This article explains Amazon's Seller Fulfilled Prime (SFP) program, weighs out its pros and cons, and differentiates it from the Fulfillment by Merchant (FBM) program and the Fulfillment by Amazon (FBA) program to help you decide which is right for you.
Access to Amazon's Prime badge gives third-party sellers exposure to the most motivated shoppers on Amazon. Thanks to Amazon, SFP merchants with existing warehouses can take advantage of the Prime program while still managing inventory themselves. SFP and FBA are primarily about sellers managing their own storage while still meeting rigorous shipping requirements. This article covers the relative benefits of each program.
What Is Amazon SFP?
Amazon SFP is a specialized program that allows merchants to use their own inventory management systems. As long as they match the Amazon Prime program's 1-2 day shipping speeds, they can receive the benefits of the Prime badge on their listings. Essentially, the Amazon FBA program offers merchants an alternative to bulk shipping by granting them access to the transportation solutions that suit them best.
There is an extensive application process, and merchants must maintain rigorous 1-2 day shipping speeds and less than a 0.5% order cancellation rate, among other requirements. This also fulfills a need for Amazon, which is struggling to construct enough warehouses to meet explosive eCommerce growth. Merchants who can match the shipping speed of Amazon Prime can simply store inventory in their own warehouses while still taking advantage of Prime program benefits.
What Is the Difference Between Amazon SFP and FBM?
Many third-party sellers are familiar with Amazon's Fulfillment by Merchant program (FBM). As the name suggests, the merchant handles all aspects of the sale with this method, most notably inventory management and shipping. Amazon FBM sellers can save a lot of money thanks to the lower fees associated with handling logistics and storage themselves, but they do not reap the benefits of the Prime badge.
Amazon SFP is sometimes explained as a subset of FBM because SFP sellers handle their own inventory storage but must purchase shipping through Amazon. If they meet all the requirements consistently, then they get the Prime advantages. SFP could also be considered as a blend between FBM and FBA. Like FBM, the seller handles inventory management. Like FBA, only Amazon-approved shipping companies can handle your order fulfillment.
Seller Fulfilled Prime Fees
Sellers using the Amazon SFP program must offer free shipping. Seller fulfilled prime fees, then, are largely dependent upon the cost that sellers will pay for shipping and warehousing. There is no fee to apply to the Amazon SFP program. It also eliminates the inbound shipping fees to Amazon warehouses and ongoing storage fees that come with the FBA program.
Of course, SFP sellers will need to pay storage and shipping fees for their inventory. But these are not charged directly through Amazon. In some cases, sellers can secure better rates through third-party shipping services that integrate with their Amazon accounts than they could with the FBA program, making Seller Fulfilled Prime a better choice.
How Does Shipping Work With SFP?
Amazon SFP sellers must purchase shipping through one of about a dozen approved Merchant API sellers. Sellers must correctly categorize their product listings to make sure that the “buy shipping” function properly prices each item to be sold. There are a variety of preset “standard” size packages, along with an “oversize” option. These all affect the pricing of the shipping.
Can Amazon SFP Sellers Use Existing Shipping Services?
In short, Amazon SFP sellers must use the “buy shipping” function for at least 99% of their orders. The Amazon SFP program is best suited for more prominent merchants with warehouses and shipping services in place. If a seller has already secured a good rate with a particular third-party shipping service, they can check with their servicer to determine if they have adopted the Merchant Fulfillment API.
In many cases, the savings on warehousing can present enough value to attract them to the SFP program. Using Amazon's existing shipping integrators also ensures that the merchant can continue to meet the 99% on-time order requirement. If a seller wants to continue to use their own shipping service, then FBM is probably a better fit, though this will not be accompanied by Prime benefits.
How to Qualify for Amazon SFP
The process to qualify for Amazon SFP is somewhat complex. Amazon only opens the program to new sellers at specific times, though the waitlist stays open to prospective applicants. The qualifications for the program center are contingent upon being able to match the promises of the Prime program for free 2-day shipping.
An important note: previously, Amazon SFP sellers were only required to offer 2-day shipping to specific states. Recently, this was changed to require sellers to ship nationwide. Amazon's current list of requirements is as follows, per Amazon's official SFP page:
- Offer premium shipping options
- Ship over 99% of your orders on time
- Have an order cancellation rate of less than 0.5%
- Use Amazon Buy Shipping Services for at least 99% of orders
- Have nationwide delivery coverage for all standard-size products
- Use ship methods that support weekend delivery and pick up (Saturday or Sunday)
- Meet targets for 1-day and 2-day delivery promises
- Deliver orders with supported Seller Fulfilled Prime carriers
- Sellers must agree to the Amazon Returns Policy
- Allow for all customer service inquiries to be dealt with by Amazon
While these are high standards to meet, acceptance into the program gains Amazon SFP sellers access to shipping integrations that allow sellers to fulfill these orders quickly.
