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SFP & FBA Onsite: Amazon’s Next Move Against Warehouse Overload

Posted by Jimi Patel | May 10, 2019

As might, as it may be, even Amazon faces problems.

Amazon SFP & FBA Onsite

Over the last few years, Amazon has become the go-to online shopping platform for millions of shoppers. But with the increase in the number of customers and sellers, Amazon had been facing issues with storing inventory at their FBA fulfillment centers. To address the overcapacity issues, Amazon has launched two programs that will encourage sellers to store inventory at their warehouses. Read on to know more about these programs.

Seller Fulfilled Prime – Get Prime Badge Without FBA

Prime

Since its inception in 2005, Amazon Prime has made it possible for shoppers to buy unlimited products and get them at their doorsteps within just two days, with no additional expenses just a flat annual price. Soon enough shoppers learned the ease and efficiency of being an Amazon “prime” member. As a result the products with prime badge started getting lot of attention from the 100+ million prime subscribers. Not just customers, even sellers are benefited with the prime badge. Prime listings are ranked better in search results and have better chances of winning the buy box.

For the longest time, this privilege was available only to those sellers who have listed their products under Amazon (FBA) program. As you know, in Fulfillment by Amazon (FBA) sellers send their inventory in Amazon warehouse and Amazon with its robust set up will store, pick and ship the products as well as handle the customer returns. But it’s not all roses and tide pods. These services come at a price called Amazon FBA Seller Fees.

In very less time, FBA became the most successful program ever launched by Amazon. However, as the merchant base grew, Amazon started facing difficulties in storing the inventory. To encourage to keep their FBA inventory moving, in the third quarter of 2018, long term storage fees were assessed monthly rather than twice a year.

In another effort to ease this pressure, Amazon came up with programs like Seller Fulfilled Prime and FBA Onsite. With SFP, they can get a prime badge on your listing but still can store the products at their warehouse. In simple words, SFP is the most convenient way to get the prime badge without incurring heavy FBA charges.

Prime Amazon

Here’s How SFP Works:

Step 1: Seller qualify for SFP program by successfully completing the trial period
Step 2: Store inventory in their own warehouse
Step 3: Buy shipping labels and process orders from Amazon-approved carriers
Step 4: Pick, pack and ship the order on the same day
Step 5: SFP carriers will collect and deliver the product to the customer in one day

If everything goes well, the buyer will receive the product on time. If the order is late or damaged, then it will be handled by the seller.

Pros:
1) Avoid Split Inventory:

Previously sellers had to select which items will be shipped by Amazon while the remaining items would be distributed through sellers website or other online marketplaces. This decision was confusing as well as time-consuming. In the end, it would get difficult to determine which products belong to FBA. But with SFP, sellers can avoid slicing and dicing their inventory among FBA and other fulfillment channels.

2) Convenient Return Handling:

FBA sellers have encountered numerous problems when it comes to handling returns. As mentioned earlier, in SFP, returns and refunds will be managed by sellers. So they will be able to easily track and identify the items which are returned. This will reduce customer frauds to a greater extent.

3) Reduces Costs On Heavy And Large Items:

While selling heavy or large items through FBA, sellers had to incur additional shipping costs for transporting the products from their warehouse to FBA warehouses. Plus the FBA fees on such items were very high. Thanks to SFP, sellers will no longer have to pay any additional fees and they will be able to ship the products directly to the consumers. Because they are saving on the extra shipping costs, they can provide the product to the customer at a much cheaper rate.

4) Less Inventory To Store, Fewer Problems For Amazon:

Yes, this program benefits Amazon as well, or it would not have launched it in the first place. By allowing sellers to handle their shipments through their fulfillment centers, Amazon has freed itself from the cost of building new fulfillment centers. According to reports, FBA infrastructure has cost Amazon billions of dollars and with the increase in popularity of prime, it was too overwhelming for Amazon to build new centers. SFP will help Amazon alleviate the pressure to invest in their fulfillment warehouses.

Cons:

1) Requirements for inventory storage
2) Investment in time and labor for picking, packing, shipping, handling and customer service
3) Amazon’s strict rules for eligibility

How To Participate In Seller Fulfilled Prime Program?

Not all sellers are eligible to enroll their products in the SFP program. Like always, Amazon has set certain criteria:
● Seller must have a professional account. It should be active and have a good standing
● Sellers should enroll in Premium Shipping (Same Day Delivery, Two Day Shipping or both)
● Sellers must agree and adhere to Amazon Return Policy
● Sellers should allow Amazon to handle all the customer service inquiries
● Sellers must use Amazon-approved carriers to deliver orders
● On time shipment rate should be over 99%
● Order cancellation rate should be less than 0.5%
● Use Amazon Buy Shipping for at least 98.5% of orders

In order to maintain its reputation, Amazon wants its potential SFP sellers to go through a trial period for 5 to 90 day, depending on when sellers satisfy the stringent performance standards. During the trial period, the prime badge won’t be displayed on the product; still, sellers will have to deliver the product within the prescribed time period. When the seller successfully completes the trail run, they are automatically enrolled in the program and prime badge will be visible on their product.

Tip: To shorten the trial period, assign prime templates to your fastest moving SKUs so you can reach 50 orders in time.

