to figure out which option might be best for your business.
Self-fulfilled Amazon Order Fulfillment Process
Amazon offers its sellers several options when it comes to order fulfillment. If you choose to go with a self-fulfilled method instead of FBA, two Amazon seller shipping options you’ll want to look at are FBM and SFP. FBM allows merchants to sell on Amazon but fulfill their own orders, while SFP allows sellers to fulfill their own orders while using a Prime badge.
FBM allows you greater control over shipping and customer service and allows you to avoid the steep fees from the FBA fulfillment process. SFP essentially combines the advantages of FBA and FBM. If you choose this option, you will handle all shipping, storage and fulfillment, ecommerce returns management, and have access to Amazon Prime customers.
Amazon Order Fulfillment Process with SFP
Amazon order fulfillment process with SFP has similar aspects to FBA and FBM shipping options. Like FBM, you store, pick, pack and ship your products to the customers yourself and handle all communications with the customer. However, this shipping option also allows you access to prime customers, competing with businesses who pay the large fees for FBA.
In order to select SFP as your Amazon shipper selling option, you have to qualify for it, meaning you must go through a trial period that involves fulfilling a minimum of 300 orders to demonstrate that you have the ability to deliver products in the time promised. In order to do this, you must:
- Have a warehouse to store inventory
- Ship 99 percent of your orders on time
- Offer premium shipping options
- Have an order cancellation rate of less than 0.5 percent
- Use Amazon Buy Shipping Services for 98.5% of orders
- Utilize supported SFP carriers
- Agree to the Amazon Returns Policy
- Allow for Amazon to deal with all customer service inquiries
Once you’ve completed the trial period successfully, you are automatically enrolled as an SFP shipper for Amazon, as long as you maintain the strict standards.
Is my business a good fit for Amazon order fulfillment process with SFP?
SFP can be a great Amazon seller shipping option, as it allows your business access to important customers while avoiding steep fees of FBA fulfillment. However, this type of fulfillment is not a good fit for every business model. If you do not have the capacity to store inventory in your own warehouse, because you are drop shipping or you are a smaller company, it might not be for you. Even if you do have a warehouse, it’s also important to keep in mind that becoming an SFP seller can cause a large influx of orders that need to be fulfilled the same day in order to keep up with Amazon’s shipping requirements.
SFP is ideal for sellers who have warehouse space and staff that can handle the order fulfillment, or companies that have a 3PL that can offer scalability and flexibility. In order to be successful as an SFP seller, you need to make sure that it would be more profitable for you than FBA or FBM. Amazon even offers a revenue calculator tool to help you compare the cost of FBA to your fulfillment costs and see if it is a viable option for you.
Advantages to SFP Amazon order fulfillment
There are many benefits to choosing SFP as your Amazon seller shipping option, the first being access to the massive Amazon Prime audience. For a yearly fee, this audience enjoys free two-day shipping on Prime eligible items. As of March 2019, there are 103 million Amazon Prime members in the United States, and once you are approved as an SFP seller, you will get a Prime badge, essentially giving you access to this large pool of loyal shoppers. These individuals are more likely to shop more, spend more, and take advantage of your subscription services. Having a Prime badge is beneficial as it is a big influencer for Amazon Prime members. If you don’t have a badge, it could discourage Prime members from ordering your product, and it could even prevent you from showing up at all under certain filters.
As far as the logistics go, when you use your own fulfillment center, or a 3PL like ITS Logistics, you will avoid expensive fulfillment and storage fees that need to be paid when you use FBA fulfillment. This can help you increase your profit margins. Becoming an SFP seller streamlines your fulfillment process as you only need to manage inventory in your own warehouses, instead of managing that inventory as well as additional inventory in Amazon’s warehouses. SFP fulfillment can certainly offer substantial advantages for some businesses.
As of March 2019, there are 103 million Amazon Prime members in the United States.