Pros and Cons of Amazon SFP
Many who are wondering "what is seller Prime on Amazon?" are weighing whether the benefit of managing their own inventory and shipping outweighs the inconvenience of the extra management tasks required. While it can be a great fit for some sellers, the benefits may not outweigh the costs for others. Here are some of the top pros and cons of Amazon SFP to keep in mind:
Pros of Amazon SFP
- Merchants independently manage inventory storage
- No additional fees on long-term storage for Amazon warehouses
- The benefits of the Amazon Prime badge
- Additional exposure to Prime buyers
- Sellers can choose their shipping API
- A good solution for multichannel sellers
Cons of Amazon SFP
- The benefit of Prime shoppers may not outweigh storage costs
- Lengthy application process
- Easy to lose SFP status if shipping speeds slow down
- It may not be a good fit for smaller sellers
- Sellers must offer weekend shipping
In short, Amazon SFP offers significant benefits to sellers large enough to manage their own inventory storage cost-effectively and sustain the quick fulfillment times required by Prime. Merchants who primarily arrange their own inventory storage to qualify for the Amazon SFP program may lose money if they can not arrange economical storage and sufficient sales. If you are considering switching to seller fulfilled Prime, it is best to make sure you have the sales history to support the change.
Seller Fulfilled Prime vs FBA
A major consideration for Amazon sellers is which service is the best fit, SFP or FBA. The following section will cover the differences between Amazon SFP and FBA to establish which is right for you.
Number of Sellers Using FBA and SFP
According to Marketplace Pulse, there are currently 1.5 million Amazon Marketplace sellers (Amazon third-party sellers). While many more sellers are listed, this is the number of those with current active listings. Of these 1.5 million, it is reported that around 57% use Amazon FBA exclusively. In comparison, an additional 34% use some combination of FBA and FBM (fulfillment by merchant is not eligible for Prime benefits).
As of 2021, around a quarter of a million third-party sellers in the United States used FBA. Clearly, Amazon FBA is a popular program, and Amazon has shunted many third-party sellers into this track by making the qualification requirements fairly easy to attain.
Qualification Process: Seller Fulfilled Prime vs FBA
Qualifying for Amazon FBA and Amazon SFP is quite different. Along with meeting the criteria listed above, sellers must apply to the program and join a waitlist to be considered. At this time, Amazon is not releasing details about how long the waitlist process will take for new sellers. Once a new seller is accepted from the waitlist, they must complete a 90-day trial period in which they meet all of the program's requirements. Then, they will officially be considered an SFP seller and display the Prime badge on their listings.
Qualifying for Amazon FBA also requires several steps:
- Registering as a Professional Seller on Amazon
- Pay a $40/month fee to Amazon
- Create product listings with standardized shipping identifiers
- Ship your products to Amazon warehouses
- Maintain an Inventory Performance Index (IPI) of 400 or better
Compared to the Seller Fulfilled Prime program, the barriers to entry for Amazon FBA are relatively low. However, keep in mind that the associated flat fee must be paid whether or not additional sales from the FBA program justify it, so sellers must make sure their margins accommodate that.
Benefits of International Shipping
One of the key benefits of Amazon FBA is the ability to ship worldwide at a low cost. This is because third-party sellers simply ship their inventory in bulk to Amazon's warehouses rather than to individual customers. This takes advantage of Amazon's massive scale to bring shipping costs down and delivery times up. For example, if many of a seller's customers are located in a different country, then it can often be advantageous to take advantage of the FBA program.
By contrast, Amazon SFP is best suited for domestic sellers. According to Amazon's official shipping tables for the Seller Fulfilled Prime program, international shipping is an optional service and is not required to maintain eligibility within the program. This is because 1- or 2-day shipping is simply not possible for most international orders because they must go through longer shipping times and customs and inspection processes. Therefore, most items directly shipped from an international source will not be Prime-eligible. However, if the seller already has merchandise housed in a domestic warehouse, this will not be an issue.
While this should not affect third-party sellers who ship almost exclusively domestically, it can get tricky if merchants offer a combination of domestic and international shipping. Because how to qualify for Seller Fulfilled Prime is largely dependent upon maintaining very high levels of 2-day shipping, international sales could hurt that metric.
If a merchant's 2-day shipping metrics drop below 98%, then they will lose their SFP status and must requalify for the program and go through the 90-day trial period again. Generally, this should not be an issue because items that are not eligible will not display the Prime badge. In some cases, sellers have reported filing requests with the Amazon Seller Performance Team to remove internationally-shipped items from their SFP metric.
Multi-Channel Fulfillment With SFP vs FBA
Part of FBA's appeal is its simplicity. Sellers arrange bulk shipping of their inventory to Amazon's warehouses - more of which are being built every year - and then take a percentage of the profits when a listing sells. This simplicity makes it a great place for sellers to start on Amazon.
