Seller Fulfilled Prime vs. FBA - What's Right For You?
by Jeanne Croteau, on June 26, 2018
If you know anything about Amazon.com, Inc. ("Amazon"), it’s that people love its two-day shipping. Since this is included in the Prime membership, it’s no surprise that there are more than 100 million subscribers. Simply put, Amazon Prime is a big deal.
As a seller, you might be trying to decide how to best meet this demand. There’s a lot to consider and so much information to wade through. To help demystify your choices, we’ve compared the Seller Fulfilled Prime program with the Fulfillment by Amazon (FBA) program.
How the Accounts Differ
To join the Seller Fulfilled Prime program, you must first complete a trial. If you're accepted, you will need to satisfy specific criteria including:
- maintaining a Professional selling plan
- offering premium shipping
- purchasing shipping from Buy Shipping Services
- using at least one approved shipping service
Additionally, you will be expected to meet or exceed performance requirements to ensure your On-Time Shipment rate is at least 99%, Buy Shipping Services is used for at least 95% of orders and the Cancellation rate is no more than 1% on Prime orders. When performance metrics fall below these levels, you will no longer be eligible for Seller Fulfilled Prime. Update: Effective July 31, 2018, sellers will be required to purchase labels through Buy Shipping for at least 98% of Prime orders. They will also need to keep cancellation rate at no more than 0.5% on Prime orders (down from the previous 1.0%).
By contrast, to participate in the FBA program, all you have to do is register. If you have an existing seller account, you can simply add the FBA feature with very little hassle. They make it really easy to just get started.
If you choose the Seller Fulfilled Prime approach, you will be responsible for storing and keeping track of your inventory. Depending on your needs, this can involve renting or buying warehouse space to make sure you have enough on hand to meet demand. This, of course, can be expensive.
FBA sellers store their inventory at an Amazon fulfillment center and are able to manage it through a simple online interface. Further, Amazon receives and scans your items, recording the unit dimensions for storage. When a customer places an order for these products, Amazon picks and packs them for delivery.
Purchasing vs. Printing Labels
To fulfill an order containing a Prime item, sellers are required to purchase all shipping labels through Buy Shipping Services. In doing so, they agree to follow Amazon’s terms and conditions as well as those of the carrier or service chosen for both outbound delivery and any applicable returns shipping.
Through FBA’s shipment creation workflow, merchants have the option to enter information about their order and then print the labels directly from Amazon. There are step-by-step instructions but, if a seller doesn’t want to apply the labels to eligible products themselves, they can sign up for the FBA Label Service.
Different Shipping Requirements
As previously stated, a requirement for joining and remaining in the Seller Fulfilled Prime program is that the account must maintain an On-Time Shipment rate of at least 99% on Prime orders. These sellers must also use Buy Shipping Service carriers such as UPS, USPS, TForce or FedEx at least 95% of the time. Customers are given a guaranteed delivery date and, if their order is late, Amazon may provide refunds which could be charged to the seller’s account.
The FBA program allows sellers to create a shipment by providing the ship-from address, entering the quantities of each items and whether they will arrive individually or packed in a case. Sellers can choose to prep the units themselves or pay Amazon to do it. When the order is ready, it can either be sent by a carrier or dropped off at a shipping center.
At the end of the day, Amazon wants their customers to be happy. As such, all Prime items are given automatic authorization of returns initiated within the window. Anything beyond this time frame is evaluated by Amazon Customer Service on a case-by-case basis. In most scenarios, a full refund is grated and processed without two business days of the item arriving at the seller’s warehouse. Generally, sellers are responsible for the cost of return shipping.
When an FBA order is returned, Amazon handles everything. They give the customer an immediate refund and send them a shipping label, enabling them to send the item back to the warehouse. Since this is basically done on the honor system, sellers will need to make sure that the item is, indeed, returned to Amazon within the 45-day grace period. If it hasn’t been received, sellers have the option to open a case to have Amazon investigate.
Making a Decision
Choosing between Seller Fulfilled Prime and FBA can be difficult. Ultimately, you have to make the decision that works best for you, your business and your customers. You may even decide to take a hybrid approach or fulfill items through the Merchant Fulfillment Network (MFN). Need help deciding? Check out our resources!