The Challenges of Repricing Seller Fulfilled Prime (SFP)
The e-commerce industry is growing at a rapid rate, with an increasing number of people joining the Amazon “goldrush”. With this ever-growing industry, a new language has emerged and it is filled with confusing terminology and abbreviations.
What Is FBA, FBM, And SFP?
There are three commonly used terms that all e-commerce sellers must understand. Number one, Fulfilment by Amazon (FBA); number 2, Fulfilment by Merchant (FBM); and number three, Seller Fulfilled Prime (SFP).
We have listed the pros and cons of each fulfillment method below.
What is FBA?
With this service, Amazon takes care of everything for you, from product to delivery, everything is efficiently arranged by them. When you become an FBA member, Amazon takes care of inventory needs; products are packed and shipped to their fulfillment centers. When an order is received, Amazon pack and deliver the product, as well as providing a return service.
If you are starting out with an Amazon business, FBA is a safe and easy option for newcomers. FBA removes the hassle of searching for and renting a storage center, and if you are shipping internationally, Amazon FBA is a smart choice.
FBA is often the top choice for small to medium-sized businesses due to its effortless operation model.
What is FBM?
Fulfilled By Merchant, (FBM) is another popular solution launched by Amazon, in which the seller takes on the responsibility of packaging and shipping the products to their customers.
When a seller sets up an Amazon account and creates listings via uploading their products, there are two delivery options available to them: either Amazon’s existing merchant fulfillment network (MFN), to deliver orders on their behalf, i.e. FBA or, independent delivery from their own warehouse or storage center. MFN sellers will also handle the returns and replacements of the products on their own.
When sellers opt for this shipping method, it is important to set-up trustworthy and efficient delivery partners to keep prices competitive and ensure profits are maintained. This shipping method is best for merchants selling products that have excellent profit margins.
What is SFP?
Seller Fulfilled Prime (SFP) allows qualified sellers with professional selling accounts to showcase an Amazon Prime badge, but the orders are fulfilled from their own warehouse or via third-party logistics (3PL) services.
It is a wise and cost-effective choice to switch to SFP to manage your business more efficiently. However, there are certain requirements that need to be met to qualify for SFP.
- In the trial period, it is mandatory to sell at least 300 products
- You need a 99% on-time/no delay shipping record
- You must use ‘Buy Shipping’ services for at least 95% of your total orders
- Your cancellation rate should not be more than 1% of total orders.
- Once all the requirements are met, you are eligible for SFP.
Automated Repricing for SFP
SFP offers a great opportunity to save money on fulfillment costs, while still enjoying the benefits of having the “Prime” badge, and most importantly, winning the Buy Box at a higher price.
However, SFP creates a real challenge for 3rd party Amazon repricing solutions. The biggest problem is that Amazon’s API and price change notifications provide very detailed data on the lowest offers on a listing and on the fulfillment method of each seller. Nonetheless, the identity of the Buy Box winner doesn’t take SFP status into account. This means that if you have a competitive FBA offer, your repricer might think you are winning the Buy Box, even though at the same time there is an SFP offer that’s $0.01 cheaper that is winning the Buy Box in major cities. This will result in such companies gaining a big chunk of your sales.
One solution for this problem, though not ideal, is to add a price restriction to your repricing method to ensure that you are not pricing too high compared to the lowest SFP offer.
On the other hand, you might have an SFP offer that is competing with FBA offers. In this case, one alternative strategy is to set a rule to follow the “general” Buy Box price, (meaning the Buy Box that doesn’t take shipping address into account), while using the lowest discount that will guarantee you win the Buy Box in geographic regions where you offer Prime.
Want to learn more about repricing strategies for SFP?
Contact Seller Snap to talk to one of our experts.