Large volume sellers, however, may be selling the same items through multiple marketplaces, most notably eBay and Walmart, or perhaps on brand-specific sites. The Amazon SFP program accommodates this by making multi-channel order fulfillment easier. In addition, SFP sellers can maintain their own inventory storage and tracking solutions that help them avoid overstock or selling out, without the bother and expense of shipping preset amounts of inventory to Amazon's warehouses as in the FBA program.
When an item sells on Amazon versus one of the other channels, the seller simply buys shipping through Amazon rather than another carrier. The rest of the inventory process remains the same. In effect, it opens the marketing capabilities of Amazon Prime to larger merchants while allowing them to keep pre-existing inventory processes in place.
Which Is Better: SFP or FBA?
In short, these programs each target a different seller. SFP meets the needs of larger sellers who can compete with Amazon's extensive fulfillment network without paying FBA fees, which can be considerable. While Amazon SFP fees are considerably lower, only very large merchants typically have the resources to meet the stringent application requirements. FBA is a great place to start for most. Once an Amazon business becomes large and profitable, a pivot to SFP can save money on inventory management and Amazon fees over the long haul.
Benefits of Amazon SFP Participation
Though the qualification procedure for Amazon SFP is high, it comes with several attractive features. Here is the breakdown of the most important benefits of the SFP program.
Lower Seller Fulfilled Prime Fees
As discussed above, Amazon SFP does not charge nearly as many fees as FBA. There is no cost to apply to the program. SFP sellers are also not charged warehouse fees or shipping and handling fees from Amazon, which tend to be high. Like FBA, Seller Fulfilled Prime fees include a referral fee. This is the percentage of the sale from each item that the seller pays to Amazon - essentially, a commission. It is called a “referral fee” because the seller benefits from Amazon's marketing and brand dominance - the ability to “refer” customers to a seller's listings. This referral fee is typically 15% of the sale of an item for both SFP and FBA.
Access to Motivated Customers
Many sellers wonder if achieving the Prime badge is worth the extra hoops of either SFP or FBA. After all, what is Seller Prime on Amazon getting them that they could not achieve from non-Prime listings? Research indicates quite a bit. According to Statista, Prime members spent $1,400 annually on Amazon, compared to $600 a year spent by non-Prime members.
Not only do Prime customers spend more money, but they also tend to purchase more items at a time. A 2020 survey indicated that 58% of Prime customers increased the number of items in their online shopping basket when same-day shipping was made available to them. The current cost of an Amazon Prime annual subscription is $119, plus tax. Because of this cost, many consumers feel that free two-shipping and even quicker delivery is the main draw to Amazon Prime. As a result, they are more likely to purchase from sellers who accommodate this expectation. Thus, participating in the Prime program can return considerable dividends to third-party sellers.
Buy Box Features
The Amazon Buy Box is the section on a product listing page that allows the customer to add the product to their cart. Amazon's algorithm considers various factors to feature the “best match” item in the Buy Box, including item price, shipping speed, and seller reviews.
According to DataHawk research, 83% of all Amazon purchases are made through the Buy Box. The number of mobile purchases is likely higher because almost all customers add an item to their cart as part of the purchasing process. Though the Buy Box appears on every product listing page, another seller's item can actually be featured instead if it is currently in stock, has a better price, or has faster shipping. The Amazon SFP program offers a better chance to appear in the Buy Box, which drives massive traffic to a seller's listings.
Compatible With Grocery Sales
Ecommerce sales of grocery items saw explosive growth during the Covid-19 pandemic. According to Supermarket News, Amazon's grocery sales are expected to double its online food and beverage sales. While Amazon FBA does allow third-party sellers to sell groceries, there are strict requirements. According to Feedvisor, food items must arrive at Amazon's warehouses with a shelf life of greater than 105 days. Amazon will throw away items that are within 50 days of their expiration date.
This creates a very tight timeline for inventory management. Sellers must keep enough merchandise in Amazon's warehouses to fulfill demand, but not so much that it hits the deadline and gets discarded. Thanks to the inventory management freedom afforded by Amazon SFP, sellers can monitor their grocery inventory more closely and fine-tune the quantities. By eliminating the extra step of shipping to Amazon's warehouses, third-party sellers can be more agile in responding to demand items with a shelf-life.
Looking Forward: Amazon SFP in 2022 and Beyond
Since its introduction in 2015, Amazon SFP has undergone multiple mutations to more closely meet consumers' growing expectations for ultra-fast shipping speeds. While Amazon has historically kept the future of the SFP program close to the vest, the recent changes in 2021, like nationwide two-day shipping expectations, seem to have brought the program up to date for now.
Amazon's places for 2022 seem to focus primarily on Amazon FBA, including higher storage, disposal, and prep services fees. While these changes likely will not affect SFP sellers, the referral fee change applies to all third-party sellers. According to Amazon's Seller Central, these changes are still being made, and in some cases, will result in lower referral fees for some items, like snowblowers.
The chief benefit of Amazon SFP moving forward is that sellers remain more in control of their own inventory and shipping costs. Though Amazon's fees may change in the coming months, SFP gives the flexibility of inventory control that many sellers are looking for.