Amazon took the supply chain world by storm in 2023. They announced Amazon Shipping, a FedEx and UPS competitor service, Amazon Supply Chain, a service that offers end-to-end supply chain management, and the reopening of Seller Fulfilled Prime (SFP).
Sifted sat down with Matt Snyder, Founder and CEO of Brands Excel and recent LeaderShipping guest, to hear his insights on the new Amazon developments.
Amazon’s made major announcements pertaining to logistics in the last few months. What initiatives have stood out to you?
Number one, Amazon’s trying to get involved in every single piece of the logistics process for sellers.
They’re trying to manage more of their clients’ shipping, all the way down to the country of origin through ocean freight. They want to reach a point where you’re using them for your Amazon FBA business, Buy With Prime or Amazon Shipping for your sales on other sites, and even letting Amazon handle your long-term storage.
Second, Seller Fulfilled Prime (SFP) is back.
With SFP re-opening, FBA isn’t the only avenue to Prime eligibility.
When you have big, bulky products that are expensive to ship and have a higher-than-average risk of damage. Having the ability to offer Seller Fulfilled Prime is a big advantage because you can use a carrier better-equipped for large products – reducing damages, and ultimately, returns. It also helps us overcome some limitations of FBA, like not being able to do multi-box shipments.
I’ve also heard sellers with expensive products are excited about SFP, because Amazon has a tendency to damage or misplace items. It’s one thing when that’s a cheaper product, but if you’re selling a $1,000 piece of jewelry, that’s much harder to swallow. With SFP, maybe you can find a carrier that makes fewer mistakes.
Another big win recently is that Amazon won’t charge the 2% fee they’d planned just for using SFP. That initially stifled the interest of a lot of sellers.
What are some challenges of Seller Fulfilled Prime?
As Amazon’s re-introduced the program, they’ve adjusted the eligibility criteria. One of the biggest changes was removing the requirement for sellers to buy their shipping services through Amazon. In the past, you could still use your carrier account separately, but you had to purchase SFP shipments through Amazon’s account. That’s still an option, but not a requirement.
The other big change here was the removal of on-time shipping (when the product first ships out) requirements, and lowering the on-time delivery (when the product arrives) requirement to 93%.
Removing the on-time shipping requirement allows sellers more flexibility.
Let’s say you have locations on the East and West Coast, and a customer in Florida makes an order at 8 p.m. Eastern time. Before, you were required to ship the product out the same day, even if that meant shipping from the West Coast. But in this example, you can now wait and ship it from your East Coast location in the morning, knowing that it will probably get delivered faster anyways.
There’s one big caveat to these changes: Amazon was offering a one-day buffer when measuring the on-time delivery performance. If a product was being sold through an FBA listing and an SFP listing, the delivery time displayed on the SFP listing would be one day greater. Now that Amazon’s removing that buffer, they’re expecting SFP sellers to meet the same level of speed performance as the FBA listing.
From our own experience, the one-day deliveries are the ones most likely to arrive late. We can do everything right, get it to the carrier on time, but ensuring they do everything correctly to deliver it on time – that’s the hard part.
If anybody has the ability to ship with more than one carrier, I’d encourage it. Carriers perform differently within different regions. Based on where you’re shipping from, and where your customer is located, UPS may be better than FedEx, or vice versa. That’s a big thing sellers need to consider if thinking about trying SFP; the carrier could be what makes or breaks you.
What do Amazon sellers need to factor in when considering Seller Fulfilled Prime?
Given the complexities of this program, it’s challenging without the right support and technology solutions. This isn’t something you’re going to be able to do through manual processes. You’ll need fast automations, and something to track the information that comes back from Amazon.
The second part of that “support” is having the right third-party logistics (3PL) partners.
Very few sellers have enough warehouses that they own or operate themselves for SFP, and if you don’t have those in place already, it’s costly to build up. A 3PL is a much better solution for a smaller business, but not every 3PL can provide the level of service you need for SFP eligibility. I’d recommend 3PLs who have experience offering SFP services.
The third piece is your carrier relationships. To make this profitable, you need good rates with your carrier. That can be hard to establish as a new seller just getting started with FedEx or UPS, so finding a 3PL partner who allows you to work off of their carrier accounts can be a big benefit.
So, the three major pillars to your SFP success: technology, storage, and packing.
Let’s shift to Amazon Shipping. After years of speculation and baby steps toward this, it looks like Amazon is finally making a move to compete directly with FedEx and UPS as a parcel carrier. What are your thoughts on this service?
They’re being aggressive with rates to win some initial market share. They’re looking to fill their excess volume capacity. Even if their rates are low, filling empty volume boosts their bottom line.
If I was considering new carriers for my operations, I’d definitely consider Amazon Shipping. Just know it’s not going to offer the same shipping speed as some other express services.
Do you have any predictions for the future of Amazon Shipping?
We’re still in its infancy stage. There’s a lot of room for growth.
For several years, the bright spot in Amazon earnings reports was the growing profitability of Amazon Web Services (AWS). Now it’s Amazon Media that has been growing tremendously. I think this is their next big thing.
Beyond just Amazon Shipping, we’re going to see Amazon’s whole collection of logistics services become a huge profit driver for them, even more than today. It’s going to reach much farther than FBA, including the full logistics lifecycle: long-term warehouse storage, ocean freight carriers, etc.
For anybody doing business with Amazon, in any way, what is the importance of having visibility into data with Amazon?
I do audits for other brands and sellers on this platform. As we go over results, they’re often shocked by a lack of profits, or the opportunities to improve profits they weren’t aware of. It’s hard to run your business if you don’t know how each individual piece is performing.
That’s where getting the right data partner is critical. There’s a lot of talk about data partners for advertising services, keyword research, and things like that, but to me, data that shows the health of your business from a cost perspective is what’s most critical. Where do you have errors or inefficiencies? Where can you improve?
Sifted is a big help with that. Something I’ve always liked about Sifted are the things unique to your platform that others just don’t offer
As an SFP seller, one of our greatest expenses is our carrier costs, so if there are ways for us to get smarter about which service we’re using, box sizing, things like that – those are small changes we can make that have huge impacts on our bottom line. Those insights don’t come without the right data partner, as well as the right team internally to find actionable insights from that data.
That’s something I prioritize when working with other brands and sellers – figuring out how we can come in, go deep into their data and see the true profitability of the business, and where there are opportunities for improvements. In some cases, that could mean cutting a product because it’s actually bleeding them money in fees.
You won’t uncover things like that without really digging into your data.
Looking ahead now in 2024, what final advice would you give to Amazon sellers?
It depends on where you are as a seller. If Amazon has been the only platform you’ve sold on, I’d encourage you to explore others, whether that be Shopify, Walmart, internationally, etc. Maximize your business on Amazon first, but if you’ve reached a good point, it may be time to explore other channels.
For everybody else – the game on Amazon is getting more and more challenging and competitive. The margin for error is getting even smaller. If you don’t have the right resources and skill sets to take the data that Amazon is giving you to make better business decisions, then you’re going to get left behind pretty quickly.
Matt Snyder is founder and CEO of Brands Excel, a consultancy that helps businesses grow and scale on Amazon. He formerly served as the Vice President of Online Retail for Vari, the leading supplier of standing desks and other office furniture. He’s shared his expertise in numerous speaking engagements and conferences, and serves on the board of directors for the Prosper Show.