Amazon has just announced that it is barring independent sellers from shipping items other than medical supplies, household staples and other priority goods to its warehouses until at least April 5. Get details in this Business Insider article. The retailer is transforming its operations to adapt to the Coronavirus pandemic, prioritizing items in highest demand.
While well intentioned, the move creates problems for Amazon sellers who rely on the company’s logistics arm, Fulfillment By Amazon (FBA), to process orders. Those sellers are now exploring other non-Amazon options for storage and shipping.
One of those options is Amazon’s own Seller Fulfilled Prime (SFP) program, which allows qualified sellers to display the Prime badge on merchandise for sale, even if they are fulfilling orders via their own warehouse or a third-party logistics (3PL) partner. There is a qualification process for the program. We address those criteria and other points in our Q&A post: Everything You Need to Know About Seller Fulfilled Prime.
The primary qualifier for SFP status is whether you, as a seller, can meet the two-day delivery requirement for Prime orders. To do that, it helps to work with a fulfillment provider with a nationwide fulfillment network that can put your product as close as possible to customers.
For E-retailers, this increased interest in alternatives to FBA is about risk mitigation. With total reliance on Amazon, or any provider, you risk business interruption, which is what we are seeing now. But there are several other significant advantages to fulfilling orders outside the Amazon ecosystem.
Lower inventory costs
If you sell through multiple channels, including your own website, your inventory costs are likely inflated if you use FBA for Amazon orders. Inventory within the Amazon system is not available to fulfill orders from other channels. With Seller Fulfilled Prime, warehouse inventory can be used to fulfill orders from any channel.
Lower storage costs
In 2018, Amazon changed its fee structure for slower-moving inventory so that companies get charged monthly, rather than semi-annually. In addition, Amazon’s Inventory Performance Index (IPI), results in higher rates to store slower-moving SKUs. Just as important, Amazon may actually limit your ability to supply the retailer with more products if your IPI falls below a certain threshold.
Better brand experience
When FBA ships your product, it arrives in an Amazon-branded box, not a custom box with your branding. That hurts your ability to maximize the customer experience and to create loyal buyers. When you ship with a 3PL, you control the branding and you can customize outgoing orders however you want.
Lower compliance requirements
If you ship to Amazon today, you know that they have strict rules on how product must be shipped to its warehouses – from the position of the label on each box to the overall pallet configuration. Fail to follow these rules and you are subject to steep fines. In contrast, a 3PL fulfillment company will allow a good amount of flexibility on how products can be received.
Explore FBA Alternatives
Those are some of the advantages of working outside Fulfillment By Amazon. We look at these and other issues in our eBook: Is FBA Right for Your Business?
The coronavirus is forcing every business to re-think how it goes to market. Some companies that thought they had a reliable fulfillment solution, are finding now that they don’t – and they’re looking to mitigate future risk.
If you’re interested in exploring alternatives to FBA, including Seller Fulfilled Prime, contact Amware. We’ll be happy to discuss the PROS and CONS of various fulfillment options as they relate to your business and situation.