On Feb 1, Amazon’s one-day and two-day delivery requirements went into effect for sellers selling via Amazon’s Seller Fulfilled Prime (SFP) service, which allows shippers to deliver directly to domestic Prime customers from their own warehouse.
However, these latest requirements could end Amazon’s SFP service and force the dwindling number of SFP sellers onto Amazon’s Fulfillment by Amazon (FBA), resulting in potential volumes typically moved by other carriers FedEx and UPS, to shift to Amazon instead.
The new Amazon requirements will expect SFP sellers to display a one and two-day delivery promise on its webpage for at least 20% of items beginning on Feb 1 for one-day delivery, increasing to 30% by Jun 1. For two day delivery, 55% of items starting on Feb 1, rising to 70% by Jun 1.
“The costs [to sellers] are unimaginable,” according to Jon Elder, an Amazon FBA consultant, “99.9% of sellers cannot offer overnight or two-day shipping nationwide and still make a profit. It’s just not possible. Sellers do not have the same resources like Amazon.”
Indeed, according to a Jan 13 webinar from Cahoot and Geekseller, “Meeting Amazon’s New SFP Requirements,” 65% of SFP sellers surveyed have only one warehouse, and 12% have two, which is not enough to offer nationwide one-day and two-day shipping. Instead, according to Cahoot, at minimum, four warehouses are necessary to achieve these latest requirements and utilize weekend pickup and delivery services from a limited number of carriers, including FedEx, UPS, USPS, and some small parcel regional carriers such as OnTrac, for an additional fee. An alternative is to pay for expedited shipping, which is pricey.
By not adhering to these shipping requirements, SFP sellers could see a negative impact on their placement of goods for sale on the Amazon website, thus becoming less competitive as other sellers offer faster shipping times and are placed higher on the website.
“More accounts [SFP] will disappear over the next few months,” according to Jamin Arvig, entrepreneur and SFP seller, “More sellers will likely move to FBA with the biggest impact on specialized goods such as plants and heavy goods, prices could go up for these goods if they have to move to FBA.”
Elder agrees, saying, “Amazon is in one sense forcing sellers to transition to FBA or become FBM [Fulfilled by Merchant] entirely.”
Seller Fulfilled Prime (SFP)
Launched in 2015, according to Elder, SFP sellers are high volume and need to meet such criteria as the ability to ship within a two-day window using their own warehouses and fulfillment systems and maintain a 99% or higher score for on-time deliveries. Sellers have to apply and undergo a trial before becoming an SFP seller.
Since launching the program, Amazon has initiated a number of requirements. However, according to Arvig, there have been problems with a number of SFP sellers not adhering to the program, which has resulted in a high attrition rate.
In 2019, the program was closed to new entrants. While the actual number of SFP participants and volumes shipped by this group are unknown, any possible shift to FBA from SFP will mean the management of last-mile delivery volume will shift to Amazon and will likely mean less volume for FedEx, UPS, USPS, regional small parcel carriers and other last-mile providers.
In its latest earnings report, announced on Feb 2, more than half of Amazon’s packages, both U.S. and worldwide, are handled through Amazon Logistics. “But as we have said in the past, our delivery partners, independent delivery partners that are out there, the USPS certainly oversees carriers as well, are an important part of that, and they will continue to help us scale that up and build up that offering and make it better,” Dave Fildes, Director of Investor Relations for Amazon said during the earnings call.