Amazon is rolling out free one-day Prime delivery, which is great for online shoppers, but where does that leave online sellers?
In a world where competition is already rife, and matching Amazon’s free 2-day Prime delivery is a logistical nightmare, we’re looking at how brands can simultaneously adapt to these changing customer expectations while preserving profitability. In this article we’ve examined various Amazon Prime fulfillment strategies and what sellers can do to win the fast shipping war.
Amazon Prime fulfillment - what’s changed
Back in the day, if you wanted a product quickly, you would go outside to the store, and, if you were willing to wait a week or so, you’d order online. Then Amazon Prime happened, bringing fast, free delivery to masses and changing customer expectations forever.
But, just as online sellers are starting to come to grips with the fact that 63% of their customers expect Amazon-fast delivery as standard, Amazon has upped the stakes - spending $800 million on delivering Prime orders within one day, for free.
How are sellers coping - Amazon Prime fulfillment strategies
The initial seller response to Amazon’s one-day free deliveries has been frustration, anger, and confusion as to how anyone can compete. Since Amazon has only just started rolling out these speedier deliveries, we don’t yet know how sellers will respond in practice, but it is likely that they will adopt one of the three Amazon Prime fulfillment strategies used to meet the current expectations of Amazon Prime customers.
1. Using FBA
The natural approach for meeting Amazon Prime fulfillment metrics is to use Fulfillment by Amazon (FBA). FBA is an Amazon-run fulfillment service that picks and ships your pre-packaged orders from Amazon warehouses across the country.
The benefits of adopting FBA is the guaranteed ability to meet fast shipping targets and automatically qualify for Amazon Prime benefits.
Seller experience, however, is that FBA requires you to relinquish your control over your stock, and can be prohibitively costly for those selling seasonal, slow-moving, large, heavy, or multi-channel stock.
Note: FBA’s service levels also differ for multi-channel fulfillment (ie. non-Amazon orders), so it doesn’t necessarily solve your fast fulfillment with other marketplaces.
2. Using SFP via in-house fulfillment
Since 2016, Amazon sellers can qualify for Amazon Prime by adopting a Seller Fulfilled Prime (SFP) fulfillment strategy. This involves meeting Amazon Prime’s delivery metrics while fulfilling orders from your own warehouse yourself.
The advantages of using an SFP fulfillment strategy include regaining control over your inventory and having the flexibility to deliver items in your own packaging using your own shipping carriers.
Seller experience, however, is that it can be challenging to meet and maintain the eligibility metrics, and hard and costly to send items on two-day shipping services for free. This is only going to become more difficult with the introduction of one-day delivery.
3. Getting on SFP by outsourcing fulfillment
A recent Amazon Prime fulfillment strategy is using an SFP fulfillment solution. Instead of using FBA to run your fulfillment, you ship your stock to a multi-channel fulfillment solution who can manage Amazon’s SFP targets for you.
The positives of adopting an SFP fulfillment solution strategy is that you retain control and flexibility over which service you use, but outsource the difficulties and costs of delivering items within two days.
Seller experience is positive, but many find it difficult to source a fulfillment solution willing to deliver under Amazon Prime’s metrics. This is only going to become more of a challenge with the one-day delivery rollout. Only a limited few fulfillment solutions have 2-day capabilities, and far fewer can support one-day deliveries.
Winning the shipping war
While you may be tempted to throw in the towel and leave Amazon to its one-day deliveries while you head elsewhere, this isn’t a wise tactic. Customer expectations are only set to follow Amazon’s lead - expecting even faster deliveries at no extra cost, regardless of the sales channel. So how should you fight to win the shipping war?
Find the right delivery partner
High-volume or growing Amazon sellers will find it extremely difficult to maintain fast delivery speeds without some form of help. If you don’t have the existing operations and networks to fulfill orders within one-day in-house, use a strategic combination of FBA and an SFP supported fulfillment solution to help you meet the speed requirements, keep your Prime badge, and protect your profits.
Attract more customers
Amazon Prime increases your visibility among Prime members - but what about non-Prime members? Use Amazon PPC advertising and Amazon Display Advertising to reach other customers on Amazon and third-party sites, attracting them to your listings with fast shipping tags and increase your sales even further.
Boost your profits
Free one-day deliveries will cost your business more in shipping and fulfillment, but that doesn’t have to impact your profits. Consider using unbranded packaging to save costs, multi-channel fulfillment solutions to reduce fees, and a strategic Amazon coach to help increase your income - allowing you to offer free delivery without charging more.
Unfortunately, the fast shipping war is far from over, but that doesn’t mean you can’t win.
With outsourced fulfillment options, cost-saving measures, and other fast shipping programs, you can delight your customers, meets Amazon’s metrics, and increase your sales and profits while you’re at it.
About the Author
This is a guest post from Michael Krakaris. Michael is one of Forbes’ 30 Under 30 and the co-founder of Deliverr. Deliverr provides fast and affordable fulfillment for your eBay, Walmart and Shopify stores, helping to boost sales through programs like Seller Fulfilled Prime, Walmart Free 2-Day Shipping and eBay Guaranteed Delivery.
Deliverr’s FBA-like multi-channel fulfillment comes with clear pricing, easy on-boarding and a hassle free experience so you can focus on growing your eCommerce business.