Disadvantages to SFP Amazon order fulfillment
Although it can offer many benefits, SFP is not always the best option for every business. There are a few disadvantages to choosing this as your order fulfillment strategy. Because of the nature of Amazon Prime, one of the strict requirements you must meet as an SFP seller is free two-day shipping, now trending towards one-day. This means you must offer free shipping to customers and be responsible for paying the shipping rates, which can drastically eat away at your margins if not carefully planned.
Along with following these demanding shipping standards, you must also purchase packing slips through Amazon, meaning you need to log into your Amazon for shippers account to create and print shipping labels, which can be very labor intensive if your system is not able to directly integrate with Amazon’s API. If you have a development or IT team, they can create applications that integrate with the Merchant Fulfillment API for ease of use. If you do not have in-house development services, you there are a few other options for integrations that you may be able to use. It is also required that you allow free returns, which, while beneficial for providing a good user experience, can be difficult if you have not accounted for those shipping costs. If you don’t have a distribution center that has the capacity to meet these requirements, it might not be the best fit for you. Don’t worry, though, if you decide not to go with SFP, there are several other Amazon seller shipping options to choose from, like FBM.
Amazon Order fulfillment process with FBM
Fulfillment by Merchant (FBM) is when sellers list their products on Amazon but handle the shipping themselves, without an Amazon Prime badge. This option can be advantageous when you have a smaller number of products or lower profit margins, as it allows you to cut down on the shipping charges in these situations. There are also times when FBM can be more cost effective if you can ship orders for a more reasonable price compared to what FBA will charge by using your own delivery partners and network, or your 3PL’s network.
Advantages to Amazon Order Fulfillment Process with FBM
Order fulfillment with FBM can be a good Amazon seller shipping option as it allows you the freedom to run your business as you like in terms of scalability, fulfillment methods and inventory level control. It is faster to begin selling your products on Amazon than when you use SFP, because you don’t have to go through the 300-order trial period. Another benefit of not having to meet all of Amazon’s SFP regulations is that you will experience no unexpected costs and potentially greater margins. Along with that, you will have less unavoidable losses due to any unexpected changes Amazon might make to their policies and you will have to spend less time doing paperwork, allowing you more time to focus on your business.
Disadvantages to Amazon Order Fulfillment Process with FBM
FBM also has some disadvantages compared to other Amazon seller shipping options. The biggest disadvantage is the battle for the “buy box.” This box is what customers see when they go to buy a product on the Amazon marketplace. You can probably picture exactly what this looks like, with an “add to cart” button and a “buy now” button. These buttons are linked to a certain product whose seller has control of the “buy box.” If you sell products on Amazon that are similar to other sellers’ products, you may not have control of the buy box. That means that a customer would have to click multiple links to even find your product listing and buy from you. If you do not have the “buy box,” it is very difficult to get sales for your Amazon product. However, if your product is unique and there are no other sellers, then it may be worth it to use FBM.
Another downside of FBM is that you cannot offer Amazon Prime to your customers. That’s potentially 103 million users who might not be interested in your product. This is because customers who have Prime will generally only shop from SFP sellers and will not be interested in sellers who make them pay additional shipping costs for slower shipping. This is important to keep in mind if you are an FBM seller, as it could cause this large audience to overlook your product and buy from a competitor.
ITS Logistics and Amazon Seller Shipping Options
We know that the various Amazon seller shipping options can be overwhelming and confusing, and that it can be hard to decide which option is best for your business. The reality is, none of the options are one size fits all. It depends on your product, warehousing and fulfillment capabilities, profit margins and more. At ITS, we know how to meet Amazon’s strict fulfillment requirements for whichever option you choose—SFP, FBA or FBM. We have the flexibility to help you scale your business, and we have the expertise to execute the specifications for any Amazon packages flawlessly.
Check out these additional ecommerce fulfillment resources:
- Reverse logistics in ecommerce
- Essentials for ecommerce drop shipping fulfillment
- Inventory management for ecommerce
- UncommonGoods and ITS Logistics – an ecommerce case study