To remain within the SFP program sellers must:
● Ship items the same day
● Buy shipping labels via Amazon
● Consistently maintain their performance

Which type Of Sellers Can Use Seller Fulfilled Prime?

Usually, it’s the retailers who are most benefited from SFP. Retailers usually have thousands of products listed on Amazon, so they face cut-throat competition. Having a prime badge on their listing gives them an edge over their competitors and the probability of winning buy box also increases which makes a huge difference in their sales. Most of the retailers have their warehouse and shipping operation up and running. So using SFP will give them the benefits of FBM and FBA combined.

SFP can also benefit the brand owners who are already shipping the goods to customers themselves. Not just retailers and brand owners, SFP can be used by all the sellers who have their warehouse and shipping facilities.

FBA Onsite – A ‘Groundbreaking’ Program:

Amazon FBA Onsite

This trial program was in beta phase in the last quarter of 2017 where it was tested with 50 hand-picked sellers. In the email invite, Amazon mentioned this program as a groundbreaking program [which] offers the best parts of Fulfillment by Amazon and Seller-Fulfilled Prime.

According to Amazon, FBA Onsite is a cost-effective tool that will benefit to the sellers as well as Amazon. It is a unique integration of SFP (Seller Fulfilled Prime) and FBA, where sellers will store their inventory at their warehouse and Amazon will handle the minute details that come into play with delivery. It will pick the ready-to-ship the products from the seller’s warehouse and figure out the best way for the products to reach the customers. It either uses its own logistics network or a third-party delivery service like FedEx, UPS or other independent companies. So, the hassle of choosing a delivery system falls in the able shoulders of Amazon, thus transforming your warehouse into a Fulfillment Center with efficient warehouse management software to help you manage your inventory better. Lastly, Amazon will also handle the customer service and troubleshooting if any problem arises during delivery, leaving you completely worry-free.

How does it work?
1. Amazon’s “warehouse experts” will come and “optimize” seller’s warehouse to turn them into mini-fulfillment centers working for them
2. Amazon will allow the sellers to use their proprietary warehouse software. This is provided to sellers so they can scan their inventory and print prime labels
3. Amazon will handle the rest of the delivery process right from picking the products to final delivery

Pros:
1) Warehouse Optimization By Amazon Experts:

Amazon is pro at warehouse management. Because they want to give the best possible service to their customers, they will help you set up your warehouse for maximum efficacy. They will optimize:

● The methods of storing inventory
● Warehouse layout and configuration
● Priority of orders based on customer delivery and carrier pickups
● The methods of picking and packaging the products
● Onsite scanning and Amazon connection

2) Amazon Warehouse Management Software:

The experts will install warehouse management software to manage the shipping process smoothly. This software improves end to end fulfillment capabilities and enable the sellers to directly ship the products from their warehouse with a prime badge. It also includes shipping integration with Seller Central as well as automated replenishment and inventory audit capabilities.

Amazon Warehouse Management

3) Reduced Labeling & Prep Work:

Amazon sellers won’t have to go through the monotonous FBA workflow because they won’t be sending the products to Amazon. Sellers can hand scan and have the products online within just minutes. This can save hours of work and hundreds of dollars.

4) Selling Hazmat Products:

Hazmat products are typically blocked from sending to an FBA distribution center. With FBA onsite, sellers can ship hazmat products from their warehouse while also getting benefits like FBA. Yes, the shipping price will be high, but the fact that you will be able to sell these products is great!

5) Reduced Shipping Costs and FBA Fees:

Instead of using your or Amazon-approved shipping carriers, sellers can get direct access to Amazon’s shipping network. This can massively save seller’s money.

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With FBA onsite, you won’t have to pay any of the below fees:

● FBA Inbound Shipping Fees
● FBA Workflow Prep / Labeling
● Order handling
● Pick & Pack
● Weight handling
● Return Fees
● Short Term Inventory Storage Fees
● Long-Term Inventory Storage Fees

Cons:

Not all sellers are eligible for FBA onsite as this is an invite-only program.

How To Be A Part Of FBA Onsite?

To get the benefits of this program, you will have to be personally invited by Amazon. Because of the amount of resources involved in this program, Amazon wants to keep it small. So, it is reaching out to only those sellers who are already successful.

The retail giant is handpicking the account based on certain metrics which are mentioned below:
● Longevity of the account
● Performance
● Dominant category
● FBA vs. FBM values

Difference between FBA, FBM, SFP and FBA Onsite:

  FBA SFP FBA Onsite FBM
Will your product get the prime badge? Yes Yes Yes No
Buy Box Advantages Yes Yes No No
Customer Service by Amazon Seller Amazon Seller
Shipping operation and warehouse needed? No Yes Yes Yes
Who pays for shipping? Amazon Seller Seller Seller or customer
FBA Fees Yes No No No

Final Thoughts:
Amazon has cleverly solved the warehouse congestion problems by giving merchants the authority to store and ship the products themselves and also helping them manage the inventory better. This means that Amazon will get more storage space, something which Amazon has been trying to get for a while now. As for the sellers, they can enjoy low selling cost, delivery cost and can also boost their sales number with the prime badge. So, it’s a win-win situation for sellers as well as Amazon.

If you need Amazon Consulting Services for inventory management or with any other aspect of your Amazon business, then immediately contact us. Amazon FBA Consultant at eStore Factory will efficiently manage your account and skyrocket the sales!